""People will always have children." This is supposedly what Chancellor Konrad Adenauer said himself a father of seven in 1955, when the question arose as to which pension system the still young Federal Republic should adopt. Under Adenauer's leadership, it was decided that Germany would adopt a generational contract: The working population would finance pensioners by paying a percentage of their salaries."
"This means that the German population is aging, which has serious consequences for the pension system. The Federal Statistical Office estimates that by 2039, one-third of all people currently employed will retire. "Younger age groups will not be able to replace the baby boomers in terms of numbers," statisticians emphasized. This will be felt in the economy as the number of skilled workers decreases and as the intergenerational contract established by Adenauer to pay for pensions is faced with seemingly insurmountable problems."
Germany adopted a pay-as-you-go generational pension contract in the 1950s funded by worker contributions. That system relied on high birthrates and lower life expectancy to remain balanced. Birthrates fell sharply after the 1970s with widespread contraception, leaving annual births far below baby boom levels. The population is aging rapidly, and the Federal Statistical Office projects one-third of current employees will retire by 2039. Fewer younger workers will replace baby boomers, reducing the skilled labor force and increasing pressure on public finances. Demographic change will strain social security and intensify distributional conflicts between generations.
Read at www.dw.com
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