Incomes of the old rising faster than those of young, study shows

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Incomes of the old rising faster than those of young, study shows
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A new report shows that the incomes earned by the old are increasing at a significantly faster rate than those of younger workers.


While Germany continues to discuss the increase in poverty risks for the elderly, a report on Wednesday by the Cologne Institute for Economic Research (IW) shows that the real earnings of seniors have in fact increased much faster than those of younger people in recent decades.

In 1984, more than 31 percent of people over 65 years old fell into the lower fifth of income levels of the entire population. But by 2014, just 19 percent of people in this age group were at this level. Over the same time period, the number of seniors who were among the upper fifth of incomes grew from 12 percent to 14 percent.

The researchers attributed the increase to one simple reason: those aged 65 to 74 in western Germany now earn on average 52 percent more since the mid-1980s. But on the other hand, those under 45 years old only earn between 21 and 31 percent more than 30 years ago.

And since German reunification in 1990, the income of elderly residents has shot up by 25 percent, compared to just 10 percent for younger people.

But the increase of income for older people is not due to rising pension rates. On the contrary, retirees on average in 2015 received 47.7 percent of their former gross salaries, compared to 55.2 percent in 1970.

And between 2004 and 2014, there was a slight increase in seniors being at risk of poverty, from 10.9 percent to 14.1 percent for those between 65 and 74 years old. But the study notes that the portion of seniors at risk of poverty is still lower than the average across the general population. Overall in 2014, 15.9 percent of Germans were at risk of poverty. Those under 25 are most at risk at 22.1 percent.

The researchers explained that the increases in incomes for the elderly were due to a variety of factors. For one, private and company retirement plans are playing a greater role. Another major reason is that more women have gone into the workforce in recent decades, meaning as couples have retired over the years, their total household pensions have increased from the additional income.

In the 1980s in West Germany, men contributed about 83 percent of state-sanctioned pensions to a household. By 2014, that proportion had sunk to 71 percent.

Fewer seniors are also now living alone than 30 years ago.

“These results are a significant reminder for politics not to let pension-related policy measures get carried away by shotgun approaches,” said IW economist Susanna Kochskämper in a statement on the report.

“Such measures must finance the younger generations, which have already been left hanging in the past few years in terms of income developments compared to older people,” added IW economist Judith Niehues.

SEE ALSO: Report shows Germany's ageing baby boomers to be drain on economic growth



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