2024-08-16 17:35:09
Combating the shortage of skilled workers
Pension down, tax advantage gone: study supports controversial ideas
Updated on 16.08.2024 – 13:48Reading time: 3 min.
There are many suggestions circulating about how to get more Germans to work. The Ifo Institute has calculated what cuts in pensions and taxes really achieve.
Higher retirement age, larger deductions for early retirement, abolition of income splitting for spouses – there are several ideas to counteract the shortage of skilled workers. And they are usually controversial. But would they even be effective?
The Ifo Institute has now addressed this question. According to the Munich-based economists, changes to pensions, taxes and social security contributions could encourage so many people to work longer that this would correspond to a gain of around 1.2 million full-time jobs. The greatest effect would be raising the retirement age from 67 to 69. The calculations at a glance.
It is unpopular with pensioners – but there are regular calls for the retirement age to be raised. The reason for this is that life expectancy has increased and with it the length of time people can receive a pension. This poses financing problems for the statutory pension insurance system. According to Ifo calculations, simply raising the retirement age from 67 to 69 could mean the creation of 473,000 full-time jobs.
Anyone who has paid into the statutory pension fund for at least 35 years can take early retirement from the age of 63 with a reduction in pension. The pension is reduced by 0.3 percent for every month that employees leave the workforce earlier than planned. Many economists believe that this is too little. A reduction of 0.5 percent would be appropriate instead. According to Ifo, this could mean an employment gain of almost 180,000 full-time jobs.
Anyone who has 45 years of contributions can even take early retirement without deductions from a certain age. This so-called pension at 63 is no longer available to today’s employees at the age of 63, but it is still used much more than politicians expected. Read here at what age you can use this early pension without deductions.
According to calculations, abolishing the retirement age of 63 would correspond to a gain of 157,000 full-time employees.
In the statutory health and nursing care insurance scheme, spouses can be co-insured without paying any contributions. This means families save a lot of money, but it also means that women in particular have less incentive to go to work themselves. According to Ifo, the abolition of the co-insurance scheme could also encourage many people to work more or for longer, equivalent to around 150,000 full-time jobs.
If married couples or registered life partners file a joint tax return, they benefit from what is known as spousal splitting. The greater the difference in income, the greater the tax advantage. Read more about how spousal splitting works here.
Critics complain that the splitting procedure means that in some situations it makes no sense for the partner who earns less – usually the woman – to go to work at all. However, the current federal government will not abolish it. Instead, tax classes 3 and 5 are to be abolished. Read here what this means for couples.
According to the Ifo Institute, the abolition of the income splitting system for spouses would motivate so many people to work more or for longer that it would correspond to around 200,000 full-time jobs.
According to the study, there is also a way to combat the shortage of skilled workers beyond pensions, taxes and social security: 400,000 additional childcare places would lead to employment gains of around 58,000 full-time equivalents.
“The tax and contribution system in Germany can definitely be restructured in such a way that the labor shortage is alleviated,” says Volker Meier, one of the authors. The greatest potential lies among older workers and women who leave the workforce relatively early and/or work part-time.