As much as companies and customers complained about staff shortages this summer, one thing can already be said: things won't get any better anytime soon.

On the contrary: If the baby boomer generation of baby boomers soon retires, this will put additional pressure on the German labor market.

Alexander Wulfers

Editor in the economy of the Frankfurter Allgemeine Sunday newspaper.

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This makes it all the more important to exploit unused potential in the labor market.

There are a number of suggestions for this, one of which is extending the working life.

If older people stay longer in their jobs instead of retiring because they are still fit and motivated, society as a whole benefits.

Unfortunately, an evaluation by the Federal Institute for Population Research (BiB), which the FAS has received in advance, shows that this is no longer happening.

For the first time in more than twenty years, employment among older people in Germany has stagnated.

For example, 60-year-old men worked even less frequently last year than two years earlier.

With the new stagnation, a trend is coming to an end which, since the mid-1990s, has kept or reintroduced a large number of older people into the labor market in Germany, thereby at least mitigating the demographic change somewhat.

A few years after reunification, employment among older people had reached a low point.

In 1996, only 37.6 percent of then-60-year-old men and only 15.3 percent of women of the same age worked.

At the age of 64, it was only 8.4 percent of men and 4.3 percent of women.

Two decades of growth have come to an end

After that, a steep climb began.

Between 2000 and 2021 alone, the number of men in employment between the ages of 60 and 64 doubled. The development was even stronger for women: the probability that they will be in work between the ages of 60 and 64 has even quadrupled since the turn of the millennium.

The researchers identify different reasons for this.

"On the one hand, there were political reforms that encouraged people to remain in the labor market for longer," explains Harun Sulak, a researcher at the BiB.

These include the gradual increase in the retirement age and the abolition of unemployment benefits.

“At the same time, more activities can be carried out today than in the past, even at an older age.

This is due to the increasing automation of activities and the structural change away from physically demanding jobs.

In addition, older people are healthier on average compared to previous generations.

Towards the end of the past decade, however, the upward trend generated in this way abated sharply.

Employment among the over 60s reached its peak towards the end of the 1910s.

Since then, the numbers have hardly or not increased at all.

The reasons for this are again varied.

One could be that in the younger cohorts in particular the potential has simply been exhausted.

By no means everyone is still physically able to do their job at 60, Harun Sulak suspects that more than 80 percent of the workforce is already quite high.

But the political environment could also play a role.

In 2014, the then federal government under Angela Merkel introduced the so-called pension at 63.

Since then, employees who have had pension insurance for enough years can retire before the normal retirement age without having to fear any deductions.

And many take advantage of this opportunity.

The researchers determined this using data from the pension insurance system.

In 2021, every third person was able to retire without deductions and thus left the labor market earlier.

Another quarter of the new pensioners in the past year even accepted deductions in order to stop working on average 28 months before the standard retirement age.

Expanding employment is not a sure-fire success

The stagnating numbers show that the expansion of employment in older age cohorts is not a sure-fire success, sums up Elke Loichinger, research group leader at the BiB.

To keep workers in the labor force longer, incentives would need to be in place well before retirement.

"Once retirement occurs, few return to work."

Two aspects, meanwhile, suggest that the stagnation may be, at least in part, a temporary phenomenon.

First, it coincides with the start of the corona pandemic.

Presumably, many people over 60 decided to retire early, who would have continued to work for a few years if short-time work, unemployment or simply the fear of infection had not prevented them from doing so.

This effect should lose relevance as the pandemic subsides.

Secondly, the deduction-free retirement age for coming cohorts will increase again.

The financial incentive to retire early is therefore reduced.

This would be the case in particular if the shortage of staff leads to rising wages and makes work more attractive.