It is part of the economists’ self-image to be uncomfortable. You should do the math when politicians, executives, activists and others come up with the very simple solutions. And when in doubt, you should always ask: How can what you are proposing work? There are always opportunities to test this self-image, especially in difficult times like these and especially in the capital. Berlin politicians have a great talent for developing simple solutions to big problems that don’t work because nobody has thought about who should pay them and how. A good example of this is the new Berlin University Act. It stipulates that there should no longer be any fixed-term employment contracts for scientists at universities. Specifically, it is about “postdocs”, people who have already acquired a doctorate and the ability to teach. With these “a follow-up commitment is to be agreed”, it says in paragraph 110, number 6.
Now there is no question that there is a real problem behind this paragraph. For mid-level academic staff, i.e. those scientists who teach but have no prospect of a professorship, the prospects at German universities and colleges are pretty bad. Many have to work their way from one temporary job to the next, sometimes up to the age of 40, without a clear perspective. Many young academics, especially in the natural sciences, do not accept this and switch to the private sector.
So there are good reasons to change something here. To do this, however, one would have to have ideas for structural reforms and, above all, money. But if both are missing and the government simply dictates a new personnel policy to the universities, then what Berlin has experienced in recent weeks will happen. Those affected resisted the compulsory satisfaction by the Senate. The President of the Humboldt University, Sabine Kunst, resigned in protest. The “Junge Akademie”, a platform for young scientists, opposed the fact that structural decisions about career paths “are made over the heads of scientists in temporary positions”. The new law came into effect like a raid for the universities, and appropriately came into force on the day before the general election. Some institutes are now looking for tricks to prevent young academics who have just been hired on a temporary basis from having to be fired.
Expropriate housing company? That only seems helpful at first glance
Another example is housing policy. The lack of affordable housing is probably the biggest social problem of our time. The simple solution: expropriate housing companies. At least that’s what 56 percent of Berliners demanded in the referendum on September 26th. The fascination of this so simple-looking solution is so great that none of the activists asked the most obvious questions: Would bread and butter really be cheaper if the farmers were expropriated? So where should the new, affordable apartments come from? And where did the money for the compensation of the shareholders come from? You could also do the math: In the first half of the year, 31.5 percent fewer new apartments were approved in multi-family houses in Berlin. In the third quarter, the decline slowed to 20.3 percent, but it remained one of the largest drops in recent times. And that should have nothing to do with the fight of Berlin politicians against the landlords? Incidentally, the approval of single and two-family houses in affluent districts such as Spandau and Reinickendorf has risen sharply.
And then there is still to be talked about the pension. Everyone knows the problem: Society is aging, the active generation is getting proportionally smaller, but has to support a growing number of retirees. Their burden will be particularly great in the years 2030 to 2045, when the baby boomer generation retires and has to be financed by the much smaller generation of millennials. A pension reform is then inevitable. That is just eight years away, so two legislative terms. This reform is inconvenient because it will be unreasonable for pensioners and contributors, which is why everyone has shirked it so far.
The new traffic light coalition also remains in this tradition. After all, it has slowed the originally planned extraordinary pension increases (a good five percent in 2022). But the real problem remains unsolved. “The traffic light leaves the next but one federal government to distribute the burden of aging fairly among the different generations,” says Joachim Ragnitz from the Ifo Institute in Dresden, for example. Scientists at the Ifo Institute have calculated: If the contribution rate cannot exceed 20 percent and the pension level cannot fall below 48 (what is called the “double stop line”), 60 percent of the federal budget will probably have to flow into the pension insurance as a subsidy in 2050 (today it’s 30 percent). Those who accept this calculation can no longer be satisfied with the very simple formulas (“The pension is safe”).