German economy not aging gracefully | Business| Economy and finance news from a German perspective | DW | 25.02.2019
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German economy not aging gracefully

Many Germans expect to spend their twilight years either impoverished or working past their best by dates. Those fears need to be taken seriously, says DW's Kate Ferguson.

Every now and then I discover a silvery strand in my hair that I swear wasn't there the day before.

Oh God, I think to myself. This aging thing is really happening.

Then, just as my thoughts are beginning to spiral into the domain of nursing care, I pluck it out and pretend it never happened.

Economists accuse German lawmakers of engaging in a similar kind of self-deception when it comes to the country's aging population.

Such criticism isn't without foundation. Hold a mirror up to Europe's largest economy and you'll see more than a few wrinkles.

Growing old together

At present, one in five Germans is over the age of 65. By 2060, it's expected to be one in three.

DW business columnist Kate Ferguson

DW business columnist Kate Ferguson

The main explanation for this demographic shift is that the so-called "baby-boomers," born between 1955 and 1969, are reaching retirement age. Thanks to medical advancements and enhanced social protection, they're likely to live longer than previous generations did, too.

And all that wisdom comes at a price.

A study commissioned by the Bertelsmann Foundation found that nearly two-thirds of Germans believe there are more risks than opportunities associated with the country's aging population. The most feared outcomes are rising poverty among the elderly and an increase in the retirement age.

In other words, Germans expect to spend their twilight years either scraping by to make ends meet or working well beyond their best by dates.

Kids to the rescue

It's a pretty bleak prospect. So, what can be done to avoid it?

 There are two obvious antidotes to an aging population. The first is to make more babies. And the second is to boost immigration. 

When it comes to making babies, a superficial glance at the figures suggests Germany isn't doing too badly.

In 2016, the country recorded its highest birth rate since 1973. This led to triumphant headlines about a new "baby boom."

But a closer look at the numbers presents less cause for celebration. Despite having hit a four-decade high, at 1.59 babies per woman of child-bearing age, the German birth rate was still just shy of the EU average of 1.60. The rate statisticians say is needed to prevent the population from shrinking is 2.1.

And even if there were an explosion in births, it would be at least 18 years before today's babies can begin the good work of shoring up their grandparents' pensions. For the large number of people retiring in the next few years, their contribution would come too late.

Outsourcing the problem

So, babies alone cannot solve Germany's aging problem.

What about immigration then?

Here, there is more cause for hope. In 2015, Germany recorded its highest rate ever of net migration. Among the 2.1 million people who arrived in the country that year, there were 890,000 asylum-seekers. Most of them were under the age of 35 and hailed from Syria, Afghanistan or Iraq. In labor market terms, their arrival was an opportunity for Germany to address its much-talked-about skills shortage

Watch video 02:11

Thousands of migrants attend jobs fair in Berlin

Just over three years later, a total of 307,000 people from these three countries have found work in Germany. Of those, well over two-thirds pay social security contributions. The rest are employed in so-called mini jobs that don't pay enough to be taxed.

While these figures suggest progress has been made, they are also a reminder that integration takes time.

As anyone who's ever tried to learn German can attest, mastering the language is no easy feat, especially if you're accustomed to using a completely different alphabet.

And even if you have got your head around the German pronouns der, die and das, you may not have the educational background considered a prerequisite for the jobs in the technology, construction and care sectors Germany desperately needs to fill.

Pay now or pay later

Yet when it comes to attracting migrants and enticing them to stay, Germany cannot afford to be complacent. Another recent study by the Bertelsmann Foundation concluded that the country needs 260,000 immigrants each year until 2060 to meet its labor market demands.

Lawmakers have taken some steps to address the problem. In December of last year, the government passed legislation making it easier for employers to hire workers from outside the EU. The rules, which go into effect next year, will also allow people with professional skills and a knowledge of German to come to the country to look for work.

In other areas, there's been less consensus among the governing coalition though. Labor Minister Hubertus Heil, a member of the center-left Social Democrats, has pledged to increase pension payments for millions of low-wage workers. But his plan has been slammed by some conservative lawmakers who say it's unaffordable.

As the wrangling continues, so too does the aging. And if I've learned one thing from my own painful experience, it's that denial is not the answer. 

According to popular belief, removing those silvery strands only tends to make them grow back faster.

Watch video 01:20

Germany is at work

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