- Ifo: Pension and tax cuts for skilled manpower shortages
Higher pension cuts, longer working lives, and reductions in spousal benefits for tax and health insurance could potentially combat the skills shortage, according to calculations by the Ifo Institute. In total, changes in these areas could, in the estimation of the Munich economists, encourage so many people to extend their working lives that it would equate to a gain of around 1.2 million full-time jobs. The study was commissioned by the Munich and Upper Bavaria Chamber of Industry and Commerce.
Controversial Proposals
The scientists examined the impact of several controversial proposals in the paper, which are supported by many economic representatives but rejected by trade unions and social associations. These proposals concern older workers and women who leave the workforce early and/or work part-time. "The tax and levy system in Germany can definitely be reformed in such a way that the labor shortage is mitigated," said Volker Meier, one of the authors.**
Pension Lever
Raising the retirement age from 67 to 69 could correspond to a gain of 473,000 full-time jobs. In the pension system, increasing the deductions for early exit from the workforce could also have a noticeable effect. Currently, the pension is reduced by 0.3 percent per month for early retirement. A higher deduction of 0.5 percent per month could, according to Ifo, mean a gain of nearly 180,000 full-time jobs. Abolishing the pension at 63 would correspond to a gain of 157,000 full-time employees.**
... and Marriage
According to the Ifo study, traditional spousal benefits could also be a lever. Abolishing the co-insurance of spouses in statutory health and long-term care insurance could also encourage many people to work more or longer, equivalent to around 150,000 full-time positions.**
And abolishing the marriage tax allowance would motivate so many people to work more or longer that it would correspond to around 200,000 full-time positions. The marriage tax allowance involves the joint taxation of the income of both spouses. This is particularly beneficial when one of the spouses - traditionally the woman - earns significantly less than the other.
Childcare against Skills Shortage
Beyond pensions, tax, and social insurance, there is another way to combat the skills shortage, according to the study: 400,000 additional childcare places could expect employment gains of around 58,000 full-time equivalents.**
The Ifo study suggests that abolishing the traditional spousal benefits in health and long-term care insurance could encourage many individuals to work more or longer, equating to approximately 150,000 full-time positions. Furthermore, eliminating the marriage tax allowance might motivate so many people to work more or longer that it would correlate to around 200,000 full-time positions, particularly beneficial when one spouse, traditionally the woman, earns less than the other.
