As German population shrinks, economic questions multiply

Sterben die Deutschen aus? (Will the Germans become extinct?) West Germany's population is declining by about 0.3 percent per year. This fact prompts the Germans on occasion to ask the above question.

If the tendency for German couples to have no children or only one child were to continue, the Federal Republic's population would decline from around 61 million today to 38 million by the year 2035.

``That's only 50 years from now,'' notes Dr. Alfred Boss, an economist with the Institute for the World Economy at University of Kiel.

A shrinking population is unusual in a world where most nations are concerned about too high birthrates.

The population decline in Germany is slow enough that its impact on the economy is mild. Nonetheless, it rouses some interest among German economists. A few effects are already noticed.

For example, many kindergartens are being closed. Elementary schools have fewer children in each class. Teachers have a relatively high unemployment level. Producers of baby foods are trying to pitch their products to old people. Toymakers face a weak market.

The longer run issues are more serious, raising substantial questions -- with few answers at the moment.

As Germany's population ages, will those of working age be content to pay the pensions of the more numerous retired? West Germany's workforce will decline from about 26.6 million now to 25.7 million in the year 2000. That drop continues with time.

As of July 1, the cost of ``social insurance'' (which provides a government pension) rose from 18.4 percent of an individual's wages to 19.2 percent. This is half paid by the employee; half by the employer. (In the US, social security takes 14.1 percent of pay, half from the employee, half from the employer.)

Dr. Eberhard Dettweiller, chief economist with the Bank f"ur Gemeinwirtschaft, suspects there is a ``pyschological limit'' to what workers will pay for social insurance. (As in the US, pensions for the retired are paid by those working. There is no major pension fund.) He suspects it would be 20 percent.

However, if there are not changes in the system, by the next century social insurance costs would have to rise to 35 percent of wages, notes Dr. R"udiger von Rosen, an economist at the Bundesbank, Germany's central bank.

Since that is probably politically unacceptable, how then will the pensions of the elderly be funded?

One solution could be to allow the arrival of more foreign workers. These employees, like working Germans, would have to pay social insurance. At the moment, with a high unemployment level, the German government has been encouraging the departure of ``guest workers'' by offering substantial relocation payments.

By 1990, however, because of the lower birthrate in the past, fewer children will be graduating from school. German firms may be faced with a shortage of workers rather than a high jobless rate.

Dr. von Rosen suspects foreign workers will move to Germany at that time from Portugal and Spain, which are becoming members of the European Community. Workers who are nationals of member countries of the Community can move across its internal borders freely.

``For a German pensioner it is of minor interest whether German or Spanish workers pay his pension,'' he says.

Dr. Frank D. Weiss, another economist with the Kiel institute, attributes the low birthrate to economics rather than to modern birth-control techniques or culture. ``The costs of having children relative to the benefits must have risen,'' he says.

One new ``cost'' was the introduction of a form of nationwide rent control in 1973, he holds. If a couple has a child and thus needs to move to a larger apartment, they probably will have to face sharply higher rent in their new, larger quarters. (A much larger proportion of Germans live in apartments than is the case in the United States.) Landlords can boost rents with a new tenant.

Another ``cost'' is the ``extraordinary'' legal rights of children in West Germany, Weiss says. For example, should the parents of a child over 18 refuse to finance his or her university education, the child can sue them for such support. The parents must pay the child's rent, food, and tuition (which is small in Germany) indefinitely as long as he or she is working toward a degree. If the government at some point becomes alarmed by the population decline, it could decide to subsidize the cost of chi ldren with additional payments to families or other changes, speculates Weiss.