What about poverty in Germany? And who does it affect? Numerous studies, reports and political initiatives deal with the problem that many Germans are apparently at risk of poverty, and that income differences are increasing at an alarming rate. But what is actually being measured?
The cleaning lady in a TV documentary was visibly upset. The French woman was outraged by France’s migration policy and expressed disappointment at her low wages. Although she works full-time, she only has 1100 euros a month. “Poor despite work” was the title of the Arte documentary, in which other examples from other European countries were also shown. Thesis: The gap between rich and poor is growing. But what is the situation in Germany, are we really poor getting poorer and the rich getting richer?
Every year, institutions such as the Paritätische Gesamtverband publish a report on the state of the nation, called the poverty report. The Federal Government’s publication of the same name appears every four years; numerous research institutes and other social organizations regularly devote themselves to the topic. In the media reports on this, the long-worn phrase almost inevitably appears: “The gap between rich and poor is widening more and more”, at least roughly.
Since this seems to have been the case year after year, unchanged and continuously for many years, according to this logic, the Federal Republic should long ago have split into an extremely rich and a bitterly poor part of the population – and there is nothing left in between that would be worth mentioning. This is clearly not the case, even if the middle class is indeed under pressure. In the very rarest of cases, however, the popular scissor phrase is accompanied by reliable data. At first glance, this seems understandable – after all, numerous different statistics, approaches and also political intentions are haunting the reporting world.
First of all, two different issues usually get mixed up, it is the apples and oranges problem: On the one hand, research into poverty in Germany. Secondly, the relation between the different income and asset classes. However, the two approaches are fundamentally different.
One population group focuses on the question of poverty and those affected by it; So the problem would be: How can poverty be avoided, or at least alleviated? The second case is about the social differences in the country. This question is important in terms of social cohesion, and ideally, exploring it will provide clues as to what would be desirable and what needs to be done politically.
If the income limit is clearly defined, below which one must speak of poverty, the increase and decrease in the number of poor or at-risk-of-poverty can be reliably determined statistically, provided the terms are used clearly (which is not always the case in reporting). The definition that is generally accepted is that those who are at risk of poverty are those who have less than 60 percent of the median income at their disposal – for 2021 this is a net income of less than 1,148 euros for single people and 2,869 euros for a family with two children.
In the last report for 2021, the Paritätische Wohlfahrtsverband concluded from the at-risk-of-poverty rate of the Federal Statistical Office for Germany (16.6 percent): “Accordingly, 13.8 million people in this country must currently be counted among the poor.” Poor. This number also includes trainees or students who, of course, cannot receive training support (Bafög) of more than 1,150 euros, but are not poor according to popular belief.
In contrast, the federal government’s current poverty and wealth report, which has been published every four years since 2001, highlights the measures taken by the state to help the socially disadvantaged. Most recently, after the report was published, this included the increase in the minimum wage and the new citizens’ allowance. These factors should already have a positive impact on the figures for 2022 and especially 2023.
Even if the effects of the corona pandemic would of course have to be taken into account for statistically correct representations: On the one hand, the restrictions actually endangered the existence of numerous citizens. On the other hand, there were the well-known aid and support measures. In addition, there is state aid in view of the sharp rise in energy costs. Poverty is avoided here by the fact that government aid takes effect when the income falls below a certain limit and is intended to prevent people from slipping down.
However, growing out of the problem zone, such as long-term unemployment, is not easy. Statisticians point to the fact that those affected often lack qualifications for the labor market, which makes it difficult to achieve higher incomes despite the shortage of workers; In addition, there is often a lack of language skills, for example in the case of migrants. In addition, unemployment seems to be “inherited”: Children from a household with precarious backgrounds have a statistically significantly higher probability of ending up in unemployment themselves.
In addition, the state aid has so far largely been taken into account for additional earnings, so that the motivation for taking up work decreases. A dilemma: on the one hand, the wage gap requirement should be observed, on the other hand, regular gainful employment should also be desirable for social reasons.
An inherent problem with determining at-risk-of-poverty percentages is the relativity of the results. This form of determination was chosen because it makes the data comparable within the EU countries. However, it inevitably has the effect that the risk of poverty will never be radically reduced: Even a theoretical tripling of all incomes overnight would change nothing – only that the risk of poverty would start with an income that was three times higher.
Another question is the distribution of wealth and income. There are entire libraries of research literature on this, and there are now studies on every conceivable aspect. The question of defining wealth, on the other hand, is quite open. In the income tax law of the Federal Republic, an employee with an annual income of around 62,000 euros is apparently already considered rich – because from this amount the top tax rate of 42 percent is due in 2023.
After taxes and social security contributions, however, there is not enough to be able to make significant savings, for example, as the German savings banks recently determined: Even those with a monthly income of around 3,500 euros (net) are hardly able to put anything aside for old age. The main reason seems to be the current high inflation, but also the tax burden and energy costs. This confirms the findings of numerous economic research institutes that the middle class is under severe downward pressure.
As far as income is concerned, Germany is among the countries with a smaller spread in the distribution in Europe: This is determined using the Gini coefficient, which is 30.5 for the Federal Republic and is therefore almost exactly on the EU average. The measure describes the inequality in income – so a Gini coefficient of zero means that all residents earn exactly the same, a level of 100 means that only one person has all disposable income for themselves. In Europe, according to the statistics authority Eurostat, earnings are most homogeneous in Slovakia (Gini: 20.9), while in Bulgaria they are most unequal (40.0). For Germany, this number has hardly changed for many years.
The situation is different if you compare the distribution of wealth in Germany. In 2017, the wealthiest 10 percent of the population owned more than 55 percent of the wealth, and another 10 percent owned another 19.5 percent of the wealth. The top one percent alone collects 27 percent of the wealth. These include goodwill, business assets and real estate. The bottom tenth of Germans, on the other hand, had no assets at all, and on average even had debt, according to the Berlin institute DIW.
According to statistics, if members of the middle class became wealthier in the years up to 2019, this was mainly due to their efforts to save, increases in the value of real estate ownership played a smaller role. The Gini coefficient when measuring wealth inequality is therefore 0.79 percent, according to the German Economic Institute (IW). However, the inequality is also due to the fact that social security in Germany has so far been very pronounced – there is therefore less incentive for private wealth accumulation than in countries such as the USA. In addition, the more prosperous a country, the greater the difference in wealth, according to the IW.
As with all considerations, individual regions and personal circumstances are of course hardly taken into account. The high income according to the income tax rate is put into perspective if you want to make ends meet for your family in an expensive big city. The classification in the federal government’s poverty and wealth report, according to which private assets of 500,000 euros should be considered proof of wealth, is not even sufficient for a family-friendly condominium in cities such as Stuttgart or Munich.
For the really wealthy in the country, such subtleties tend not to play a major role. However, the naturally prevailing distribution and redistribution discussion becomes tricky when it comes to the taxation of such values bound in companies and their inheritance, for example. Research cannot contribute too much here – what is desirable and what is feasible is in the eye of the (political) observer.
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The post “Cleaning lady raged on TV about poverty despite work: What’s the truth behind the accusation?” comes from WirtschaftsKurier.
