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Thriving in the Recession

Germany's Increasingly Powerful Seniors

By SPIEGEL Staff

Things are changing for Germany's aged. On one hand, their influence is growing and, controversially, they got the biggest pension increase in more than a decade last week. On the other hand academics are calling for a rethink on retirement, arguing that the old must work longer and harder.

This summer's biggest winner is not the sweet, young, bikini-clad thing frolicking on the beach. No, this summer's biggest winner is an elegant, older woman with white hair and glasses who laughs long and often. Because for Ulrike Mascher, 70, the past few months have gone extremely well. Since last October, Mascher, a former member of parliament for the Social Democratic Party (SPD), has been the head of the Sozialverband VdK, Germany's largest pensioner lobby group. Her influence has grown tremendously since she assumed the position. "Even our press releases get more attention now," she says.

In one such press release, issued on April 27, Mascher called for a "protective umbrella for retirees." Within hours of the release, Labor Minister Olaf Scholz had held a hurried press conference in which he promised not to cut pensions, "not next year and not in the years after that."

In uttering these words, Scholz suspended a mechanism that is almost as old as the Federal Republic of Germany. Until now, pensions have been linked to wages, and because wages threaten to decline, now that many Germans are working reduced hours, pensions would normally also be headed downward.

German Finance Minister Peer Steinbrück railed against that promise this week, saying "I have great doubts whether this is the right signal to send to the next generations. Those really affected (by the economic crisis) are the 25 to 35 year olds who may want to have children soon," Steinbrück said. "We should be worrying more about this generation." Steinbrück also noted that while other Germans had to worry about hanging onto their jobs, pensioners have never had it better.

It's true. Last week German retirees got the biggest boost in their pensions in more than a decade. From July 1, retirees in the West received a 2.4 percent increase, while those in the states of the former East Germany were getting a 3.4 percent hike in pension benefits. "It's certainly a start," says a cheerful Mascher.

It's more than that though, it is an historic victory. And retirees haven't even had to do very much to get their pension increase. There were no major demonstrations, no rallies. All it took was a few words and politicians snapped to attention.

The old folks have never been this powerful. Twenty million German men and women are older than 60 and they make up one third of all voters. And their influence will only grow especially when the baby boomers -- those born in the 1950s and 60s -- start retiring, around 2015.

Warning: Catastrophic Consequences of Aging Population

Demographers and economists have been warning of the consequences of this for years. They wonder how an aging society can survive in an internationally competitive economy and predict all kinds of catastrophe. Fritz Beske, an economist in the northern German city of Kiel, has calculated that the costs of the German healthcare system will rise dramatically within the next 40 years, despite expected advances in medicine. According to Beske, the compulsory health insurance contribution could rise above 40 percent.

But there are also surprisingly optimistic messages from other quarters. Human beings, say some researchers, are intellectually and physically capable of working much longer than society currently expects them to. It stands to reason that, if older people remain productive longer, then they will also be paying into the pension and health insurance system for longer. So the social welfare system, and its funding, is not as endangered as one might think.

Leading this new movement are well-known academics such as Heidelberg-based gerontologist Andreas Kruse, who heads the German government's gerontology commission, and Axel Börsch-Supan, an economist in the southwestern German city of Mannheim. Their conclusions are becoming more and more interesting to a wide range of industries, including German automakers, lawyers, architects and advertising professionals.

Almost every week, there's a meeting held in Germany to address questions arising in an era in which older members of society are no longer treated as second class citizens, simply drawing benefits from the sidelines. Questions like: How can companies become more inclusive of their older workers? What products do older people want to buy?

Businesses Look Into The Future -- and It's Elderly

One gets a glimpse of this future in Hall 43 at auto manufacturer, BMW's Dingolfing assembly plant, about an hour's drive out of Munich. Erich Bloch, 48, is stretching in front of a set of wall bars. He does the exercises once a day; they were recommended by his physical therapist. But he also does them because they make him feel better and add a little color to his working life. "The diversion is good for your mental health," he said.

He then returns to his workstation at an assembly line known as "Line 2017," -- so named for the year the entire BMW workforce will have reached the average age of all the workers at this particular assembly line. Because like Bloch, half of the 38 men working here -- all wearing blue overalls as they assemble rear-axle transmissions -- are close to 47.

In addition to the potential to take some exercise when they want, the employees at the Dingolfing plant also go on breaks together, take time out in a yellow-walled rest room and have specially padded floors at their workstations. That's because a padded floor is easier on the joints and spine, areas where most of the men here are already having problems after many years of strenuous physical work. BMW also plans to invest in similarly considerate working conditions for younger employees so that they won't have to deal with the same physical problems prematurely.

This pilot program at BMW is all about a paradigm shift. In the past, companies wanted to extract as much as possible from their employees; their strength, their stamina, their ideas. And when that was used up employees headed for early retirement and then eventually, full retirement. But today smart employers are already treating their employees more carefully. Even though only half of all men and women between 55 and 65 still work.

The current economic crisis is accentuating this trend. For the past year the number of unemployed older than 55 has been growing. This is another reason that VdK President Mascher, the Left Party and many SPD members are being more vocal about a reduction in the retirement age to 65. Starting 2029, the new retirement age of 67 will apply to all Germans. This results in a hidden "reduction of social benefits," Mascher and colleagues argue, because it means the older unemployed will have to wait an additional two years to begin receiving pension benefits.

That's debatable. Should the economy start to recover, everything will look different and the demand for labor will increase. And when that happens, businesses will prefer to hire young, energetic people. Having said that, those young, energetic employees are soon to be a minority in this aging society; in a decade only one-sixth of all Germans will be under 20.

As a result, Germany may run out of workers -- which would obviously have grave consequences for the general standard of living. If the labor market remains the way it is today, a gainfully employed person will have to be one-third more productive in 2035 to achieve the same level of prosperity as today. German think tank, Prognos, predicts the first shortfalls may become evident as early as 2015. In Bavaria alone, there will be a shortfall of about 130,000 university graduates.

For BMW, this means that the average age of their 80,000 employees will be 47, six years higher than today. And almost a third of the carmaker's employees will be 50 or older, a scenario the company is already simulating -- with some success -- at "Line 2017."

That assembly line runs at a faster pace than other lines and because the workers are older and more experienced, the error rate is close to zero. Fellow carmaker Audi and Deutsche Bahn, the German national railway, have launched similar projects. These companies are proud of the lessons they are learning. "We're well armed for the future," say BMW.