Government presents first report on poverty and wealth

In April 2001, the government presented the first report on poverty and wealth in Germany. The report's analysis shows that, in nearly all areas, the problem of social exclusion has increased while at the same time justice in distribution has decreased. Families with children and single parents are particularly affected by these developments. The report, along with Germany's first National Action Plan on social inclusion (in response to an EU initiative), states that the government wants to fight poverty primarily through promoting labour market integration and greater qualifications. Trade unions, however, are seeking more concrete redistribution policies.

On 25 April 2001, the German government presented a report entitled Living conditions in Germany – the first governmental report on poverty and wealth (Lebenslagen in Deutschland – Der erste Armuts- und Reichtumsbericht der Bundesregierung). In presenting this report, the government fulfilled a mandate issued by parliament (Bundestag) on 27 January 2000 to analyse the social situation in Germany. If the Bundestag responds favourably, the report might become the basis for future continuous reporting on poverty and wealth issues.

Some 23 organisations were involved in a consultative group on the report, including: the German Trade Union Federation (Deutscher Gewerkschaftsbund, DGB); the Confederation of German Employer's Associations (Bundesvereinigung Deutscher Arbeitgeberverbände, BDA); the catholic and protestant churches; the Confederation of German Welfare Organisations (Paritätischer Wohlfahrtsverband) and other welfare organisations; the Federal Statistical Office (Statistisches Bundesamt); the Federal Bank (Bundesbank); and organisations representing municipal authorities. On the part of the government, representatives of the Chancellor's office, the Ministry for Finances and the Ministry for Families, Older People, Women and Youth, along with the parliamentary groups of the ruling Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD) and and Alliance 90/The Greens (Bündnis 90/Die Grünen), were permanent "guests" on the consultative body. In addition, 30 social scientists from universities and research institutes participated in a scientific expert body.

Structure of the report

The report is divided into two sections. Section A describes and analyses the social situation in Germany in the period up until 1998, on the basis of data from the Federal Statistical Office, the "socio-economic panel" (Sozio-ökonomisches Panel, SOEP) and the "panel on low wages" (Niedrigeinkommenpanel, NEP). This section is divided into the following subsections:

  1. income, property and debts;
  2. the social and economic position of people on welfare;
  3. the living conditions of families and children;
  4. education;
  5. labour market;
  6. living/housing conditions;
  7. health situation and care needs;
  8. disabilities; and
  9. immigration.

In line with the principle of gender mainstreaming, the report includes gender-specific aspects in its analysis.

Section B is entitled Shaping the future - renewing Germany. Politics of the new government (Die Zukunft gestalten – Deutschland erneuern. Die Politik der neuen Bundesregierung). It sets out the government's strategy to fight poverty, which is guided by the principles of strengthening solidarity and self-responsibility on the one hand, and improving the framework conditions for economic growth and employment on the other.

In addition, the report provides a short overview of the issue of reporting on poverty and wealth in the international context, especially in other European countries. The government states that, although most countries produce reports on poverty, the analytical approach of the German report is different, as it reflects a "pluralistic understanding" of poverty and wealth.

Pluralistic understanding of poverty and wealth

Through the report, the government aims to "de-emotionalise" the discussion on "poverty" and "wealth". It argues that both terms are too complex for a simple definition, and that rather they are used as synonyms for the lower and upper limits of the distribution of prosperity. The report is therefore not based on a fixed definition of poverty but on a concept of poverty as a "pluralistic" term, which involves living conditions which are seen as inadequate from various perspectives. The report thus refers to a definition given by the EU Council of Ministers in 1984, which regards as poor "those persons, families and groups of persons whose resources (material, cultural and social) are so limited as to exclude them from the minimum acceptable way of life in the Member State to which they belong". Following this definition, the report describes poverty from different perspectives, such as: poverty of income; living in districts with social problems; homelessness; a lack of competence to deal with problems; or facing critical family problems.

The report refers to a notion of relative poverty (relative Armut), whereby to be poor means possessing fewer resources in comparison with the median standard within society. This concept allows for a better assessment of unequal distribution of resources among the population, states the report. Possession of under 50%-60% of the median level of resources is viewed as leading to social exclusion. This concept of relative poverty is different from a "political-normative" understanding, whereby poverty is measured by counting the number of people receiving social benefits (plus those not claiming and living in "hidden poverty") It also differs from an "absolute" definition of poverty according to the criterion of whether someone has sufficient resources to stay alive - the report views this concept as not being relevant in highly developed industrial countries.

The report also seeks to take the dynamics of poverty into consideration by examining developments over time, based on various statistical surveys.

Key findings

The report's analysis finds that social exclusion has increased in nearly all areas, while at the same time justice in distribution has decreased. The main findings are as follows.

  • In west Germany, inequality in income distribution has increased slightly but continuously. A similar development can be seen in east Germany, although there the inequality is less marked. Different social groups are affected differently by this increasing inequality: while the number of poor older people has dropped slightly, poverty among children, households with children and single parents has increased. Between 1993 and 1998, the number of poor children under the age of six decreased slightly, having previously increased rapidly, but the proportion of older children and young people living in poverty is still very high. The report states that the labour market position of the parent is decisive: in 1998, one-sixth of all poor children in west Germany lived in households with an unemployed parent. In the same year, unemployment reached a peak of around 4.3 million people, and more families were dependent on social benefits. This led to an increase in the costs of social benefits, especially those aimed at preventing long-term unemployment, poverty and extreme poverty.
  • The report emphasises that a person's labour market integration is central to the availability of material resources, which is central to the issues of poverty and wealth. Essentially, income and financial assets are the means whereby people can reach a position of relative prosperity. In order to assess the standard of living, the equality of opportunities and the financial needs of the population, it is important to analyse the overall income distribution. Incomes are not equally distributed, and the inequality is only partly reduced by social security payments, taxes and social security contributions.
  • According to the results of an income and consumption random sample, the average net annual income of households in west Germany increased from DEM 23,700 to DEM 61,800 between 1973 and 1998, a rise of 20.5%. In east Germany, average net income rose from DEM 39,800 in 1993 to DEM 47,400 in 1998, an increase of 9.6% over five years.
  • In 1995, there were about 13,000 "income millionaires" (Einkommensmillionäre) - people earning more than DEM 1 million per year - in Germany, of whom 229 lived in east Germany. Their average net income was about DEM 3 million.
  • In the 1990s, access to higher income positions became more difficult, while the risks of falling behind in income terms increased.
  • The average value of the private property of west German households amounts to about DEM 254,000, and of east German households about DEM 88,000. German households possess private property to a total value of about DEM 8,200 billion. This private property is not equally distributed: in west Germany 42% of the private property is owned by 10% of the households. By contrast, half of the population possess only 4.5% of the private property.

Government policies

In the section of the report setting out its policies on poverty and wealth issues, the government considers high taxes to be an obstacle to individual initiative and the readiness to invest. The government claims that its current reforms will have positive effects on the labour market, as labour market integration and qualification are the government's main targets in the fight against poverty. The current labour market policy is concentrated on active policy, instead of merely paying benefits, in order to fight long-term and youth unemployment. In addition, the government is following a consensus-oriented policy, as expressed by the tripartite National Alliance for Jobs (DE0103213F). Another approach taken by the government is to strengthen society as a "civic body" and thereby increase the individual sense of responsibility. Moreover, the government has improved the framework conditions for families through several financial subsidies, tax relief, the promotion of part-time work and other measures.

National plan on social inclusion

Three weeks after the poverty and wealth report was issued, on 16 May 2001 the cabinet adopted the first "National Action Plan to fight poverty and social exclusion" (Nationaler Aktionsplan zur Bekämpfung von Armut und sozialer Ausgrenzung), covering 2001-3.

In December 2000, the Nice European Council (EU0012288F) adopted the following key goals with a view to making a substantial substantial impact on the eradication of poverty and social exclusion by 2010:

  • to facilitate participation in employment and access by all to resources, rights, goods and services;
  • to prevent the risks of exclusion;
  • to help the most vulnerable; and
  • to mobilise all relevant actors.

It was agreed that EU Member States will produce National Action Plans on these targets by 1 June 2001, covering the two-year period July 2001 to June 2003. In contrast to the National Action Plans on employment, which are implemented on the basis of EU-level Employment Guidelines (EU0010276F), the National Action Plans on social inclusion are to translate a set of appropriate objectives at national level in the fight against poverty and social exclusion.

In accordance with the wealth and poverty report's findings, the German National Action Plan sets out how the country will promote social inclusion through improving: labour market integration; vocational and further training; and the reconciliation of work and family life

Reactions

In response to these two government initiatives on poverty and social inclusion, trade unions, church representatives and politicians demanded a redistribution policy in favour of families and unemployed people. In a press release, the vice-president of DGB, Ursula Engelen-Kefer, welcomed the fact that the government had presented a report on poverty and wealth, which had been demanded by DGB since 1984. She called for a discussion on social justice "without taboos" and asked the government to present concrete measures to improve the distribution of assets, income and opportunities. A councillor of the protestant church in Germany, Manfred Kock, appealed to employers to invest in jobs and, by so doing, to allow more people to participate in the acquisition of property. He doubted whether the prosperous part of society cares about the "social obligation" laid down in German constitutional law. The opposition Christian Democratic Party (Christlich Demokratische Union, CDU) demanded more financial aid for families and proposed a monthly family allowance of DEM 1,200 for the first three years after the birth of a child.

Commentary

Up until now, there had been no official analysis of both poverty and wealth in Germany. While the issue of poverty was discussed in the context of a general debate on social policy, the wealth aspect was usually missing, although only an analysis of both aspects supplies evidence of the level of social cohesion. In the 1990s, this topic was promoted through a study on poverty in Germany by DGB and the Confederation of German Welfare Organisations, which was published in 1994 and updated in 2000. In 1997, the protestant and catholic churches published a joint statement in which they pleaded for "a future in solidarity and justice" (Für eine Zukunft in Solidarität und Gerechtigkeit) and emphasised that both aspects of inequality (poverty and wealth) should be taken into consideration. This suggestion can be also found in the "fair share" campaign of the the IG Metall metalworkers' union, launched in October 2000, which aims to initiate a broader debate on poverty and wealth in Germany (DE0010287F).

While the demand for an active distribution policy was raised in these debates, as well as in some comments on the new report on poverty and wealth, the government itself does not include (re)distribution as a part of its policy. By concentrating on the support of families and the integration of individuals in the labour market – which are both, of course, important steps – the government's approach seems to see the problem of inequality as only a problem of people being excluded from the average standard within society, while the group of people who own the largest share of private property are not taken into account. There may be an impression that both aspects of inequality – poverty and wealth - are being taken into consideration within the analysis, but not within the political strategy. (Alexandra Scheele, Institute for Economic and Social Research, WSI)

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