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Topic: Deep cuts in Germany
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abnormal
rabble-rouser
Babbler # 1245
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posted 18 October 2003 06:07 PM
The German pension scheme is what's commonly called a "paygo" system ("Pay as you go"). In other words, current pension contributions (or taxes if those are inadequate) pay for current pension benefits. This works well if the number of workers remains relatively steady or increases and people retire at relatively old ages. [When Bismark originally set up the German retirement system it was to get rid of the "old" aristocracy that was still cluttering up the civil service. Besides, there weren't many of them since 65 was truly a ripe old age.]The problem (or at least one of the problems) faced by Germany is changing demographics. Fewer people are entering the work force than are leaving it. This means that there is an ever shrinking base of currently employed to pay for the currently retired. quote:
The current ratio of three employees for every pensioner for example is projected to fall to one-to-one by 2030.
That last statement means that, by 2030, every worker will, on the average, have to fund one retiree as well as pay taxes, feed their families, etc. Without some sort of major restructuring this isn't sustainable. Add to that the various EU directives on the matter and something has to give.
From: far, far away | Registered: Aug 2001
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