Germany: Revolt of the Young

They're balking at the prospect of shouldering the financial burden of a fast-growing cohort of retirees

It wasn't the sort of political discourse Germans are used to. Philipp Missfelder, chairman of the youth wing of the center-right Christian Democrats, griped that medical care for old folks was creating an intolerable financial burden for the young. It's about time 85-year-olds started paying for their own hip replacements and false teeth, Missfelder declared in an August interview with the Berlin daily Tagesspiegel that was widely quoted by other news media. "In the old days, people got around on crutches," he said.

In consensus-oriented Germany, which lacks America's radio shock jocks and right-wing talkmeisters, Missfelder's comments provoked a furious backlash. Within days, Christian Democrat elders had muzzled the 24-year-old politician. Asked for comment early in September, Missfelder offered only a terse e-mail. "Reform is needed, but there must not be a war between generations," he wrote, and refused to say more -- for now.

Missfelder may have been politically incorrect, but he touched a nerve. It's dawning on Germany's young people that the retirement years won't be nearly as comfortable for them as they were for their elders. Nowadays, Grandpa and Grandma typically retire by 60 and, if they've paid into the system their whole working lives, may together collect a government pension of more than $45,000 a year. But today's 30-year-olds may have to work until 70 and still wind up collecting a lot less. Meanwhile, it is their payroll deductions that largely support today's old folks. "I have long given up any expectation of receiving a dime from the government when I'm 60," says Arndt Rautenberg, a 36-year-old managing director of the German unit of software consultant Sapient. "I am very concerned there is a growing sentiment of misunderstanding and even anger at older people."

It hasn't quite come to a war between the generations -- yet. But there is mounting frustration that the mostly older folks in power are not doing enough to prepare for an alarming demographic shift caused by Germany's low birthrate and declining population. The problem is most acute in Germany, but it afflicts all of Europe. It's not just pension systems that will become unaffordable; so will health care and nursing-home care. German media such as Stern magazine, a popular weekly that featured the aging debate on its Sept. 4 cover, describe a future in which soaring payroll deductions for social security drive even more companies and talented workers to other shores. By 2050 or so, in the worst-case scenario, Germany is an impoverished geriatric ghetto.

Chancellor Gerhard Schröder's main response has been to name a high-profile panel. The group's recommendations, issued on Aug. 28, include increasing the legal retirement age from 65 to 67 starting in 2011 and automatically reducing benefits in line with declines in the number of people who pay into the pension system. But Schröder was noncommittal in response to these modest proposals, promising only that he would "thoroughly examine" them. Meanwhile, Germany is still a long way from solving its underlying economic problems. Schröder's "Agenda 2010" reforms, which aim at partially deregulating the labor market and taming health-care costs, are in danger of getting watered down by Berlin partisan politics.

The demographic numbers are indeed scary. Today, there are about four working-age people in Germany for every person at or above 65. By 2040, the ratio will be only 2 to 1. France is headed down the same path. An extended baby boom means that the working population will continue to grow slightly until 2010, according to the French government's Pension Advisory Board. But the population of over-60s will start increasing fast in 2006. In 2040, according to the state statistical bureau, 1 out of 3 Frenchmen will be over 60, compared with 1 out of 5 today.

Some of Schröder's harshest critics are the leaders of his own party's youth wing, the so-called Young Socialists, or Jusos. They accuse Schröder of spinelessly orienting policy according to headlines in the tabloid-style Bild, Germany's most widely read newspaper. At IG Metall, the union that represents auto and steel workers, militant Chairman Jürgen Peters barely withstood an uprising in August by younger activists who want to move the union more to the political middle. Young people are also chafing at the red tape and labor market regulations that make it hard to start a business or just get a job. Germany's labor law "above all protects those who are already in a completely insured, eight-hour-a-day job," complains Björn Böhning, deputy chairman of the Jusos.

Still, there is no consensus among the young. Conservatives and centrists tend to favor a more U.S.-style system, with lower taxes and fewer barriers to entrepreneurship. Many accept the idea they will be pay for their own retirement. "Basically, the situation is going more toward self-management," says Rita Booker, a 35-year-old Berliner whose company, European Standards Consulting, helps German corporations train managers in Central Europe. On the left, young people want to emulate countries such as Denmark, which has managed to create a flexible labor market and cut unemployment while retaining a big social safety net. "The younger generation has never been so divided," says Böhning with a sigh.

Of course, young people get some benefits themselves from the welfare state. Free university education springs to mind. Still, many young people think that their elders are getting a better deal, and they resent it. Some 62% of Germans under 25 see relations with the older generation as "full of conflict," according to an April poll by Infratest Social Research in Munich. "There are going to be more and more voters over 50, and it's going to be difficult to do anything against their interests," says Uwe-Michael Sinn, a 34-year-old Frankfurt man who is caring for an eight-month-old son while working from his home helping companies market over the Internet.

There's not much time left to find a solution. Germany's baby boomers will start retiring by the end of the current decade. "Everybody has to understand now that there is an urgent need to do something," says Dominique Döttling, 36, who operates her own consulting firm in the south German town of Uhingen and was a member of Schröder's social security commission. But, like global warming, demographic problems require society to accept pain now to avert an abstract problem years in the future. Considering Germany's record on reform so far, young folks should probably start saving up for that hip replacement now.

By Jack Ewing in Frankfurt, with John Rossant in Paris

— With assistance by John Rossant

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