On September 17, the German Labor Ministry sent a draft report “on Poverty and Wealth” to the other ministries to be rubber-stamped. Only the final report, once sanctified by Chancellor Angela Merkel, would be made public. The draft was supposed to remain hidden. But it seeped to the surface almost immediately. And it was hot. Too hot.
The massive data described the tough reality that many people faced in Germany—a reality that got tougher every year. For example, in 1998, the lower 50% of the population owned 4% of all private wealth, while the upper 10% owned 45%. By 2008, the lower 50% owned only 1%, but the upper 10% had increased its share to 53% (at the expense also of the in-between 40%). Other reports have painted similar pictures.
The poverty report by Germany’s statistical agency showed that the “poverty rate” in Germany has been creeping up: in 2008, it was 15.5%; in 2009 it was 15.6%, and in 2010 it was 15.8%. Particularly hard-hit were people under 65 who lived alone. Their poverty rate was 36.1%. For single-parent households, it was 37.1%. The city of Munich issued its own poverty report. By taking into account Munich’s high cost of living, it found that nearly a fifth of its residents lived in poverty.
Poverty data has been stirring public debate for a while, and across most of Europe. Even the largest consumer products companies are adjusting to it by using commercial strategies that were successful in developing countries. But now the Labor Ministry’s “Poverty and Wealth” report, as revised by the Economy Ministry, was leaked to the Süddeutsche Zeitung, which then put a grunt to work to compare the two versions. Turns out, the original version had been censured!
It started in the introduction. In the new version, the sentence, “Private wealth in Germany is very unevenly distributed,” has been deleted.
The original version pointed out: “While wages have risen in the upper areas over the past ten years, lower wages adjusted for inflation have dropped. The income spread has increased,” which would hurt “the sense of justice of the people” and could “jeopardize social cohesion.” Incendiary words, emanating from a Labor Ministry run by a conservative government. Too incendiary.
It was replaced by the new jargon, heard so often in the battle over Greece: falling real wages were an “expression of structural improvements” in the labor market and created low-wage jobs for many unemployed people.
The report also noted that the hourly wage of many people who live alone and work fulltime wasn’t enough to secure a livelihood. This “increased the risks of poverty and weakened social cohesion.” That comment was deleted. Now it only said that the low-wage issue “should be looked at critically.”
Even certain data has been deleted, including this sentence: “However, in 2010, over four million people worked in Germany for an hourly wage of less than €7.”
The opposition was outraged. “The whitewash of the report is shabby,” said Katja Kipping, head of the Left Party, accusing the government of a cover-up.
“Those who hide and ignore reality cannot make fair policies,” said Andrea Nahles, SPD Secretary General. “The reality” for which the coalition was “responsible” was “too gloomy even for the Merkel government. She wants to deny it instead of tackling the problems.” And she lambasted the coalition’s policies that served “only a very specific affluent clientele.”
“The federal Government wants to water down, conceal, and beautify crucial elements of the report,” griped Annelie Buntenbach, board member of the Confederation of German Trade Unions (DGB), an umbrella organization representing over 6 million workers.
The report has heated up the public fight between Labor Minister Ursula von der Leyen (CDU), who doesn’t mind shining a light on conditions in Germany, and Economy Minister Philipp Rösler (FDP), who is facing a very iffy reelection fight. The CDU and FDP are uneasy coalition partners. But if the FDP, which is teetering, doesn’t make it into parliament in next year’s election, Rösler would be axed from any role in the government.
He and laissez-faire stalwarts at his ministry were bothered by comments on the increasing social chasms in Germany, and their impact on social cohesion. He’d already criticized the original report after it was leaked, claiming that certain elements weren’t “the opinion of the Federal government.”
Then the backpedaling started. A spokesperson of the Labor Ministry declared that, yes, there’d been requests to change some things, but “all reports of the Federal Government” had to be coordinated with all ministers and the chancellor. It allowed the government to speak with one voice. So this was “a totally normal process.”
Alas, the statement that censuring such reports was “a totally normal process” caused another burst of outrage. As always, to no effect.
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Combination of 'natural' underclass, to which badly educated immigrants were added and now the aging comes on top of that. Aging with unfunded rapidly cost-increasing entitlements and lower participationrates.
Nothing new we knew this from around 1970 or so as we knew from not far after that that the non-Western immigration would not do the job of keeping this affordable (you have hands to do some of the work, but that is not the main problem with mass unemployment. The main problems are addeing considerable nett receivers makes things simply not more affordable (plus there is a skillsgap with these groups). Problem was hidden for the man in the street (and he/she didnot really grasp it anyway) and now in a crisis when the money runs out and aging really hits in it cannot longer be denied (or better escaped).
That is the reason why I think that a bit further on up the road the European middleclasses who bring up most of the taxes will demand lower taxes to be able to save themselves/build up a pension. Which leaves society with a whole range of social economic misfits at the bottom. For whom entitlements are only partly possible/affordable anymore. People who are structurally unemployed, disabled (or would be disabled), aged without own pension and savings, most non-Western immigrants. problem the European countries have is you cannot charge a middle of the road person 50/60% or more in all sorts of taxes and give nothing or hardly nothing in return. Let people still pay for most of their healthcare and education of their kids, hardly insured in case of a calamity, marginal statepensions with these sort of taxrates will not work.
My ideas have always been that the crisis will end with some countries having an Ireland model (low tax business oriented) and otherones a French. With the latter to be stayed away from as it is bound to collapse. In that respect I see the divide North South growing further. As I expect the North to see the light relatively early in the process and the South to continue as now until the money runs out and there is nothing left to finance better education that is one of the main pillars of wealth and economic success.
But also in countries like Germany pretty massive poverty. Well poverty according to Western standards. With as huge added problem that prices are extremely high and no cheap alternatives. You can easily live on European poverty line income in half of the world. Not good for your competitiveness with a more and more globalised world. Europe will have to find a way to make lower end incomes able to survive. And I donot see that happening from the revenue that would be needed to do that side. And even less from the cost of living side of things.
@Rik who writes "You can easily live on European poverty line income in half of the world."…
Perhaps… if one is well under 45 years of age, never falls ill and does not expect to live beyond 60-65.
@Ton
Including healthcare, which is a) often as well much cheaper than in the US or Europe and b) even with very marginal healthcare people nowadays get 70+ in most parts of the world (for people with European poverty line income). I doubt even if it is lower for this incomegroup than average US 50% of the costs add basically 2 hospital years while the average unhealthy lifestyle of the average American will likely reduce it with more than those 2 years.
Furthermore1 it is very doubtful if the European healthcare entitlements will remain as they look basically unaffordable long term.
Furthermore2 the costs for the present healthcare should be added to the poverty line income (somebody has to pay it and now it is often not included). So if you take that into consideration it would further increase spending income in half of the world and substantially (as healthcare is almost everywhere cheaper than in the West).
You are missing my point btw. The point is that if per worker (taxpayer) 0.7 other not working people live from entitlements (as is roughly what we will see in Europe in a few decades not even to mention civil servants), you need high taxes or social security premia as nearly nothing is funded. And these taxes are part of the coststructure via wages. It simply is extremely negative for your competitveness.
My problem is not that Europeans would like to have a systen with free healthcare and a lot of social security. That is up to them. My point is that I donot see the working population paying for it if taxes have to get up from say 45% to 60% (and both overall probably more) for an average worker to keep paying for it.
My problem is also not immigration. Up to Europeans themselves to decide if they want that or not. My problem is that if you get mainly poorly educated people in you might have some hand to do the work (if you in general drop the present standards) for say the lederly, the problem is that as a group in no way they will pay the taxes necessary for their own entitlements not even to mention the healthcare and pensions of the elderly. They look more like an added problem than a solution.
I can't find the article anymore, but I recall reading that Germans were having a harder and harder time paying their electric bill because it's so high. A direct result of high priced wind and solar….ok found it! http://www.spiegel.de/international/germany/germany-s-nuclear-phase-out-brings-unexpected-costs-to-consumers-a-837007.html
"About 200,000 recipients of Hartz IV, Germany's benefits program for the long-term unemployed, had their power cut off last year because of unpaid bills, according to Paritätische Gesamtverband, an umbrella association for social movements in Germany.
The consumer protection organization for the federal state of North Rhine-Westphalia estimates that number to be as high as 600,000 per year. Ulrike Mascher, president of VdK, an interest group focusing on social justice, uses terms such as 'fuel poverty' and a 'blatant violation of fundamental social rights,' when talking about the issue."