Mothers’ Pension (Mütterrente) Reform in Germany

Artmann, Fuchs-Schündeln, and Giupponi (2024) compute the MVPF of a reform that increased the generosity of Germany’s statutory public pension system. Germany’s pension system operates on a Pay-As-You-Go schedule, where individuals are obligated to pay into the system while working. Participants accumulate “pension points” with each payment, with one pension point defined as the contributions made by someone earning the national average income that year. Through the Mütterrente childcare pension benefit scheme, parents (usually mothers) continue to receive pension points while spending time raising their children.

In 2014, Germany retroactively gave mothers with children born before January 1, 1992 an additional pension point per child. These mothers saw on average a €3,830 (4.4%) increase in pension wealth, while mothers with children born after that date saw no change. Using working histories data for the entire population of workers subject to social security contributions and administrative data from the German Pension Insurance, the paper implements a difference-in-differences design that compares women who had their first child just before versus after January 1, 1992. The paper finds that mothers who saw an increase in their pension wealth from the reform reduced their labor earnings by 1.3% in the 3-5 years after the reform, or (in present value) by €2,660 in total. This response is driven entirely by reductions in labor supply from mothers who were already working (as opposed to mothers leaving the labor force).