The root cause of the Baby Boomer pension predicament - The underlying cause of the pension predicament facing baby boomers
In a few decades, Germany is set to experience a significant demographic shift as the Baby Boomer generation retires. By 2039, around 13.4 million people will have exceeded the legal retirement age of 67, according to official statistics from the 2024 Microcensus by the Federal Statistical Office.
Currently, the labor market is still supported by a substantial number of working individuals aged 60-64, totalling 4.4 million. However, within the next 15 years, the labor market is expected to lose nearly a third (31 percent) of today's working population due to retirements.
The 55-59 age group, the largest on the labor market, currently has 5.6 million working persons. Subsequent five-year age groups have fewer than five million working persons each. The Baby Boomer generation, which will be missing from the labor market, has been a significant contributor to the country's workforce.
To offset this demographic decline, Germany is looking to immigration. The most important effects contributing to this offset include the influx of working-age migrants who increase the labor force, the integration of skilled immigrants who boost economic productivity, and the arrival of younger migrants who help stabilize the pension system by paying social contributions.
Unfortunately, younger generations cannot numerically compensate for the departure of Baby Boomers. This means that Germany faces a significant challenge in maintaining its workforce and economy in the coming years. As such, the country is focusing on strategies to attract and integrate immigrants, as well as to encourage older workers to stay in the workforce for longer.
