Child-raising periods offer limited reduction in Germany’s gender pension gap

The crediting of child-raising periods to Germany’s statutory pension system has only a minor impact on reducing the pension gap between men and women. A recent study conducted by the German Institute for Economic Research (DIW Berlin), in collaboration with the Hertie School Berlin, the Einstein Center Population Diversity (ECPD), and the Research Data Centre of the German Pension Insurance, reveals that for birth cohorts from 1952 to 1959, the gender pension gap in western Germany has declined by just four percentage points, from 41 percent to 37 percent.

The disparity remains significant when comparing mothers to women without children. The motherhood pension gap is reduced from 31 percent to 26 percent, highlighting the limited effect of child-raising credits. In eastern Germany, where the overall pension gap between men and women is much smaller at ten percent, the situation is different. Here, mothers tend to fare better than childless women in pension entitlements, benefiting from higher employment rates historically seen in the region.

The system of child-rearing credits was introduced in 1986 to provide mothers with improved financial security in retirement. However, nearly four decades later, the effectiveness of this reform remains limited. Peter Haan, head of the State Department at DIW Berlin, notes that while child-raising periods offer some assistance, they fall short of significantly improving pension outcomes for mothers. Michaela Kreyenfeld, co-director at ECPD, emphasizes that these periods only serve their intended purpose if women can return to full-time or near-full-time employment after childbirth.

Under current regulations, mothers receive one earnings point—equivalent to the average earnings of an employee—for up to three years following the birth of a child. However, the financial impact of motherhood extends well beyond this period. Many women reduce their working hours or shift to part-time employment after having children, contributing to a persistent gender pay gap that directly translates into lower pension entitlements later in life.

Despite the increase in female workforce participation over time, the pension gap remains a pressing issue. Previous reforms, including the 2014 introduction of the so-called mothers’ pension, sought to address disparities by extending child-raising credits for mothers whose children were born before 1992. However, the study’s findings indicate that these measures have not been sufficient to close the gender pension gap.

In eastern Germany, where the gender pension gap is relatively small, new concerns are emerging. The study suggests that pension inequalities could widen in the future due to an increasing number of mothers working part-time. To counteract this trend, the authors recommend policies that promote a more equal division of childcare and employment responsibilities between parents. Strengthening childcare infrastructure and creating flexible working arrangements could help more women maintain full-time employment after childbirth.

Additionally, the study calls for reforms in Germany’s tax system to enhance employment incentives. Revising marital income tax splitting and adjusting regulations around mini-jobs could encourage greater workforce participation among women, thereby improving their pension prospects in the long term.

While child-raising credits provide some financial support, they are not enough to bridge the pension gap significantly. Without broader policy changes addressing the root causes of gender disparities in employment and wages, the long-term financial security of women in Germany remains at risk.

Source: DIW Berlin