finance the costs of social insurance. The pension reform called for contributions shared by
employers AND employees, and the introduction of employee contributions (with a
corresponding reduction of employer contributions), and this was something many party and
union members could not accept, because it violated the principle of “production pays.”
Third, the introduction of the “premium reserve” generated vigorous opposition.
Again, the party and union rank and file could not understand why the SAP leadership
cooperated in a reform that would introduce privately managed obligatory mutual funds. To
be sure, the contribution-financed pay-as-you-go component of the system would continue to
provide the bulk of pension benefits (at least in the short to medium term). But the idea of
individual funded accounts so violated many members’ conception of the role of the state and
market in the provision of welfare, that they mobilized to get the Party to rescind this
provision. The SAP leadership acquiesced, but only partially. The SAP negotiated the
inclusion of a state-run investment fund in the premium reserve’s fund catalogue. Those who
do not make an active fund choice or who want the state fund to manage their premium
pension account can choose the state fund option.
Welfare State Adjustment and Retrenchment in Germany
By the mid 1990s, the costs of unification began to strain the public budget. As the
deficit and unemployment increased, cost containment, included welfare state reform, became
a central issue. Welfare state reform did not occupy a prominent place on the political agenda
in Germany until the second half of the 1990s. Until the early 2000s, the pace of reform has
been much slower than in the Netherlands and other countries. Cox (2001) attributes this to
differences in the ways in which political actors in each country perceived the nature of crisis.
Reform was delayed in Germany because political elites did not believe that welfare reform
was necessary. Other explanations emphasize the ways in which the structure of Germany’s
federal institutions provide actors with opportunities to block proposed reforms.
Pension reform has been a centerpiece of both Christian Democratic-Liberal and
Social Democratic-Green reform efforts. Despite the Bismarckian contributory design of
public pensions, state grants to the pension system amount to about 30% of the federal budget.
Pension reform was not just about cost-containment, it was also about reducing non-wage
labor costs (like pension contributions) that are usually blamed for Germany’s current
economic malaise.
This section briefly highlights several of the aspects of the 2001 pension reform
processes that were shaped by labor’s conceptions of solidarity as well as the cognitive
understandings embedded in existing policy.
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Convention