To mitigate the impact of inflation, economist Gunter Schnabel has called for the retirement age to be raised. But according to critics, his proposal is not only based on a false assumption. They also acknowledge the “populist element” in it.
Life in Germany is getting more expensive. In the meantime, not only energy costs rose sharply, but also the prices of other products. According to data from the Federal Statistics Office, food prices rose at an above-average rate in April. According to experts, consumers will have to prepare for inflation rates of more than seven percent in the coming months.
In the fight against high inflation, economist Gunter Schnabel supports an increase in the retirement age. “The retirement age must rise. Germany already has a big problem with skilled workers, hundreds of thousands of vacant jobs,” the economic researcher told Bild newspaper. As a result, among other things, wages should rise sharply in the next few years, making other goods and services more expensive, Schnabel said.
According to the head of the macroeconomics department at the German Institute for Economic Research, Alexander Kryolowski, Schnabl’s background demand is a thesis that posits that an aging society can have an inflationary effect for two reasons: First, the supply of labor decreases, which increases wages. On the other hand, the pensioners fed demand because they were liquidating their savings.
However, Kriwolutzky believes that it is wrong for many reasons to draw the conclusion that a longer working life would effectively combat current price increases. “In order to control inflation, we need measures that have a quick impact now. These include monetary policy measures. In contrast, increasing working life is a long-term measure,” says Kriwoluzky ntv.de. It will be necessary to stabilize the pension system. Politicians in the end should discuss this transparently. “But linking the extension of working life in the current situation of high inflation rates to inflation fears has a populist effect.” It is also problematic because it indicates that the central bank cannot fight inflation alone, which is not true.
“Labour shortage is not a relevant inflation factor”
When asked by ntv.de, Sebastian Dollian, director of the Institute for Macroeconomics and Business Cycle Research in Düsseldorf, does not believe that raising the retirement age is an effective measure to stem high inflation. “Inflation is currently driven by higher energy prices and higher food prices, not excessive wage pressures,” Dollian says. “Extending the retirement age will not help in the face of higher energy and food prices.” There are theories that have predicted that inflation will appear in the long run due to a shrinking workforce because this shortage can increase wages. So far, however, empirical evidence has not indicated that current inflation has anything to do with age-related shortages in the labor force or excessive wage increases.
“Labour shortages at the moment are not a relevant factor of inflation, neither in Germany nor in the most important countries from which we import,” Dollian says. Rather, the lack of employment in certain areas is due to the fact that working conditions in many areas are poor or have deteriorated during the Corona period – as is the case in the health system. “If these grievances are eliminated, bottlenecks in these areas should improve.”
Last summer, proposals by the Federal Ministry of Economics and Technology’s Scientific Advisory Board on reform toward retirement at age 68 caused a great deal of excitement. According to the current legal situation, the minimum retirement age will be gradually raised from 65 to 67 without deductions by 2029.