Germany is ageing more rapidly than almost all other countries in the world. In 2007 it had the lowest number of new-born children relatively to the size of its population of all OECD countries. Since the fertility rate (number of children per woman) in Germany had already fallen much earlier than in other countries, the twenty- and thirty-year-olds are less numerous today, the most important cohorts for reproduction, and these groups in addition have quite low fertility rates. Without further immigration the German population would shrink faster than all other OECD countries. The consequences will be felt by tomorrow’s pensioners. A greater financial crisis of the German pension system and the state budget is already pre-programmed, which will become a serious problem in the second half of the 2020s reaching its peak in the 2030s.
In order to avert the worst, Germany needs proactive population policies whose goal is a drastic increase in the birth rate. Of key importance is improving the work–life balance, which can be achieved by adopting the French system of pre-school education and all-day schools. Furthermore, Germany needs a family splitting in the income tax system as well as a more child-friendly pension system that takes into stronger consideration that the later pensions in the pay-as-you-go system will only flow to the extent that children are born. The Ifo Institute favours a compulsory funded pension insurance (Riester Plan) for childless adults and a special pay-as-you-go pension that is calibrated according to the number of children a pensioner has contributed.
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