A German child born in 2020 may spend 57 per cent of their lifetime wages paying for pensions, healthcare, aged care and unemployment benefits. 

At least, that is the warning recently delivered by Germany’s most famous group of economic advisers, the German Council of Economic Experts (Die Wirtschaftsweisen).

The economists estimate that a German born in 1940 paid about 34 per cent of their wages towards financing the social safety net. A German worker born in 1990 will pay about 47 per cent.

Today’s primary school children could eventually face a burden of 57 per cent if the system remains unchanged.

Think about that for a moment. More than half of every worker’s labour could eventually be absorbed by social contributions. 

The debate unfolding in Germany offers a glimpse into Australia’s future. 

Germany’s baby boomer generation looms much larger than Australia’s because it combined a stronger postwar baby boom with decades of very low fertility and far less population growth from migration. This has left younger generations too small to balance the demographic scales.

The result can be seen in the chart below. Germany is visibly older than Australia.

As the giant German baby boomer cohort retires over the next decade, the country is not only losing experienced workers, it is also facing decades of increasing demand for healthcare and aged-care services. 

How should Germany pay for it? That question sits at the centre of German politics. 

The economic advisers argue that without reforms, social security contributions will continue rising as fewer workers support more retirees.

Their proposed solutions include slower growth in pension benefits, tighter eligibility for aged-care support, reforms to healthcare funding and a greater expectation that older Germans contribute more of their own savings towards care costs. 

Predictably, these ideas have triggered fierce opposition. Nobody enjoys hearing that benefits may need to be........

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