NYTimes.com Article: Aging Europe Finds Its Pension Is Running Out

[Friam mailing list]

This article from NYTimes.com
has been sent to you by [hidden email].


/-------------------- advertisement -----------------------\

Explore more of Starbucks at Starbucks.com.
http://www.starbucks.com/default.asp?ci=1015
\----------------------------------------------------------/

Aging Europe Finds Its Pension Is Running Out

June 29, 2003
By RICHARD BERNSTEIN




 

BAD FÜSSING, Germany, June 25 - This spa town in the
Bavarian countryside, blessed with natural hot springs with
reportedly curative powers, does not resemble Fort
Lauderdale or Miami Beach, but it is the rough German
equivalent, the place where retirees go for their comfort
and well-being.

But if Bad Füssing is small compared with senior citizens'
centers in the United States, it nonetheless represents a
big part of the future in Germany and elsewhere in Europe,
where a population that is both living longer and producing
fewer children is beginning to change some of the
fundamentals of both social and political life.

The changing demographic picture has produced political
uncertainty and crowds of angry demonstrators in European
countries whose governments, reacting to the shift from
youth to the aged, are moving to reduce social services,
including the pensions that millions have been counting on
for their golden years.

"We've only seen the beginning of that," said Wolfgang
Lutz, a demographer at the Austrian Academy of Sciences who
projects a steep upward curve in the average age of
Europeans in the years ahead.

But while pension reform is the urgent political issue of
the moment in Germany, Austria, France and other countries,
many experts see it as a harbinger of things to come, a
sign of a demographic shift with important implications not
only for the welfare of retirees but also for European
societies as a whole. The crucial factor is age.

One study by William Frey, a demographer at the Brookings
Institution in Washington, predicts that the median age in
the United States in 2050 will be 35.4, only a very slight
increase from what it is now. In Europe, by contrast, it is
expected to rise to 52.3 from 37.7.

The likely meaning of this "stunning difference," as the
British weekly The Economist called the growing demographic
disparity between Europe and the United States, is that
American power - economic and military - will continue to
grow relative to Europe's, which will also decline in
comparison with other parts of the world like China, India
and Latin America.

With its population not only aging but shrinking as well,
Europe seems to face two broad possibilities: either it
will have to make up the population shortfall by
substantial increases in immigration, which would almost
surely create new political tensions in countries where
anti-immigrant parties have gained strength in recent
years, or it will have to accept being older and smaller
and therefore, as some have been warning, less influential
in world affairs.

"The European countries are aging in a world that is
becoming younger," Mr. Frey said in a telephone interview.
"And in a global economy, they're not going to share in the
energy and vitality that comes with a younger population."

Mr. Lutz, who with Brian C. O'Neill and Sergei Scherbov
wrote an article on the subject in Science, agrees that the
crucial issue is less a smaller population than an older
one.

"There is a fear that just as the world is entering its
most competitive stage ever, Europe will be less
competitive vis-à-vis the United States and the Asian
economies, which are much younger and are benefiting from
what you might call a demographic window of opportunity,"
he said.

The first effect of this has taken the form of efforts by
European governments both of the left and of the right to
trim the pay-as-you-go pension system, under which the
taxes paid by current workers are used to pay the pensions
of current retirees. This has produced angry protests. In
Austria, which has one of the most generous social welfare
systems, workers have staged the first general strikes in
that country since the end of World War II. In France,
there has been a series of national one-day work stoppages
as the conservative government has put forward a proposal
that would require workers to stay on the job several more
years than at present to be eligible for pensions, which
would be smaller.

But some experts are convinced that the reform efforts
being proposed, difficult and controversial as they are,
will prove inadequate to cope with an aging population.

"In reality, a legal retirement age of 80 is what we should
aim at," Erich Streissler, an Austrian economist, wrote in
a newspaper article.

Mr. Streissler's basic argument is one that applies to most
of the countries of the European Union: people are retiring
well before the official retirement age of 60 to 65,
depending on the country.

Across Europe, only 39 percent of men age 55 to 65 still
work, according to the Organization for Economic
Cooperation and Development.

This means, given the historically low birthrates of "old"
Europe, that a decreasing number of young people are paying
into pension systems that have to support a larger number
of people who, on average, will be in retirement for almost
as many years as they worked to earn their pensions in the
first place.

Or, as Mr. Streissler put it about his own country, the
system works "to give every Austrian the right to retire in
midlife with what is internationally a particularly high
pension, so that he can waste an ever increasing portion of
his lengthening life expectancy in unemployment."

Here in Bad Füssing, the population trends in Germany are
easy to see. Forty years ago, when this village decided to
turn itself into a holiday resort, the local population was
a grand total of 38, according to Rudolf Weinberger, the
spa's director. Now, Mr. Weinberger says, Bad Füssing is
the biggest spa in Europe, with 250,000 guests coming each
year and a permanent population of 6,400, including 2,400
retirees.

Two other spas in addition to Bad Füssing have sprung up in
this area not far from the Austrian border, along with
four- and five-story chaletlike hotels, guesthouses,
restaurants and shops.

"It's a good life in Germany as a retired person," Günther
Burhenne, 67, said, immersed in an indoor pool at one of
Bad Füssing's three elaborate hot-spring bathing complexes.
Behind him was a gaudy mosaic of fish and sea anemones.
Outside, a crowd did calisthenics while standing waist deep
in sulfuric water.

There are many people here like Mr. Burhenne, who had a
34-year career in the German Army, and then worked briefly
as a real estate agent before he retired. The guests at Bad
Füssing seem far from old and decrepit. They are just a bit
beyond middle age and are still vigorous enough to play 18
holes at one of the eight golf courses built near here in
the last two decades.

But that is the point about Germany, which, like Austria,
is at the leading edge of European population change with
its anxieties about the future. People like Mr. Burhenne
can enjoy their retirement, but some people here see the
national debate about what is called pension reform as a
dark cloud on the horizon.

"It will definitely get harder because there are not enough
jobs," said Helga Schimpfhauser, 63, reclining on a chaise
longue in another part of the spa. "They talk about raising
the retirement age, but nobody will hire you after 50
anyway."

Lounging with his wife nearby, a man who would give his
name only as Reinhardt was fuming because the spa refused
to accept his state health insurance this year and he had
to pay the $8 daily entrance fee out of his own pocket. He
had not been told that most health insurance programs in
Germany removed spa treatments as an automatic benefit last
year, though if doctors prescribe such treatment a person
is still covered for one visit every three years.

For European governments, there is no alternative to
reform, which means lower benefits and higher retirement
ages. Austria, despite the labor walkouts, has passed
legislation cutting benefits by 10 percent and gradually
raising the retirement age to 65 from 60. Similar
legislation seems almost certain in France and here in
Germany, which has one of Europe's lowest birthrates.

Indeed, Germany's Ministry for Family Affairs, Senior
Citizens, Women and Youth has compiled figures showing just
how much the population is changing. The fertility rate
itself is 1.34 children per woman, well below the rate of
2.1 said to be needed to maintain a stable population.

The reasons given for this apply throughout the
industrialized world: people in highly developed,
prosperous societies tend to have fewer children; women
postpone childbearing to pursue careers, or forgo having
children altogether.

In Germany, among women born in 1950, 14.9 percent of west
Germans and 8 percent of east Germans are childless. By
comparison, of women born in West Germany in 1965, 31.2
percent are childless along with 26.4 percent of women born
in East Germany.

Even more striking are the differences by social strata.
Fully 39 percent of the most educated German women are
childless, the government's statistics show, compared with
under 25 percent for women with less education.

"The more money you make, the greater is the opportunity
cost for having children," said Bernd Raffelhüschen, a
member of a German governmental commission studying pension
reform.

Projecting the population into the future is difficult
because nobody can be sure that the birthrate will not
begin to increase, as it has, for example, in recent years
in France. Indeed, a higher birthrate, combined with
immigration, could significantly halt the trend toward an
older and a smaller European population.

Mr. Lutz and his colleagues estimate that one million
immigrants a year into Europe would be the same as women
having on average one more child. But one million
immigrants a year would mean 50 million by 2050, and that
alone would be a demographic shift that many Europeans find
culturally and politically unacceptable.

In Germany, all government projections show a downward
population trend, even after factoring in a high number of
immigrants.

But more important in Germany, as in the rest of Europe, is
the rapid growth in the numbers of the elderly. In 1950, 30
percent of the German population was under 20 and only
about 2 percent was over 80. By 2050, under-20's are
expected to be only 16 percent, while the over-80's are
estimated to reach about 12 percent.

The consequences of this shift are already striking, Mr.
Raffelhüschen said. "At the moment, we really have two
working people and one retired person," he said. "In 2035
or so, every worker will support one retired person."

The solution being recommended by the pension reform
commission is to reduce the pension amount from 70 percent
of the average national salary to less than 60 percent.

That is a large drop in a country where 80 percent of
pension income comes from the state, but few experts see
any hope that this reduction can be avoided.

This is because even if there were to be a sudden increase
in the fertility rate, it would take a generation for the
additional people being born to enter the work force.

"The only thing that can help a little bit," Mr.
Raffelhüschen said, "is age-specific immigration, people 20
or 30 or so, because they would substitute for those who
are not being born."

http://www.nytimes.com/2003/06/29/international/europe/29AGIN.html?ex=1057914294&ei=1&en=6574d539d32f35d2


---------------------------------

Get Home Delivery of The New York Times Newspaper. Imagine
reading The New York Times any time & anywhere you like!
Leisurely catch up on events & expand your horizons. Enjoy
now for 50% off Home Delivery! Click here:

http://www.nytimes.com/ads/nytcirc/index.html



HOW TO ADVERTISE
---------------------------------
For information on advertising in e-mail newsletters
or other creative advertising opportunities with The
New York Times on the Web, please contact
[hidden email] or visit our online media
kit at http://www.nytimes.com/adinfo

For general information about NYTimes.com, write to
[hidden email].  

Copyright 2003 The New York Times Company