The Confederation of German Employers’ Associations (BDA) is pressing the government to proceed swiftly towards reforming the country’s pension system this year, knocking down incentives to retire early.

BDA president Rainer Dulger said that “2023 must be a year of action. Germany needs real and sustainable reforms. Now is the time to put the necessary reforms into practice, without any mental restrictions”. He also addressed labour market figures published on 3 January.

According to the figures published by the federal employment agency – Bundesagentur für Arbeit – the German labour market remained robust last year despite the consequences on the economy caused by the war in Ukraine, with unemployment falling significantly on average, and employment continuing to rise.

The number of unemployed people in Germany fell by 195,000 to 2.41m in 2022 compared with the previous year, while the demand for new employees remained sustained over the past 12 months, although noticeably weakening in the second half of the year, the employment agency said.

The demand for new employees increased by 139,000 year-on-year in 2022, bringing the number of registered free jobs to 845,000, according to the federal agency.

Dulger said the debate on labour market policy had changed, with the main challenges now being a shortage of skilled workers and training for employees.

The German labour market, according to BDA, continues to have structural problems, and one solution is to create the right conditions for people to work longer.

“It is crucial to dismantle any incentives for early retirement. The ‘pension at 63’ (Rente mit 63) is a brake on prosperity,” Dulger said referring to a measure allowing employees to retire at 63 without pension cuts, but with 45 years of contributions.

Rainer Dulger at BDA

Rainer Dulger, BDA

Dulger’s comments add to an intense debate started in Germany after chancellor Olaf Scholz said in an interview that he wants to create conditions for people to work longer

A report published by Federal Institute for Population Research – Bundesinstitut für Bevölkerungsforschung (BiB) – showed that people of the ‘baby boomer’ generation tend to leave the labour market at the age of 63 or 64, before the statutory retirement age that has been increasing gradually since 2012 from 65 years to 67 years.

From 1 January this year, however, those born in 1960 can retire early under the “pension at 63” rule but at 64 years and four months, while for those born after 1960 the early retirement age will increase until 2029 to 65, according to the Deutsche Rentenversicherung.

Labour minister Hubertus Heil has rejected the idea of knocking off the possibility of retiring after 45 years of contributions without cuts, raising instead the “real retirement age”.

“The share of those that are still employed at 60-64 years old has risen from 20% in 2000 to over 60% today. If we increase this rate to 70% we will have 700,000 more skilled workers by 2030,” he said in an interview with the Rheinischen Post.

Monika Schnitzer, the chair of the German council of economic experts advising on economic policy, has called for the scrapping of “pension at 63”, speaking instead in favour of retirement age at 69, according to reports.

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