Letter from Berlin: Is Germany Falling into Poverty?

By Michael Scott Moore

A new study claims that around 8 percent of all Germans live under the poverty line. Some believe the country is giving birth to an underclass that, unlike the impoverished of previous generations, has completely given up on the future. It's the fiery political debate of the week in Berlin.

A generation lost? The number of children living in family's on welfare has doubled since 2005.
DPA

A generation lost? The number of children living in family's on welfare has doubled since 2005.

When the word poverty drops off the tip of people's tongues here in well-off Germany, it's usually part of a reference to the developing world. But not this week. A leading German politician and a fresh new report have shed new light on poverty problems closer to home.

"Many people call it an underclass problem," Kurt Beck, chairman of Germany's Social Democratic Party (SPD), said in an interview last week. "There are far too many people in Germany who see no more hope of improving their situation."

Beck's use of the word "underclass," sparked a controversy that grew into a full-scale brush fire on Monday after the Social Democrat-aligned Friedrich Ebert Foundation released a study claiming that 6.5 million Germans live in poverty, without much prospect of improving their lot. That's 8 percent of all Germans. Disturbingly, that figure soars to 20 percent in the states that comprised the former East Germany. Those who fell below the poverty line in the study earned an average of just €424 per month.

Germany's national politicians seemed shocked to learn that their nation even had an underclass. Conservative Chancellor Angela Merkel said her government would not tolerate a stark divide between rich and poor. Contradicting the straight-talking leader of his party, which is the junior coalition partner in Merkel's government, SPD Vice Chairman Franz Müntefering said "underclass was an unfortunate term -- since "there are no classes" in Germany.

For decades, Germany was indeed mostly devoid of classes. The social democratic system in West Germany as well as the Communist regime in the East were designed (at least in theory) to buffer Germans from the sharp edges of capitalism during the Cold War. Germans on both sides of the Iron Curtain grew up under some notion of "classlessness." But now that a reunified Germany is struggling to compete in a globalized economy, a divide between rich and poor has developed that no politician from either of the old societies quite knows how to deal with.

"Of course all these kinds of calculations are relative," said Martin Werding, who heads the Department of Social Policy and Labor Markets at the Information and Research Institute (IFO) in Berlin. "What we call 'poor' might sound a bit cynical in comparison to other countries." In its report, the Friedrich Ebert Foundation placed the poverty line at €938 per month, less than 60 percent of the German average.

A penchant for "authoritarian politics"

But technical definitions won't much matter as long as this group of Germans continues to feel disenfranchised -- and the side-effects are already tangible in Germany society. The study comes just a month after frustrated voters sent neo-Nazi politicians to a third German state legislature in the space of two years. The radical right has been rising in Germany along with unemployment -- a fact the Friedrich Ebert study alludes to with a reference to the poor's penchant for "authoritarian politics."

At the same time, though, the German underclass isn't just white: About 24 percent of all immigrants to Germany are poor.

The problem is a fundamental paradox in the German economy. The government gives out huge amounts of aid -- around 30 percent of Germany's gross national product goes into the social safety net. But with unemployment rampant, the sense of security here is unusually low for a European nation. "The danger of being poor is larger here than in other European countries," says Jeppe Fisker Jörgensen, author of a separate study conducted jointly by the Hans-Böckler Foundation and a think-tank called Berlinpolis.

Feigned shock aside, of course, these economic problems aren't really news. Former Chancellor Gerhard Schröder grew deeply unpopular after he set out to reform the German welfare system with a regime of cuts called Hartz IV. The legislation led to deep cuts in benefits for unemployed workers and started to push the long-term unemployed who had been receiving hefty unemployment payments into the less-generous social welfare system. Few would argue that Hartz IV alone is responsible for the increase in poverty, but some say it is compounding the problem.

The National Poverty Conference, an umbrella group comprised of a number of German social and welfare organizations, claims that the number of children in families that fall below the poverty line and receive social welfare payments has almost doubled since Hartz IV was implemented in 2005.

Still, many German politicians are defending the labor market reforms. Wolfgang Thierse, a member of the SPD and a vice president of the German parliament, said that Hartz IV did not cause the problem, it merely made an existing problem more visible.

Growing divide

The split between rich and poor has grown, too. The richest 10 percent of German households own a full 47 percent of the country's privately-held assets -- a rise of around 2 percent since 1998. Meanwhile, workers are falling behind in what they need to know in order to land a job. "Lack of training and long-term unemployment are extreme and typically German problems," said Waltraut Peter, a welfare policy analyst for the German Institute for Economic Research (DIW). "We've known that for a long time."

The problem is a vexing one for politicians, which may explain why they act so shocked when new evidence of it appears. Germans expect generous pension and health-care plans, which raise the price of hiring. That sends corporations elsewhere in search of workers -- to cheaper countries within the European Union, to the former Soviet bloc, or to the Far East -- which raises unemployment, and frustration, in Germany. To fix the problem, Germany would have to lower the cost of doing business by cutting benefits -- which means tightening the belt on an already-frustrated working class.

As old as the story may be, it is still an uncomfortable one in Germany where, even 16 years after reunification, some voters in the eastern states are still not sure they like democracy at all. Members of the new underclass, says Frank Karl, lead author of the Friedrich-Ebert study, "feel like losers … And the worst part is: When we ask whether they think their children will do any better, most of them say no."

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