Critics slam passive pension schemes and tax breaks for extra work hours as inadequate economic measures
In recent discussions, economists have expressed doubts about the effectiveness of tax incentives in encouraging extended work hours in Germany. Martin Werding, an economist working for the "Rheinische Post", has stated that tax-free overtime or overtime supplements had no significant effects when tested in France. Similarly, he does not express support for the tax exemption of supplements for overtime in Germany. The German government, however, plans to make supplements for overtime tax-free, and up to 2,000 euros of the active pension tax-free for persons who have reached the standard retirement age and continue to work. This move is aimed at encouraging older individuals to continue working. However, the top economist from Bochum, Martin Werding, has expressed skepticism about the effectiveness of the active pension and tax exemption of overtime in increasing working hours in Germany. He suggests that the first thing to be abolished are possibilities for early retirement without deductions, specifically at the age of 63. The current pension reductions for early retirement are considered too low by the member of the German government's Council of Economic Experts to compensate for the longer retirement period. They propose mathematically correct setting of the pension reductions for early retirement. Another suggestion comes from DIW chief economist Marcel Fratzscher, who proposes a mandatory service year for retirees to share the workload more fairly between generations. He suggests older people could work in social or civilian defense sectors. Fratzscher also emphasizes incentives for longer working life and investments in prevention rather than a flat retirement age increase to 70 years. The German Chamber of Commerce and Industry (DIHK) demands reforms leading to later retirement and reduced social benefits to stabilize financing and keep companies internationally competitive. Despite the tax advantages, older persons who would continue working regardless of the tax advantage appreciate the tax exemption of up to 2,000 euros per month. However, the disincentive effects of the active pension are a concern for economic experts regarding its ability to increase working hours in Germany. The member of the German government's Council of Economic Experts suggests abolishing possibilities for early retirement without deductions, specifically at the age of 63, as a more effective measure.
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