Geoscience Reference
In-Depth Information
He failed to obtain a formal commitment to wage moderation. He could not
formally undo the policy of wage convergence between East and West, thus
failing to link wages and productivity. And, he committed to not engage in
welfare retrenchment policies as a way to contain the growing deficit. In doing
so he sided with Eastern members of the CDU against his own finance minister,
Theo Weigel, and his government coalition partners, the Liberal Party (FDP).
16
As a result, indirect transfers to the East via public insurance programs kept
growing strong. The effort was particularly visible in the areas of pensions,
unemployment insurance, public employment policies, and social assistance.
The integration of Eastern pensioners was a major challenge for several
reasons (Hegelich
2004
): for one, current Eastern pensioners lacked previous
contributions to be entitled to Western-like payments; second, the large lev-
els of unemployment also implied a lack of revenue into the system for the
future. The mechanical implementation of Western criteria to the East would
have produced an unsustainable gap in terms of benefits between Eastern and
Western pensioners. Amidst a long list of legislative reforms, two provisions
were especially important to correct the lack of earlier contributions and boost
entitlements in the East. First, the legislative framework extending the Western
pension system to the new l ander recognized the years of service of workers
in Eastern Germany. And, second, it also recognized as contributory years
those spent by women in the East providing for their children. Because of the
“right to work” in the GDR and the recognition of womens' household work,
these provisions implied that the majority of Eastern pensioners could show
longer work histories than their Western counterparts. Needless to say, the
implementation of this system required not only large start up funds but also
a constant flow of transfers to fund the new pool of entitled recipients. The
figures reported in
Table 6.4
are reflective of these efforts. As a result, despite
the fact that their salaries remain significantly lower, the gap between Eastern
and Western pensions was not just closed, but actually overcome in a remark-
able redistributive overturn. According to data from the German Parliament
reported by Hegelich (
2004
: 90), the average pension in the old l ander was
1438 DM. In contrast, the average pension in the new l ander that same year
was 1610 DM.
17
By 2000, Hegelich reports, “the average level of pensions
(men and women) in the new l ander was still 113% of the level of the old
l ander” (p. 89). Clearly old age citizens and the newly retired stand out, in
financial terms, among those benefiting from Reunification.
Concerning unemployment, the failure of the many initiatives, such as the
Treuhandanstalt (Czada
1994
), to generate a quick jump start of the Eastern
16
For details, see Sally and Webber (
1994
: 36).
17
If this figure is broken out by gender, the impact of the decision to recognize the years of
household work in the East becomes apparent: while the average pension for men was almost
identical in the new Germany (1827 DM in the West versus 1864 DM in the East), the average
pension for women in the East was, as of 1998, 25 % larger than in the West (1176 DM in the
old l ander vs. 1457 DM in the new l ander).
