January 31, 2022

What are intergenerational contracts? What are the issues related to it? Should these contracts be discontinued?


These questions are very common when a person is introduced to “Intergenerational Contracts”. This article tries to answer these small nuances by giving an in-depth explanation of the topic in discussion.


The term Intergenerational Contract means “something occurring between generations”. This word covers different generations of a family under its ambit. 

Within the families, a workman of the family had legal, moral, and conventional duties towards the elderly. This is rooted in the belief that younger generations will succeed more than the passing generation with the development.


While the government will provide opportunities to the younger generation to build the skills to get success in life.


With the progress of the societies, the Social Security system emerged as a concept to protect citizens of the land through welfare. The welfare schemes provide help which consists of emotional, financial, political, and generational.

Intergenerational contracts are social contracts expected to be abiding by members of society. These contracts lack a consent clause as it requires approval of future generations, as they lack decision making or are yet to be born. 

The emergence of social security principles has led to the shifting of these contracts from family levels to society at large. 

Foundation of this societal contract date back to the 19th century when Europe was fighting in the war. 

While industrialization forced people to move away from their families. Familial ties broke and as a result, a few children were born. 


This scenario led to the start of the first social security system in Europe by Otto Van Bismarck, the first Chancellor of Germany.

In this System, the working population will finance the pensions of the retired generation; 


While setting an example for future generations to follow their footsteps.

The current Social Security System formalizes State Pensions for people getting retired and those whose age is above 65. These State Pensions are funded by the government in some countries and working populations. 

Some countries that provide State Pensions to retired generations are Germany, Switzerland, Canada.


The traditional functions to fulfill the intergenerational contract consist of morality, legality, conventionality;

But nowadays they have been reduced to fulfillment of only financial transfers.

However, younger generations are on the verge to renounce this societal contract.

The reason for the relinquishment holds a gap in Income- Generational data, increasing inflation.

These issues have led to the reconsideration of these societal contracts by younger generations.

As well as raising concern about taking a natural consensus of the generation while no younger generation was part of political decision making or was not born when decisions had to be taken. 

The idea of Intergenerational contracts works well when there are few retirees. For example, in the times of Bismarck, ten working-class people financed the pension of one retired person. This system is still active in Germany but counting its last few seconds.


The term “contract” given to these contracts isn’t appropriate. 

In some cases, the “Sandwich generation” does not abide by this contract and fails to provide the level of solidarity that retirees expect. The medical and assisted costs of living are higher for the old people as compared to the youth and the working class. In Germany, two working-class people will be able to finance the pension of a single “retiree” by 2040. 

The question which now arises is who will pay for all this? Well, the answer of course is the Working force of the country, who will already be under the pressure of planning for the futures of their kids. This is the reason why these Intergenerational Contracts are bound to be breached. These contractual plans vary in different countries and their issues as well. 

The absence of a consent clause in societal contracts also gives the right to the younger generation to not honour the contract.

While this may be legally correct on part of the younger generation.

This poses serious threats to our elderly who will be left with no assistance.


Seeing the cons of Intergenerational Contracts, a rational mind would surely think about their future.

But their existence is completely possible because of the following measures:

1. Everyone needs to work Longer: Due to increased life expectancy, a later Retirement age is unavoidable.

 Nowadays in western countries, the life expectancy of men is around 85 and the life expectancy of women is around 88.

But still, the retirement age is 65. This threatens the very existence of a pension system.

Thus, governments around the world should keep a check on life expectancy and accordingly set the retirement age.

2. Putting AutoStop on Social security: 

Wasting Money can dismantle the very ideals of Intergenerational contracts.

So, governments around the world should prevent the wastage of Pensions by checking the income of working adults.

3. Introduce Mandatory insurance for High Aged Medical Care:

It should be mandatory for all citizens to pay for a new kind of medical insurance for elderly people.

For example, Germany has introduced new concepts of long-term care insurance.

This will ease the pressure on the “Sandwich Generation” and also on the government.

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