Warning of 250,000 Job Losses as Germany Overhauls Pensions, Taxes, and Healthcare
28.06.2026 - 14:14:07 | boerse-global.de
A comprehensive reform package discussed by top German government officials this week could put a quarter of a million jobs at risk, researchers warn, even as coalition leaders push forward with ambitious changes to pensions, taxes, and healthcare before the summer parliamentary recess.
The Institute for Macroeconomics and Business Cycle Research (IMK) and the Economic and Social Sciences Institute (WSI) published a joint analysis cautioning that the planned rise in the statutory pension insurance contribution rate — to roughly 22 percent by 2032 — would weigh on economic growth and threaten up to 250,000 positions. The warning comes as Chancellor Merz stated his intention to implement all 33 recommendations from the government’s expert commission on pension reform.
Pension overhaul and the end of early retirement
One of the most contentious proposals involves the gradual elimination of the so-called “Rente mit 63” — a scheme that allows workers with 45 years of contributions to retire at age 63 without deductions. The phase-out is set to begin on 1 January 2027. The retirement age itself will be linked to rising life expectancy under the new rules, though no specific target age was given.
To encourage private savings, a new “Altersvorsorge-Depot” — a dedicated retirement investment account — will launch on the same date. Already in effect since the start of this year is the “Aktivrente,” which lets pensioners earn up to €24,000 tax-free while drawing their pension.
Changes to the Altersteilzeit (partial retirement) system are also on the table. The minimum age to start a partial retirement arrangement will rise from 55 to 58, and the widely used “block model” — where employees work full-time for half the period and then stop working entirely — will be abolished. Only the equal-distribution model, where working hours are evenly halved throughout the period, will remain. Existing contracts are protected by grandfathering provisions.
Tax relief, higher levies, and a housing benefit cut
Parallel to the pension overhaul, the government is negotiating a tax reform aimed at lowering the income tax burden for small and middle earners. Under the proposal, the top marginal rate of 42 percent would kick in only from an annual income of €100,000 — up from the current threshold, which is lower. The Social Democrats (SPD) are pushing for a new wealth tax of 45 percent on incomes above €278,000, a move the Christian Democratic Union (CDU) has so far rejected.
To help finance the package, a hike in the spirits tax is planned for 1 January 2027. However, the fiscal math remains contested. Finance Minister Klingbeil is scheduled to table the 2027 federal budget in cabinet on 6 July. Part of that budget includes a €1.5 billion reduction in housing benefit (Wohngeld), drawing sharp criticism from social welfare organisations.
The coalition is also advancing a healthcare savings package worth billions of euros. The corresponding legislation is expected to pass during the Bundestag’s final session week from 6 to 10 July, with the Bundesrat likely to take up the bills on 10 July.
Mixed reactions from economists and local governments
Monika Schnitzer, a member of the German Council of Economic Experts (the “Wirtschaftsweise”), described the overall reform package as a chance for a fresh political start. But representatives of cities and municipalities urged caution, particularly if the federal government does not fully cover the health insurance costs of Bürgergeld (basic income) recipients. A key coalition committee is scheduled for Wednesday to finalise the remaining details before the summer break.
