A German think tank, the Institute for Employment and Vocational Research, is calling for new tools to retain workers in the labor market and prevent early retirement. The institute’s leader, Enzo Weber, told the Handelsblatt that the current economic transformation requires a new approach, as the traditional instruments of labor market policy are no longer sufficient.
Weber emphasized that the state should not provide financial support for older workers to retire early, as this would be the worst possible solution. He explained that once individuals start receiving early retirement benefits, they are often lost to the labor market. According to the German Pension Insurance, around 890,000 people retired in 2023, with only 44 percent of them having reached the regular retirement age.
Instead, the think tank leader suggested that the government should focus on attracting free-lance workers to new industries and start-ups. Many of these workers would not need extensive retraining, but rather brief upskilling programs, allowing them to transition to new fields. For example, a technician from the automotive industry could work in the wind energy sector after receiving additional training.
However, Weber acknowledged that some workers may not be able to maintain their previous salaries in new industries. To address this, the think tank recommends that companies be offered financial incentives to invest a portion of severance packages in employee retraining and wage supplements. This, Weber argued, would make it less attractive for companies to use severance packages to push employees into early retirement.