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Rethinking the Welfare State

The Political Economy of Pension Reform

Edited by Martin Rein and Winfried Schmähl

In this book a distinguished group of contributors discuss the changing political economy of pension reform. They focus on those countries which have launched a significant reframing of their pension system. Each chapter provides a detailed review of recent pension reforms and offers institutional evidence of the extent to which these reforms suggest a redirection of the welfare state towards a more public-private mix of policies. The countries were selected to represent the variety of new directions which mature industrial countries as well as countries in transition have taken.
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Chapter 6: Paradigm Shift in German Pension Policy: Measures Aiming at a New Public–Private Mix and their Effects

Winfried Schmähl


6. Paradigm shift in German pension policy: measures aiming at a new public–private mix and their effects Winfried Schmähl INTRODUCTION Germany has one of the oldest public pension schemes in the world. When in 1889 the political decision on the design of the statutory (social) pension insurance was made, a number of structural elements were introduced that more than one hundred years later still influence pension schemes.1 However, since the late nineteenth century a lot of changes have taken place in the process of adapting pension arrangements to changing conditions in the environment of pension schemes, such as demography, economy, household structures and living conditions, but also in political objectives and dominating normative positions in the country. Nevertheless, there has also been some continuity. Several attempts or proposals to abolish the social insurance scheme that is mainly based on contribution payments were not successful.2 Pension reform has been a topic debated worldwide for many years and also has a high ranking on the political agenda in Germany. Pension reform was also of great importance in several election campaigns to the Federal Parliament after the Second World War. One of the central questions in recent debates is the role of the state in general as well as in pension policy. Pay-as-you-go (PAYGO)-financed public schemes in particular are under severe political pressure in Germany. Often a radical shift towards capital funding is proposed, which is in general linked to proposals for privatizing at least major parts...

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