"I am not an Exploiter"
"In 1900, one farmer fed three consumers. Today over eighty cvonsumers depend on one farmer..Productivity is decisive..The economy is far more productive now than in the fifties, sixties and seventies because seniors of today saved in their active time and invested capital..Future growth will decide over the size of the cake that can be distributed between the old and the young..The propagandists of a "war of the generations" have been at work for more than a decade.." Translated from the German
"I am not an Exploiter"
by Wilfried Herz
[This article originally published in: DIE ZEIT 17/2003 is translated from the German on the World Wide Web, http://zeus.zeit.de/text/2003/17/Generationenkonflikt.]
Today's senior citizens plunder the welfare system and squander pensions, the young say. Tomorrow's senior citizens will be poor and without rights, politicians declare. They all err. A plea against the conflict of the generation
In a few years, I will be one of the senior citizens who live at the expense of the young. I will be one of those "over-provided" pensioners. Will I enjoy the life of a parasite while the busy work bees no longer know how they can pay the exorbitant old age pensions?
The propagandists of a "war of the generations" have been at work for more than a decade. In 1989 the Giessen sociologist Reimer Gronemeyer predicted the "threatening war of the young against the old". The two authors father Gunter and son Peter Ederer sowed disunion in the middle of the nineties. "A generation of parasites built a "cradle-to-grave society that their grandchildren should rescue." In "Stern" a few months ago Walter Wullenweber demonized my generation as inconsiderate parasites who steal from their children.
This debate is fueled with maliciously false arguments and reveals an alarming economic ignorance among the scourged. The younger ones see themselves as victims - alienated by leaders in the economy and politics and plundered by a social system that generously remembers pensioners. They hardly expect any thing from this system. According to a survey, 80 percent of those under 25 do not believe they will receive a pension in old age from which they can live. Politics reacts in a way that envelops all the parties. The young are regarded as a species worth protecting, no longer seniors as up to the eighties.
In the time of my active life, I was among the higher income people and paid great amounts into the pension fund. The immense work was always fun to me. The limits of contractual working time never interested me. Now my monthly pension will be 1500 Euro after deduction of health insurance. (The pension would be higher if I were not affected by a legislative oddity of German unity. Since the Berlin office of ZEIT moved a few kilometers from the former western to the former eastern part of the city, I have been an Ossi (eastern) for several years for pension insurance - with a lower contribution and later with a lower pension.)
This pension does not allow a life in luxury although it is more than most retirees receive. Happily I provided for old age. However the pension will be taxed until I enter in retirement. This will reduce the pension. The planned additional income from capital saved in decades is also reduced by the stock market crash. Enough time is left to me up to the age limit to compensate for the changed rules. While I do not complain, the young generation has reason to be critical.
The scare-mongering afflicting so many young persons has a foundation. The society grows older since children have become a rare commodity and seniors live longer. Thus fewer and fewer employed persons appear on the horizon for more and more retired persons.in the pension system. Employed persons pay directed in this system with their contributions. Every trainee and every student knows the number of persons that a payee of a pensioner will provide in three decades. Today the relation is two-to-one.
The population prognoses are actually the only certainty in this catastrophe scenario. The old-age structure says nothing about the prosperity of present and future generations. "We must actu7ally starve to death" according to the number of persons theory, former social minister Norbert Blum (CDU) wrote. In 1900, one farmer fed three consumers. Today one farmer supplies over eighty consumers. Blum is right on this point. Productivity is decisive.
The conclusions promising a depressing future to the young are certainly questionable. On the other hand, politicians like Blum (!935) and the Green spokesperson Katrin Goring-Eckhardt (1966) only waken illusions with their promises to make pension security "future-friendly". No one knows how the economy will develop in thirty years. Economic researchers recently showed their inability to estimate the development of the next months. Future growth will decide over the size of the cake that can be distributed between the old and the young.
If the German economy only grows a modest two percent on the yearly average - too little to substantially reduce mass unemployment -, the gross domestic product will be twice as great in three decades as today. This should be enough for a reasonable life for everyone from babies to senior citizens. The young in the course of their working lives may even succeed today in increasing productivity thanks to new technologies. Better education and more investments may arise. If the annual growth rate rises to four percent on average, the cake will be more than three times as large in thirty years. Such rates were achieved in Germany in the seventies and in the United States in the nineties. Growth chances and not provision in old age should be the long-running issue in the domestic political debate.
Whoever tells the young that they are poor and without rights ignores clear facts and the simplest economic connections. Every generation builds on the fundamentals left behind by its predecessors. I do not envy the young that they must earn more today, have shorter work times, more vacation and live in larger dwellings than my generation or my parents. Still the economy is far more productive now than in the fifties, sixties and seventies because seniors of today saved in their active time and invested capital.
I will not have a bad conscience since my situation as a pensioner will be better than my forefathers and foremothers. Perhaps many young persons envy seniors and their income because the6y overrate the amount of the pensions.. Two-thirds of women and a hefty share of men describe their pension claim higher than it is actually is, according to an analysis of the German Institute for Old Age Security.
The gray-haired who flourish on cruise ships and luxury hotels under the southern sun do not only depend on their social pensions. A "benchmark pensioner", technical jargon for a retired person who earned an average amount in 45 years receives a pension of 1072 Euro in the West and 941 Euro in the East. Old age poverty has happily become rare though no great excursions are possible with most pensions.
I am amazed how easily the young are intimidated and believe they will only inherit a mountain of state debts instead of billions of private assets. There are no serious signs that the seniors will squander all their assets before the heirs get a chance. Although old age security is the main motive for their own savings, many seniors still put something aside for a rainy day even after receiving pensions for a long time.
It was a half economic truth when the SPD leader (Socialist party in Germany) Franz Muntefering, born in 1940, justified the austerity course of the coalition in the parliament's budgetary debate with the argument "that our children and grandchildren want to inherit something other than promissory notes and mortgages." The huge debt mountain burdens state budgets and taxpayers while creating revenue with the credit interests.
What is involved is the very old problem of just distribution between the poor and the rich independent of the generations, not a distribution conflict between old and young. The neediest do not lend money to the state. The rising generation of poor devils cannot rejoice about an opulent inheritance.
The debate on dividing pension burdens between the childless on one hand and fathers and mothers on the other hand is similar. Should those who don't raise children (and don't bring potential contributors into the world) receive enormous pension reductions in the future as proposed by the economics professor Hans-Werner Sinn, father of three children, and the childless Angela Merkel? Everyone should live according to his or her fashion. However every child in his first eighteen years burdens the family budget at 150,000 Euro. Nevertheless playing off the increased poverty risk of families rich in children against the far lower old age poverty is unfair.
The argument that the distribution of burdens between the young and old must be quickly reconfigured since the overpowering block of senior voters will otherwise prevent reforms is very malicious. The inevitable cuts in old age benefits were accepted in the past. The first holes in the pension funds were manifest from the middle of the seventies. The legislators cut the pension claims many times without seniors mounting the barricades. Without these interventions, the pensions today would be 50 percent higher. The current debates in the red-green coalition around a freezing of the 2004 pension increase and a new pension formula for the next decade3s are forerunners of further reductions.
I am obviously concerned that the young will not be overstrained. Soon I will live from them. The amount of the pension security contribution is a question of sober economic calculation rather than justice. The limit is where contributions destroy jobs and prevent new employment. If mass unemployment should be brought under control, contributions can only be lowered through additional payees in the pension funds. The young will even profit twice since the unemployment insurance will also be lower for them.
The young err if they believe the alleged demography trap can be escaped with a capital-covered pension insurance. The hope for more security and yields is illusory. Insurances that invest their capital in securities and property cannot be uncoupled from the ups and downs of the economy and the stock exchange. These dreams should be over with the bursting of the speculative bubble on the stock markets. A very different variant is conceivable. The new world of work requires a very new financing system of social insurance through taxes and no longer through contributions dependent on working income. The first initiatives and reflections exist.
However beyond all financing models, seniors could relieve the young if the young allow this relief. Seniors must work longer and not retire at sixty. Then they will pay contributions longer. They will also be boarders of pension insurance for a shorter time. Whoever holds to the saying of lifelong learning in his or her active life will also be fit enough at sixty-plus to keep pace in the work process. Excepting hard bodily work, a generally diminished effectiveness of seniors is a fairy-tale long refuted by doctors.
In the meantime I am in the minority in my age group of those who still have a firm job. No one over fifty works in half of German businesses...
The premature change of older employees into retirement for everyone is too expensive for the economy and for social insurance. My experience and my knowledge gathered in almost four decades is in no way limited to unimportant events like Helmut Schmidt's apologizing for the election deception of pensioners in the seventies or the German government building bunkers in Saddam Hussein's Baghdad at the beginning of the eighties. The failed attempts of economic stimulation, the vast number of monetary crises, the downfall of mammoth conglomerates or whole states into misery and following all the changing fashions in science are experiential treasures. Optimally using the human capital of old and young is central, not trivializing the indisputable achievements of the young.
Attractive jobs must be offered seniors whose further career stages are no longer important. Seniors should not prematurely swarm to golf courses, allotment gardens or Mallorca. Whoever works with personal responsibility will not become an odd job man and command receiver in old age. The younger will be relieved in pension insurance.
My pension is secure. Still I know what must be clear to all future and present pensioners: No welfare state can guarantee an absolute amount of pensions on account of the vicissitudes of the economy. There could and can never be a greater security than the reliable promise that pensioners will share in the general economic development. If a war of the generations would destroy this promise, this would be harmful for all future pensioners.
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