The Role of Social Partners in Transforming the German Pension System

Abstract

Social partners, trade unions and employer associations have been involved in most changes to the corporatist welfare state of Germany. In 2001, the government enacted a pension reform to replace the generous but - due to demographic constraints - unsustainable pay-as-you-go public pension system. The decrease of public pensions was offset by strengthening the occupational and private pillars.

This paper examines the social partners’ political lobbying before the reform, contrasted with their involvement in supplementary pension provision afterwards. The study, based on an in-depth personal interview with Mr. Walter Riester, the Labour Minister brokering the reform, shows that the parallel application of pension reform and social pacts literature contribute to the understanding of the pension structure.

The social partners’ internal division prevented the cooperation with the government; however, they could prevent the implementation of a mandatory supplementary system, and could achieve concessions in exchange for not vetoing the reform. Subsequently, their involvement in pension provision turned out to be the gold standard.

Keywords: Pension, Riester Reform, Social Pact, Social Partner, Trade Union, Employer Association, Collective Bargaining

JEL Classification: H53, H55, I3, J5, L31, P16