Introduction
The German pension was designed by Otto von Bismark the German chancellor who greatly influenced German politics during his time of service. That was over 100 years ago and is considered to be one of the first formal pension systems of the world. The German pension has become the model for many social security systems around the world. In the past it was responsible for providing the Germans a generous and reliable form of retirement income and has been praised as one of the causes of social and political stability in Germany. That is starting to change, in this essay I will explain how those generous pension plans that the government has set may hurt the German economy in the long run.
History
Germany is experiencing a demographic transformation change in its age structure among many other things. Germany’s demographic profile is actually changing into to an upside down pyramid, unlike that of the U.S.’s. Germany’s fertility rate remained very low after the Second World War unlike the U.S.’s two decade baby boom. Five years following the war’s end, Germany did begin to see its fertility rate start to recover. The rebound still never matched the level of the U.S. in the height of its baby boom years. The former West Germany fertility rate peaked at 2.5 in the mid 60s; the U.S peaked at 3.7 in 1957. It then fell even lower, dropping below 1.5 in the early 70s compared to the U.S.’s rate at 1.74. Germany’s rate fluctuated between 1.45 and 1.35 throughout the 80s. The former German Democratic Republic fertility rate tracked closely up to the 70s when the East German government instituted a series of reforms to boost the rate as a way to compensate for years of emigration. These reforms were only successful for about a decade. The East German fertility rate mirrored the other two in 1980, but fell to 1.5 by 1990. The united Germany fertility rate has been the lowest in the postwar era, fluctuating between 1.25 and 1.4....