Economist Calls for Immediate Reforms to Retirement Age in Germany

Tue 29th Jul, 2025

An economist has sparked a debate regarding the future of Germany's pension system, emphasizing the need for urgent reforms to the current retirement age policy. The discussion follows recent comments from the Economic Minister, which highlighted the necessity for Germans to work longer and harder to secure the viability of the pension system.

According to Oliver Stettes, head of labor market and wage policy at the Institute of the German Economy, the ongoing demographic changes and low average working hours present a significant threat to the financial sustainability of the pension system. Stettes noted that many workers are opting for early retirement, which exacerbates the financial strain on the system.

Stettes pointed out that while part-time work has contributed to employment statistics, it does not compensate for the declining number of total working hours resulting from early retirements. He argued that if these trends continue, the pension system could face substantial deficits, affecting even those currently in retirement.

To address these challenges, Stettes advocates for the abolition of the "retirement at 63" policy, which allows individuals to retire without penalties after 45 years of contributions. He argues that this system disproportionately benefits those in higher-paying jobs rather than those in physically demanding professions.

Stettes further suggested enhancing child care and elder care support to enable workers, especially those with family responsibilities, to remain in the workforce longer. He expressed concern that without significant policy changes, the current generation of workers may face severe consequences as they approach retirement.

As the retirement age is set to gradually increase, reaching 67 by 2031, the economist questions whether this adjustment will suffice to sustain the pension system. He warns that failing to adapt could lead to dire repercussions for both current workers and retirees.

Moreover, Stettes criticized the growing trend of mini-jobs, which often provide minimal social security contributions. He stressed that this model must be reevaluated, especially in light of the ongoing shortage of skilled labor in Germany. By adjusting the framework surrounding mini-jobs, companies could be encouraged to increase the working hours of their part-time employees.

In conclusion, Stettes calls for immediate action from policymakers to reform the retirement system and ensure its sustainability for future generations. The current trajectory, he argues, poses risks that cannot be ignored, necessitating a reevaluation of what it means to retire in Germany.


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