The Director of the Institute of German Economics (IW) in Cologne, Michael Hüther, is lending his support to Economy Minister Katarina Reiche’s considerations regarding an extended working life. In a commentary published by news site ntv.de, Hüther argues that a retirement age of 67 may no longer be sustainable given rising life expectancy.
He emphasizes that increasing the working lifespan and consequently boosting the employment rate of older individuals, is a vital component in fulfilling Germany’s economic workload and securing the nation’s social systems. Hüther’s assessment points to a fundamental shortfall in Germany’s overall economic output. This isn’s necessarily due to a lack of diligence, but rather a consequence of the country’s aging population.
Specifically, Hüther highlights a demographic challenge stemming from the “pill echo” a period of reduced birth rates between 1965 and 1975. Between 2026 and 2029, an estimated 5.2 million people will reach the age of 66, while only 3.1 million will enter the 20-year-old age bracket. This imbalance is compounded by a decline in annual working hours per employed person, which has decreased from 1,554 in 1991 to 1,332 in 2024. In West Germany, this figure stood at 1,966 in 1970.
Beyond raising the retirement age, Hüther advocates for an increase in the annual working hours. This can be achieved through adjustments to the weekly working hours and the number of working days, even with maintaining current levels of part-time employment. He explains that increasing annual working hours addresses different regulatory frameworks compared to extending working lifespans. Regulations governing weekly working hours, vacation entitlements above the statutory minimum of 20 days and public holidays are subject to varying levels of control – involving social partners, state legislatures and other institutions. Targeted increases in annual hours could also help individuals currently in involuntary part-time employment, such as single parents struggling to access adequate childcare.
Furthermore, Hüther suggests that targeted immigration can play a role in securing the pension system. He calls for a “labor market-driven” approach to skilled worker immigration, alongside efforts to increase the employment rate of potentially employable individuals already residing in the country. This involves reducing disincentives within the social security system and providing integration and educational opportunities.
Overall, Hüther notes a lack of dynamism in the existing framework governing work. He suggests a need to address the organization of working hours and locations within businesses, deregulate temporary employment and fixed-term contracts to augment Germany’s overall work volume.
He underscores the importance of assessing policy proposals based on their merits rather than ideological biases. Hüther emphasizes that a range of measures can reinforce one another and should not be pitted against each other. Ultimately, he believes a more flexible and dynamic regulatory environment could stimulate greater gains in labor productivity, advocating for open discussion free of preconceived notions.
