German politicians must prioritise their efforts to reduce demographic problems

Amidst a changing world there are some common obstacles Germany needs to solve for the long run and these are seven key policy areas that Germany can focus on to ensure long-term success:

1. Provide a social wage that offers both security and participation for all to work or retrain in the long run.

Pensions have remained constant for years, while the Bundesrepublik lacks, like almost every other developed country, an adequate pension security for new adults; many start to retire at the age of 58. These generational-threats prevent a “time of active employment” for 20-25-year-olds.

Agriculture needs drastic reforms to increase agricultural employment and innovation and to reverse catastrophic decline in regional attractiveness. A loss of agricultural output and farming jobs as a result is threatening the future of the German economy.

Success is important for Germany’s leaders. Today, the Future Institute considers Germany to be in the middle of a profound demographic crisis, which is bound to affect growth.

2. Extend life expectancy in order to build a better future

Just how old can men and women get in Germany? This will help solve the question: what should Germany’s social security systems be prepared for. In the light of these population trends and to avoid stagnation in the long run, Germany must find a better balance between social security pensions and a healthier life expectancy. Thus far, Germany has had a progressive life expectancy system, but that trend can’t go on.

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3. Define necessary wages for an agricultural work force

With an ageing population, agriculture is a costly and unstable one, requiring a new social security system, although to produce an endless supply of new workers and farmers. The new jobs must be organized differently and structured in a more efficient way than in the past: based on competencies, skills and interests rather than genes. Germany’s internal market won’t evolve, leaving foreign workers and farmers a part in the production chain for years to come.

4. Redirect government funding away from companies with high profit margins

Spending on corporate and economic governance by the German government will rise, but according to experts, this will result in part in less job and economy growth. The efficient capital markets are doing their job already by demanding a higher share of fair and transparent decision-making processes. To develop better business planning and models in the industrial sector, the state should focus less on infrastructure subsidies, investments and costs of new technologies.

5. Strengthen local protection and enforcement

Reform the application of child, parental and labor benefits and applicable tax and social security requirements to reduce costs for companies and consumers. Other business-related taxes are lower than the European average but higher than the usual US level: top income tax and VAT levels of 41.5% compared to 32% and 14% respectively. In a country where the tax burden is one of the highest in the industrialised world, these high levels threaten Germany’s capacity to expand the labor force and production-level growth.

6. Expand research and innovation

At the economic council of ministers, Karl-Theodor zu Guttenberg recently proposed a renewed interest in increasing the contribution of science and technology to Germany’s long-term and society-wide interest. A more active partner in the R&D process, Germany’s public budget can contribute more to policies for research, innovation and the promotion of technology in areas such as education, innovation in business, and environmental systems.

The global economy is the lever to overcome natural and technological phenomena. The pace of technological change has outpaced what the markets can adapt to, increasing the need for a more effective transformation of the economy. Germany can play a vital role in this process.

7. Attack the lack of talent for new areas

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