Approaches towards better insurance of discontinuous employment biographies in the German statutory pension scheme

In flexible labour markets the individual employment prospects over the life cycle increasingly depend on the readiness to be mobile and to undertake occupational changes as well as life-long learning. However, continuous adaptation to changing demands on the labour market holds the risk of discontinuities in employment biographies which can have a negative impact on old-age incomes. From a social policy point of view, labour market mobility calls for a compensation of such income losses within the statutory pension insurance. Furthermore, insuring the risks arising from labour market flexibility within pension insurance may create a stable environment which favours a risk-taking behaviour on the labour market. This could provide an incentive for workers to risk making necessary occupational changes and thereby contribute to the ‘activation’strategies adopted in many countries. The article discusses incentive-compatible arrangements to cover such risks within the German pension insurance.