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Pension bonus of the generation with few grandchildren

Author

Listed:
  • Robert Fenge
  • Jakob von Weizsäcker

Abstract

The low German birth-rate has two immediate effects on the pension system. Firstly, there will be fewer contributors in the next generation. Secondly, the childless typically pay more in pension contributions. Women without children in particular usually have higher taxable earnings than they would have had with children. This leads to a higher volume of contributions and in the pay-as-you-go system this means higher pensions for the recipient generation. In this respect current pensioners find themselves in a perfect demographic situation, that is one with many children but few grandchildren. The unexpected gain for the generation with few grandchildren, which is estimated at 7% of current pensions, has not received much attention in the pension discussion. This article discusses the direct distribution effects of childlessness in the pension system, in particular for the generation with few grandchildren. The authors propose using this pension bonus directly for family promotion to gain more contributors in future. They argue for a reduction of the present pension level and a payout of the "few grandchildren factor" to families.

Suggested Citation

  • Robert Fenge & Jakob von Weizsäcker, 2006. "Pension bonus of the generation with few grandchildren," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 59(05), pages 11-18, March.
    • Handle: RePEc:ces:ifosdt:v:59:y:2006:i:05:p:11-18
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    References listed on IDEAS

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    3. Sinn, Hans-Werner, 2005. "Europe's Demographic Deficit," Munich Reprints in Economics 934, University of Munich, Department of Economics.
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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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