At the end of September the German federal government put forward a modified reform concept for retirement provisions. As government representatives, Labour Minister Walter Riester and SPD social expert Ulla Schmidt explain the goals and central elements of the pension reform which "by expanding private retirement provisions intend to connect the reliability of the pay-as-you-go system based on the idea of solidarity with the better returns of the capital market". Especially the "lack of fairness between generations" from a "one-sided burden on the younger generation" stands at the heart of the criticism that is expressed by Horst Seehofer, deputy head of the CDU/CSU opposition in the German Bundestag. Improvements in the reform concept are also requested by Prof. Winfried Schmähl, University of Bremen, and Prof. Bernd Raffelhüschen, University of Freiburg.
By Hans-Werner Sinn and Silke Übelmesser
German society is ageing and birth rates are declining. The shifts in the age structure of the population are making it increasingly difficult to meet pension entitlements, and the younger generation's voting power in democratic decision-making is weakening. This article shows that there is currently a strategic majority for pension reform that will ease the burden on the younger generation. This majority will disappear, however, by about 2023 due to demographic developments. The voting structure will then turn, and Germany will find itself under a gerontocratic regime with a problematic impact on its ability to reform. Needed reforms must be implemented now, when strategic majorities are still present.
By Christian Baretti, Robert Fenge, Bernd Huber, Willi Leibfritz und Matthias Steinherr
Federalism in Germany has been increasingly at the focus of political debate in recent years. Criticism is directed at the increasing interlinkage of spending and revenue-intake competencies of the federal and Länder governments as well as a financial system that leaves the Länder little scope for their own initiatives in improving their financial situation. The Ifo Institute, with the collaboration of Prof. Bernd Huber of the University of Munich, has conducted a comprehensive examination of this problem. The study concludes that German federalism is in need of strengthening. The scope of action of the Länder should be increased to do more justice to the preferences of the Länder population. At the same time, however, the goal of a uniform standard of living throughout Germany must be kept in mind. In concrete terms, the Ifo Institute proposes that the Länder be granted the right to levy taxes in the form of surcharges and deductions on income tax and corporate income tax. An empirical analysis also determined that the Länder fiscal equalisation tends to have a negative impact on growth in the Länder because of the strong tapping of additional tax revenue. For this reason, fiscal equalisation should be reformed in a way that the negative incentives from high marginal tapping can be reduced. At the same time, all Länder must continue to receive sufficient financing, and additional reconstruction aid for the new Länder must not be called into question. The Ifo Institute also proposes that mixed financing schemes (joint tasks, financial aid, and cash benefit laws) be reduced. A regional differentiation in the pay scale for government employees also seems to be advisable.
By Martin Werding
On the basis of the CESifo pension model, this article shows the differing effects of some variants of pension law. The reform laws of 1992, 1999 and 2000 were examined as well as the Ifo recommendations on pension reform published in ifo Schnelldienst 18/2000. In examining the politically implemented or planned reforms, the most sustainable impact on the development of pension contributions and the level of pension benefits are found in the "Riester reforms". According to calculations by the Ifo Institute, even this variant will not be able to maintain a pension contribution rate of 22%, but will reach the 23% mark already in 2030 and 24% in 2035.
By Joachim Gürtler
The 22nd Ifo Survey of EDP Service Providers was conducted in July and August. The current business situation was again given a less favourable assessment, but on balance 60% of the firms gave a positive response to the six-month business outlook. The industry continues to suffer from personnel shortages.
By Wolfgang Ochel
No one disputes that economic prosperity in the information age is largely dependent on work force qualifications. Measured in terms of the number of participants and the length of continuing vocational training measures, Germany has fallen behind most other industrial countries.
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