Abstract

Debates on gender equality in the German pension system are ongoing. Additionally, the ageing of society challenges the national pay-as-you-go system and requires removing barriers to child care. Recent pension reforms mainly address mothers, by improving the recognition of child care and establishing more social justice towards parents with children born before 1992.

Before 2014, periods of child caring were creditable for the pension insurance for a maximum duration of one year for children born before 1992 and for three years for children born after 1991. After the most recent pension reform, retroactively, pension credits were recognized for two years instead of one year of child caring for children born after 1991. There are two arguments to justify the retroactive recognition: Firstly, one reason for the legislative change was the appreciation of child rearing as a common good. Secondly, proponents of the reform intended to additionally compensate mothers for their opportunity costs due to child rearing. Many argued that in the 1980s and at the beginning of the 1990s almost no public child care facilities were available and mothers had no choice but to interrupt their employment careers to raise their children. When child caring facilities became available during the 1990s, full-time child caring turned increasingly into a voluntary decision.

In our study, we examine whether the legislative change compensates mothers for foregone earnings arising from employment interruptions due to child rearing. We make use of the longitudinal individual-level data set BASiD (Biographical data of selected social insurance agencies in Germany). BASiD is a combined data set of the German National Pension Insurance and the Institute for Employment Research. Linking data from two different institutions offers the opportunity to amplify the information available.