Growing social inequality in Germany

By Denis Krasnin
24 June 2014

The Central Equality Association, an alliance of social welfare organisations, has published its annual report for 2014 under the title “Society: In crisis?” The report, based on carefully researched data, provides a vivid picture of the dire social situation in Germany that stands in stark contrast to the positive reports in the media.

While the media has reported as a success that the number of those in work reached a new high of 41.6 million in 2012, the report contrasts this with the number of hours worked. With just over 58 billion hours, this stood only marginally above the total in 1960, when only 26 million people were employed. Even if it is acknowledged that average working times were longer at that time, the increase in those employed over recent years is linked to the explosion in part-time working, with grave social consequences.

The number of full-time jobs with social insurance dropped between 1993 and 2012 from 25.5 million to 21.8 million. There is a “clear trend of a reduction in the percentage of full-time employment with compulsory social insurance,” the report notes. During the same period, the number of part-time jobs doubled to 7.1 million. Women have been particularly affected, with one out of two working part-time.

A further 4.8 people were in limited employment in 2012. They work in mini-jobs, or on a short, medium-term or temporary basis. According to figures from the federal labour agency, almost an additional 3 million people have a second job on such terms on top of their main employment. The reduction in the unemployment figures boasted about by the government is connected with the rise in such precarious conditions of employment.

For the long-term unemployed, those who have been out of a job for more than a year, it is increasingly difficult to get out of poverty. One third of the unemployed, over a million people, fall into this category, although the statistics by no means account for everyone. For example, when a long-term unemployed person completes a compulsory task, he or she is removed from the unemployment statistics. In the last month of 2012, this accounted for at least 392,000. Those who are sick, single parents with children under three years and the elderly are not included.

In May, the number of those “capable of work and eligible for benefits” (those capable of work who claim jobless benefit II or Hartz IV social welfare) stood at 4.43 million. Along with the unemployed, this included 1.3 million workers who top-up, relying on benefits despite working.

It is hard to get out of long-term unemployment. Only one third manage to obtain a job with compulsory social insurance. For the majority, precarious employment conditions await. Despite working, many still rely on benefits from the state. Only half manage to maintain a job of any kind for more than a year. Then they are once again unemployed and have to deal with the rules and regulations of the job centre. According to poverty researcher Irene Beckert, 1.5 unemployed people do not claim basic welfare support even though they are entitled to it.

The planned minimum wage of €8.50 per hour will not help those in low-wage jobs and the underemployed. A single person, who rents a flat for €350 per month, would be in a worse position after working 37.7 hours per week than someone on Hartz IV, according to calculations in the report. The minimum wage will not save anyone from poverty, but will remove part of the burden on state spending for Hartz IV.

A further consequence of the expansion of low-wage and part-time jobs is a growth in the gulf between income and wealth. The percentage of the population’s income that is wages sank from 73.5 percent in 1993 to 64.2 percent in 2012. There was a corresponding increase in the percentage of capital income. The impoverishment and exclusion of workers is increasingly being consolidated into an unbroken trend, according to the report.

Fifteen percent of the population are poor—i.e., they earn less than 60 percent of average income. “Poverty in Germany has grown gradually but almost continuously in recent years, both in the states in western Germany as well as those of the former East Germany,” the authors write. Clearly “a large and growing number of people [have been] disconnected from the development of wellbeing.”

The main areas of poverty are the major cities of Dortmund, Leipzig, Duisburg, Berlin, Bremen, Essen, Hannover and Dresden. In each of these cities, one in five are poor, and in the first three it is one in four.

In addition, one in ten adults are overly indebted and are not able to pay off their own debts. In 2009, 6.19 million people were in debt for the entire year. By 2013, this had increased by a further 390,000; in particularly, the number “of the youngest and oldest grew sharply.”

Between 2004 and 2013, the number of those indebted under the age of 20 trebled, while that of those over 70 rose by 40 percent. The main causes were “unemployment, family situation, illness and failure to establish their own businesses.” It must be added that not a few unemployed have been forced into debt by the job centres.

Conditions for the poorest of the poor has been researched in detail scientifically. With the richest it is different: “Basic data comes from surveys which often barely capture the very highest levels of wealth, thereby only partially depicting the existing wealth relations.”

But even this incomplete data shows a high degree of social inequality. According to surveys, total household wealth in Germany, after deducting debt and loans, stands at €6.3 trillion, an average of €83,008 per resident. In fact, the poorest 20 percent of the 40 million households have an average debt of €4,600, while the richest 10 percent possess average wealth of €1.15 million. Germany leads the way in Europe as the country with the most unequal distribution of wealth.

Within the top 10 percent, there is also a wide variation in wealth distribution. According to a study by the business consultants Boston Consulting, 839 households in Germany, 0.002 percent, own more than US$100 million in wealth, or €73.5 million. According to the Manager Magazin ’s rich list from last year, the richest 100 Germans, all of whom are billionaires, possess an average wealth of €3.63 billion, a record high.

The annual report comes to the conclusion that the findings are indicative “of deepening social divisions” “With that, social cohesion decreases.” It ends with an appeal to the ruling class to adopt more wealth redistribution measures so that “social cohesion” can grow again.

The response to previous reports confirms that such appeals will be fruitless. In the 2011 annual report, chairman of the Central Equality Association Ulrich Schneider warned of social unrest such as in London and other major British cities. Since then, social conditions for the overwhelming majority of the population have worsened.

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