Trends in Working Life Expectancy and Untapped Employment Potential in an Ageing Population: The Case of Germany

The population of Germany is ageing rapidly. As a result, the country's working age population is expected to shrink substantially over the next 15 years. To cope with this challenge, a number of policy reforms have been introduced to activate untapped employment potential and increase the length of working life. However, little is known to what extent employment potentials have already been realised, and what differences exist between socio-economic groups. This paper addresses these questions using large-scale data from the German Microcensus to calculate working life expectancy (WLE) and unrealised working life expectancy. WLE not only accounts for labour market status (i.e., employed, unemployed, and inactive), but also considers actual working hours and preferences on working hours that allow capturing under- and overemployment. Our results show that WLE for most groups exhibits a U-shaped development, with WLE in 2022 resembling the levels recorded in 1991. At the same time, socio-economic inequalities in WLE were and still are substantial, and the group with the highest WLE works more than twice as long over their lifetime compared with the group with the lowest WLE. Moreover, trends in unrealised employment potential mirror trends in WLE - when WLE goes down, unrealised potential goes up. During recent years, only individuals with a low level of education have continued to display considerable unrealised potential, whereas for highly educated individuals, virtually no unrealised potential remains. On the contrary, we obtained evidence of overemployment for this group.