The Elderly in Ageing Societies: Cost Factor or Safety Net? a Comparison of Family Regimes and Intergenerational Transfers in Germany and Japan.

Felix Lill, Herr
Rikiya Matsukura, Nihon University

Various works have argued that population ageing, leading to higher dependency ratios, provokes generational conflict over scarce resources. But while in numerous post-industrial economies, the younger cohorts are put at a comparative disadvantage through the labour market and the public sector, these imbalances have also been alleviated through informal downward transfers within the family. Comparing Japan and Germany, two pioneers of ageing, this paper investigates whether and to what extent the family institution can serve as a bulwark against generational conflict. Discussing their demographic positions in the OECD context as well as their welfare regimes, family traditions and policies causing welfare regime transition, the results are also relevant for a wider set of countries. As a commonality, financial pressure on the individual has increased in the last years due to changes in living arrangements, income levels and liberalising welfare policies. While this pressure has been stronger in Japan, the family policy response has been more comprehensive in Germany. The traditional role of the family, though, is even stronger in Japan than in Germany. According to typologies of Esping-Andersen (1990) and Shinkawa (2013), Japan’s welfare and family regimes are transitioning rather towards a liberal market-oriented type. Germany’s transition includes social-democratic and liberal elements. Departing from the logic of Brumberg and Modigliani’s (1954) lifecycle model and Mudrazija’s (2014) extension with overlapping generations as well as the descriptive basis the two most recent waves of National Transfers Accounts (2004 and 2009 for Japan, 2003 and 2008 for Germany), hypotheses are tested with the SHARE/JSTAR datasets. The main dependent variable is given private transfers. This work, still in progress, tests to what extent the elderly serve as a safety net for more precarious younger cohorts in either country. In light of institutional changes, the prospects to successfully deal with demographical changes are compared.

Various works have argued that population ageing, leading to higher dependency ratios, provokes generational conflict over scarce resources. But while in numerous post-industrial economies, the younger cohorts are put at a comparative disadvantage through the labour market and the public sector, these imbalances have also been alleviated through informal downward transfers within the family. Comparing Japan and Germany, two pioneers of ageing, this paper investigates whether and to what extent the family institution can serve as a bulwark against generational conflict.

Discussing their demographic positions in the OECD context as well as their welfare regimes, family traditions and policies causing welfare regime transition, the results are also relevant for a wider set of countries. As a commonality, financial pressure on the individual has increased in the last years due to changes in living arrangements, income levels and liberalising welfare policies. While this pressure has been stronger in Japan, the family policy response has been more comprehensive in Germany. The traditional role of the family, though, is even stronger in Japan than in Germany. According to typologies of Esping-Andersen (1990) and Shinkawa (2013), Japan’s welfare and family regimes are transitioning rather towards a liberal market-oriented type. Germany’s transition includes social-democratic and liberal elements. The theoretical departure points are the logic of Brumberg and Modigliani’s (1954) lifecycle model and Mudrazija’s (2014) extension with overlapping generations, while the descriptive quantitative basis are the two most recent waves of National Transfers Accounts (2004 and 2009 for Japan, 2003 and 2008 for Germany).

Hypotheses are tested with all available waves of the Survey of Health, Ageing and Retirement in Europe (SHARE, 2004-2015) for Germany, and the Japanese Study of Aging and Retirement (JSTAR, 2007-2011). This work, still in progress, tests to what extent the elderly serve as a safety net for more precarious younger cohorts in either country. The method is logistic regression and the main dependent variables are given private downwards transfers in each cash and kind, whereas transfers in kind are taken to be grandchildcare provided by the respondent. While to explain transfers in cash, the main independent variables are financial and real estate wealth of the respondent, the main independent variables for in-kind transfers are health of the respondent, marital status of the child and living proximity between respondent and adult child. An independent variable in both cases is the labour market status of the child.

Preliminary results show that amid population ageing, there is strong downward solidarity in both countries. Regarding downward financial transfers, financial and real estate wealth of the respondent is positively correlated with the outcome variable in both Japan and Germany. The recipient of the downward financial transfer being a labour market outsider is also positively correlated. Even once only labour market outsiders are considered, financial and real estate wealth of the respondent (donor) is still significantly correlated with the provision of downward financial transfers. In other words, financial solidarity is stronger among wealthier families (parents). Regarding the provision of downward in-kind transfers, the financial situation of either donor or recipient is shown to be less relevant than the recipient’s (adult child’s) marital status or the health situation of the donor (respondent). In addition, living proximity is a strong predictor for the provision of downward in-kind transfers in either country. In turn, cash and kind transfers are not shown to be substitutes for each other.

Though much of these preliminary results comes as expected, they do hint at a growing challenge in ageing populations. Where under the current institutions the welfare state reaches its limits and the family steps in as a support network, socio-economic differences are becoming more important. Those who need private familial support the most do not appear to be those who are most likely to receive it. This tendency, witnessed in both countries, is more threatening in Japan because of more challenging developments in terms of household income, household savings rate, non-regular employment among younger cohorts, decreasing living proximity among parents and adult children, and the strong old-age bias in government spending. In such case, a stronger welfare state would be needed in order not to jeopardise inter-generational solidarity. This work, at a later stage, shall be expanded to a wider set of countries.

Presented in Session 1125: Ageing and Intergenerational Relations