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The Fight Against Poverty – Policy Options and Reality

Studienarbeit 2009 96 Seiten

BWL - Wirtschaftspolitik

Leseprobe

Table of contents

Executive Summary

List of Abbreviations

List of Figures

List of Tables

1 Introduction

2 Problem Definition

3 Objectives

4 Methodology

5 The Fight Against Poverty
5.1. Poverty – A Definition
5.2. How to Measure Poverty
5.3. The Variety of Poverty
5.3.1. Key Factors of the Risk of Becoming Poor
5.3.2. Poverty Among Poor Educated People
5.3.3. Child Poverty
5.3.4. Poverty of Seniors
5.3.5. Poverty Among Handicapped People

6 The International Day for the Eradication of Poverty

7 Poverty in Germany
7.1. The Risk-of-Poverty-Line in Germany
7.2. The Present Situation in Germany

8 Prospective Poor People
8.1. Outsiders of Today are the Poor of Tomorrow
8.2. An Income Above the Average is No Relaxing Situation

9 Policy Options Against Poverty
9.1. Actions to Avoid Poverty
9.1.1. Minimum Wages
9.1.2. Securing Pensions
9.1.3. Tax Policy
9.1.4. Asset Accumulation
9.1.5. Prevent Excessive Indebtedness
9.1.6. Education
9.1.7. Basic Education
9.1.8. Vocational Education
9.1.9. Lifelong Learning
9.2. Actions to Help People Out of Poverty
9.2.1. Education
9.2.2. Help for Single Parents
9.2.3. Language Skills
9.2.4. Aid for Families with Many Children
9.2.5. Help People Out of Drug-Addiction
9.2.6. Social Housing
9.2.7. Disabled People

10 Reality – How Political Options Impact on Life The Status Quo – Facts
10.1. Policy Options to Avoid Poverty Impact Reality
10.1.1. Effects of the Policy Option “Minimum Wages”
10.1.2. Effects of Policy Options to Secure Pensions
10.1.3. Effects of the Tax Policy
10.1.4. Effects of Asset Accumulation
10.1.5. Effects of Policy Options to Prevent Indebtedness
10.1.6. Effects of Policy Options to Improve Education
10.1.7. Basic Education in Reality
10.1.8. Vocational Education in Reality
10.1.9. Lifelong Learning in reality
10.2. Policy Options to Help out of Poverty Impact Reality
10.2.1. Education
10.2.2. Effects of Policy Options to Support Single Parents
10.2.3. Effects of Policy Options to Improve Language Skills
10.2.4. Effects of Policy Options to Support Families with Many Children
10.2.5. Effects of Policy Options Against Drug-Addiction
10.2.6. Effects of the Policy Option “Social Housing”
10.2.7. Effects of Political Options to Support Disabled People

11 Results

12 Conclusion

13 Integral Total Management (ITM) – Checklist
13.1. General Economics
13.2. Strategic Management
13.3. Marketing
13.4. Financial Management
13.5. Human Resources Management
13.6. Business Law
13.7. Research Methods/Management Decision Making
13.8. Soft Skills/Leadership

14 Bibliography

Executive Summary

Ghettos of poor and unemployed people, homeless people, families relying on food banks, sick people without health insurance…. There is a long list of people which comes into our minds when we think about poverty and people who are affected by it.

If we search for an exact definition of poverty we will not find a single, universally accepted standard definition of it. Poverty is hardly measurable. Every interpretation is affected by credos of value. The ethical correctness of these trails to valuate poverty is scientifically not concluding appraised (Floren 2007, p. 120). The European Union’s working definition of poverty is (1985, http://ec.europa.eu/employment_social/social_model/6_en.html):

“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.”

This definition is the basis of the valuations of poverty in this assignment.

The variety of poverty shows how many groups of people in particular are at risk of becoming poor.

In Germany the gap of income and the number of poor people in the society increased from the year 2000 to the year 2005 faster than in any other country of the OECD. Causes are the high unemployment rate in the year 2005 and a significant gap of income.

Nobody can be excluded if we talk about the poor ones in future. High income during employment does not mean that there is enough money for times of unemployment or old-age-pension.

When thinking about poverty we should never forget of what advantage it is to have a high old-age pension when you are lonesome and you have to pay for every help you need?

Policy options have to be divided in to groups:

1. Actions to prevent poverty
2. Actions to help people out of poverty

From a scientific point of view there is only one thing needed to stay out of poverty: enough money to sustain your expenditures.

Therefore a well paid job is necessary. Minimum wages are a controversially discussed topic during the last months. Only an occupation with an adequate salary is good for covering all costs.

Another crucial point is to secure the old age pensions. Due to this the Federal Government promotes a 3-layer programme. The tax policy is also a point which can be influenced by the state. Prevention of excessive indebtness and a adequate asset accumulation are also important topics.

Proper education is a crucial point to prevent poverty and likewise the core measure to get out of poverty. Only good education opens the doors to the well paid jobs.

Some social groups are usually not able to get out of poverty on their own. Therefore help is needed. Especially for single parents, families with many children, drug addicts and disabled people as well.

Proper programmes for social housing or for improving language skills are often helpful for the poor.

Here, the government has countless options to help people, but the realty is often different…

In the fight against poverty the Federal government starts several actions to avoid and to help people out of poverty. The central statements behind these actions are:

1. Every person should secure his life by gainful employment at first.
2. Furthermore specific social transfer benefits should help to secure basic needs, especially for families.

They directly stress the responsibility of the successful fight against poverty lying in the hands of everyone. Especially one aspect implied in the first statement is important for every citizen: Gainful employment, everyone himself is responsible for, gives the chance to secure life.

In the past poverty and employment were inseparably connected and mutual exclusive. As employment was taken poverty was banned, in case of unemployment poverty threatened. Today especially the first statement is no longer true without restrictions. The effectiveness of employment as major driver in avoiding and helping out of poverty was weakened. The reason is the increase of low-wage employees. The belief gainful employment can always secure life is no longer true.

The actual problem in Germany is a high amount of fully-employed people becoming poor. The expression “working poor” describes working full-time in one and even more jobs earn wages under the existence minimum. Labour unions claim legal minimum wages in the different lines of business. The Confederation of German Employers BDA demands the negotiation of minimum wages by the bargaining parties, employer associations and labour unions. The free social market economy of Germany may not be influenced by law.

The Federal Government established and renewed the “Mindestarbeitsbedingungsgesetz” and “Arbeitnehmer-Entsendegesetz”, which do not give legal minimum limits. The laws ease the establishment of minimum wages in business lines.

Low wages and the difference of income are one reason of the gap between rich and poor. To even this income differences the federal government introduce the progressive income tax rate. It attenuates the inequality of the gross incomes. But the gap between rich and poor is only less affected by the tax policy.

The other reason for the gap between rich and poor is the difference of assets. The gap increases because the middle-class decreases. More and more people become poor. Poor people are not able to establish coverage by accumulating asset. People who are able to accumulate asset need the right strategy. Capital investments offer different strategies to accumulate asset, from conservative to risky.

In the actual financial crises many people and companies have lost much asset. The trust of savers in the banking system and especially in shares hits the rock bottom. Today every possibility to accumulate asset is questioned.

The coverage in old-age was formerly granted by legal pensions. But legal pensions are no longer safe, as it was belief for a long time. The “three-layer-concept” of retirement provision offers possibilities to close the increasing gap. The intention is to support the conventional public old-age pension by two additional layers. Nevertheless every layer and every kind of provision has its own particularities which should be considered.

Poor and unemployed people are often threatened by indebtedness. Especially unemployed people are not able to pay back their bills and become excessively indebted soon. To leave this hopeless way debt relief and employment are the best means. In insolvency proceedings the debt relief is pronounced. From the year 2002 until now the annual increase of insolvency proceedings decreases. Additionally the average amount of indebtedness decreases in these years too.

The basic requirement for employment and therefore a central driver to avoid and to help out of poverty is education. Federal Chancellor Angela Merkel proclaimed the “Educational Republic of Germany. “

One reason for her reaction is secondary general schools are in trouble. After graduation many youngsters stay in the transitional system for too long. They don’t find a vocational education.

Another reason is even the vocational education has a problem. The participation in the Dual System in the vocational education decreases from 51.2 percent to 42.6 percent in 2005. This is an alarming development. Although the tendency is declining in the year 2005 to 2006 the efficiency of the Dual System should be improved even more.

Forecasts of the employment market show a growing demand for highly qualified employees between 2003 and 2020. The demand for low qualified people will reduce. According this forecast qualification and competence become the securing means of future, for everyone at anytime. This can only be granted by lifelong learning.

Besides the stated major effects of policy options affecting the whole society there are some groups of people, which need special support: Single parents, families with many children, people addicted to drugs, homeless, disabled and migrated people are treated in detail…

List of Abbreviations

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List of Figures

Figure 1: „Stand Up“. Source: http://www.deine-stimme-gegen-armut.de/aktiv-werden/aktionstage.html

Figure 2: Rate of persons in % with earning an income lower than 50 % of the median income. Source: OECD 2008

Figure 3: Share of the society who is living in an unemployed household in the year 2005 in %. Source: OECD 2008

Figure 4: Survival at the Bottom. Source: Hans-Böckler-Stiftung

Figure 5: Olaf Scholz, Secretary of State for Employment. Source: Federal Ministry for Employment and Social Welfare

Figure 6: Demographic Change in Germany. Source: Bundeszentrale für politische Bildung

Figure 7: Pension Age in Germany. Source: Deutsche Rentenversicherung Bund

Figure 8: Franz Müntefering, former Secretary of State for Employment. Source: SPD

Figure 9: Poverty Exposure by Living Conditions. Source: Statistisches Bundesamt

Figure 10: Ulrike v. d. Leyen, Federal Minister for Family Affairs. Source: Federal Ministry for Family, Seniors, Women and Youth.

Figure 11: Social Housing. Source: WEG Elsterwerda

Figure 12: Progress of employment and unemployment, 1991-2007. Source: Statistisches Bundesamt 2008e

Figure 13: Employed people according status. Source: Statistisches Bundesamt 2008h

Figure 14: Labour union demonstrating for minimum wages. Source: www.dgb.de

Figure 15: The chairman of the labour union NGG Franz-Josef Möllenberg. Source: www.initiative-mindestlohn.de

Figure 16: Progress of old-age pensions. Source: Verband deutscher Rentenversicherungsträger 2004

Figure 17: Demonstration of pensioners. Source: www.spiegel.de

Figure 18: Manuela Queisser, OECD. Source: www.manager-magazin.de

Figure 19: Income distribution. Source: Bundesministerium für Arbeit und Soziales 2008b

Figure 20: Parts of income tax. Source: Bundesministerium für Arbeit und Soziales 2008c

Figure 21: Millionaire fair in Munich, October 2008. Source: www.spiegel.de

Figure 22: Structure of financial asset. Source: Deutsche Bundesbank 2007

Figure 23: Desperate woman. Source: www.pflegeeltern.com

Figure 24: Excessive indebtedness of private households. Source: Statistisches Bundesamt 2006c

Figure 25: Federal Chancellor Angela Merkel. Source: www.n24.de

Figure 26: Frustrated child. Source: www.unicheck.de

Figure 27: Transient situation of youngsters. Source: Bundesministerium für Bildung und Forschung 2008c, p. 165

Figure 28: Distribution of new entrants to the three sectors of the vocational system. Source: Bundesministerium für Bildung und Forschung 2008c, p. 96

Figure 29: Development of the demand for labour. Source: Bundesministerium für Bildung und Forschung 2008c, p. 201

Figure 30: Single mother with two children. Source: www.epochtimes.de

Figure 31: German lesson with pupils of foreign nations. Source: www.wdr.de

Figure 32: Rates of poverty risks for families. Source: Statistisches Bundesamt 2005

Figure 33: Children having fun. Source: www.spiegel.de

Figure 34: Drug addict is shooting stars. Source: www.dradio.de

Figure 35: Legal drugs. Source: www.landtag.ltsh.de

Figure 36: A homeless person spends the night on the ground. Source: http://www.planet-wissen.de

Figure 37: Homeless people respectively people endangered by losing their flats, 1997-2006. Source: Bundesarbeitsgemeinschaft Wohnungslosenhilfe e.V. 2006

Figure 38: Dr. Ilja Seifert, MdB. Source: www.polixea-portal.de

List of Tables

Table 1: Proportion and number of elderly population (aged 65 and above) at risk of poverty in the EU Member States. Source: Eurostat’s New Cronos Databse

Table 2: Employment Quota of Handicapped People. Source: 3. Armuts- und Reichtumsbericht der Bundesregierung

Table 3: Different limits regarding the risk of becoming poor 2004 and 2005. Source: Statistisches Bundesamt, Leben in Europa 2005 und 2006a

Table 4: Examples of risk-of-poverty-limits of different households. Source: Statistisches Bundesamt, Leben in Europa 2005

Table 5: Participators of low-wage employment in the years 1995, 2000 and 2006. Source: Universität Duisburg Essen, p. 7

Table 6: Three-Layer-Concept of retirement provision. Source: 3-schichten-modell 2006

Table 7: Consumer insolvencies. Source: Statistisches Bundesamt 2008d, p. 5

Table 8: Integration courses of the Federal Government. Source: Bundesregierung 2008d, p. 19

Table 9: Drug consumers. Source: Gesundheitsberichterstattung des Bundes 2008

Table 10: Predominant means of subsistence. Source: Statistisches Bundesamt 2006b, p. 1275

1 Introduction

Did you know that 13.5 percent of people in the total population in Germany lives below the poverty line?

Most of people don’t know that!

Poverty in Germany is a largely unknown issue. But it exists!

Even more concerning: 16.5 % of all German households are threatened by poverty as well.

What can politicians do to help those people? Are there any political options at all?

In this assignment we first would like to inform about poverty in general and in Germany in particular.

Second, we show that policy options exist and third how these measures take hold in practise.

2 Problem Definition

Is there any poverty in Germany?

Some people might ask.

Yes, there is a wide range of different forms of poverty in Germany!

The German government tries different measures to fight against poverty.

Especially there are particular groups such as families with many children or people with no graduation – to mention only a few - often live in poverty or are threaded by poverty.

Therefore government needs specific task to help those people.

3 Objectives

The objective of this assignment is firstly, to inform about poverty in Germany in general. Secondly, to show the different options politics has and finally to show how these take place.

4 Methodology

- Reference book research
- Internet research

5 The Fight Against Poverty

Ghettos of poor and unemployed people, homeless people, families relying on food banks, sick people without health insurance…. There is a long list of people who come into our minds when we think about poverty and who is affected by it. If you ask people how they will define poverty or poor people you will often hear something like this:

- Poverty – Social iniquity
- Having not enough money to live a normal life
- Poverty in developing countries
- …

Each statement leads to more questions. How would you define social iniquity or a normal life? These different meanings of poverty and poor people ask for an exact definition before we can go into details.

5.1. Poverty – A Definition

There is no single, universally accepted standard definition of poverty.

Poverty is hardly measurable. Every interpretation is affected by credos of value. The ethic correctness of these trails to valuate poverty is scientifically not concluding appraised (Floren 2007, p. 120).

The European Union’s working definition of poverty is (1985, http://ec.europa.eu/employment_social/social_model/6_en.html):

“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.”

Floren (2007, p. 120) says that there is a difference between absolute poverty and relative poverty. Absolute poverty means being immediately in danger of starving to death. Today we will still find this kind of poverty in developing countries. In prosperous countries we will find absolute poverty very rarely. In these countries we speak of relative poverty. Relative poverty is for example defined by the European Union as stated above.

All modern societies agree in general that we have to avoid poverty or fight against it. On the one hand for ethical reasons on the other hand for instrumental reasons. Poverty is often accompanied by conflicts such as political radicalism or a high crime rate (Hradil 2001, p. 242).

For an exacter definition or localization of poverty we have to define the different varieties of poverty first.

As a basic principle there are two definitions of poverty (Hradil 2001, p.243):

- definition according to resources
- definition according to circumstances

The definition according to resources outlines poverty caused by less income. Poverty will be measured on the basis of the income of a household. This concludes that someone is poor if he or she has not enough income for buying goods needed for their lifestyle.

The definition according to circumstances supports the multidimensional view of poverty. There are many different circumstances which will be included in this definition. Here are some examples: food, clothing, conditions of employment, leisure time, habitation, conditions of healthfulness, prestige and so on. Measuring all these circumstances means to define different measurement methods and different poverty lines for all observed circumstances. From this it follows that this definition of poverty is on the one hand a really multidimensional view but on the other hand it is very circuitous to define all these different circumstances.

Although the definition of poverty according to circumstances is the measuring method which is most extensive and in fact is often not used because of its difficulties in defining such variety of circumstances.

5.2. How to Measure Poverty

For better international comparability the definition of poverty according to circumstances limited to the income poverty is used for displaying the poverty of a country. There is no doubt that income poverty is the core of poverty in modern society (Floren, p. 121).

Within the EU poverty is measured by using the relative income poverty line. Each country has to define the average income of a household rather the median equivalence income per household. The median equivalence income is defined as the total available income of a household divided by an equivalence factor. The equivalence factor is used to consider the size of a household and the formation (how many children and adults) of it. According to this a poverty line is fixed. It is a percentage of the average income. People with an income below 60 % of the median income are identified as the ones who are at risk to become poor (EAPN, p. 7).

This shows the risk of poverty in general. But it is also possible to break down the figures. Then you can get detailed figures of the people who are at risk becoming poor. It is possible to itemize them into special groups of persons for example elderly people, male or female, profession and so on.

Income poverty has different causes.

5.3. The Variety of Poverty

If we talk about the variety of poverty we will have to ask who is at risk of becoming poor. The risk-of-poverty-rate shows how many people of the whole population of a country are at risk of becoming poor.

5.3.1. Key Factors of the Risk of Becoming Poor

There are some key factors which are an indicator for being at risk of becoming poor (EAPN-Wegweiser, p. 13).

- Unemployment or a low paid and insecure employment: People cannot earn a stable and adequate income.
- A low educational background and low qualification: Jobs are very limited in this category and also low paid.
- The size and type of the family: Large families and single parents are often at risk of becoming poor because they have low income and high costs. It is difficult for them to find a well paid job.
- The gender: Women are usual more at risk of becoming poor because they often have jobs which are low paid or do jobs (child care) which are not paid.
- Handicap or health problems: The access to jobs is limited and there are higher costs because of a handicap.
- People of an ethnic minority group: They are affected by racism and discrimination. This limits also the access to jobs.
In this assignment we want to specify four different varieties of poverty:
- poverty among poor educated people,
- child poverty,
- poverty of seniors and
- poverty among handicapped people

5.3.2. Poverty Among Poor Educated People

Children of poor families have a bad chance for a good education. This is unfortunately reality in Austria and in most of the European countries, as Gabriele Schmid, director of the education department of the AK Vienna announced in the Glocalist Daily News in March 2008 (http://www.glocalist.com/index.php?id=20&tx_ttnews%5Btt_news%5D= 2995&tx_ttnews%5Bcat%5D=3&cHash=656c0f01b8).

PISA displays clearly that pupils from well educated families achieve excellent marks above the average. Pupils from poor educated families are most the time at risk of not getting by.

It’s a vicious circle. Without higher education it is almost impossible to get a well paid job.

The request for similar chances of education for everybody is known in Germany since the 60s. At that time people discussed the topic how education influences the prosperity in Germany for the first time. Universities were separated as places of high education for the higher social class society.

The request for similar education for everyone shows that education is a warrantor for social fairness (Stompe, http://www.gender.hu-berlin.de/w/files/ztg_bulletin_2930/stompe _annelie__armut_und_bildung__pisa_im_spiegel_sozialer_ungleichheit_bulletin_2930.pdf).

There are different possibilities for breaking this vicious circle. Here, I only want to show some requests how it may be possible.

- a compulsory pre school year
- full time schools
- comprehensive school for all 10 to 14 years old children

Education and knowledge should be imparted in schools and not at home. Full time and comprehensives schools support this idea.

5.3.3. Child Poverty

The highest risk of poverty for children is when both parents are unemployed and they are living from Hartz-IV-Leistungen (in Germany) (http://www.kinder-armut.de).

The bulletin “zur Lage der Kinder in Deutschland” from the UNICEF published in May 2008, shows that more than every sixth child is affected by poverty in Germany. Children from single-parent-families, from families with foreign background or from families with many children are affected by poverty above the average (http://www.kinder-armut.de/news/3-news/28-unicef-jedes-sechste-deutsche-kind-in-deutschland-ist-arm.html).

The ever-turning poverty spiral became manifest. The third poverty bulletin of the German government shows that the social discriminated children:

- nourish on unhealthy food
- exercise seldom
- live in isolated residential quarters
- do not attend good schools
- have only poor chances for an apprenticeship
- do not have enough social support

We can really talk about “poverty careers” which develop in such circumstances. Missing chances for education mean that important potential of children and youngsters will be missed. This has also a great impact on the economic effort.

In 2004 every third child shows on the first day at school developmental disorder or challenging behaviour. Family poverty is very close to education poverty (http://www.kinder-armut.de).

à Child poverty is more than having not enough money. Poverty is heritable!

(Deutsches Kinderhilfswerk)

The Deutsche Kinderhilfswerk requests in its “Kinderreport 2007”:

- a fast and radical change of paradigm in family and child policy
- a national programme to fight against child poverty
- development of the child allowance to a self-contained basic social care for children
- area wide child care institutions

Whether these requests and the implementation of these ideas are the break of the viscous circle is the topic of the chapter 10.2.4 in this assignment.

5.3.4. Poverty of Seniors

The European Centre published in the year 2006 a policy brief on the poverty of seniors in EU25. It reviews the situation with respect to poverty of current populations of elderly people living in 25 EU Member States.

Asghar Zaidi (2006), Director for Research at the European Centre of Social Welfare Policy and Research and his team found out that in the early years of the 21st century, about 13 million elderly people were at risk of poverty in 25 EU member States, which is as many as one-in-six of all 74 million elderly people living in EU. These results are calculated by using the 60% of median income poverty line for each respective country. The table below shows the whole result.

Table 1: Proportion and number of elderly population (aged 65 and above) at risk of poverty in the EU Member States. Source: Eurostat’s New Cronos Databse

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The group of 50+ people was once a special “persuaded to buy group”. Nowadays and in future, in the time of the demographical change, this group will be the one most affected by poverty.

These people were often several times out of work. The reforms of the pension system will extremely reduce the amount of pension in future.

Unemployed mothers were the loosers of the pension policy in former times. In future the loosers of the pension policy will be low-income earners, unemployed and foremost a lot of freelancers. They do not moan about the pension with 67 years, they know that they have to work as long as they can, sometime until death (Niejhar, E. 2007).

A lot of people do not take the inflation into account as well as the higher costs for living when they become older. Every one should be informed about retirement arrangements and should calculate his or her personal pension.

5.3.5. Poverty Among Handicapped People

Handicapped people are a special group of people who has to be integrated in the society. They have often problems to gain access to “normal” things like schools and apprenticeships.

Equal rights for these people are fundamental. The aid must start very early when they go to a kindergarten or on their first day at school. An integrative aid in kindergartens and schools is very important for their future employment.

It is very important for handicapped people to get a good education for a well paid job in future.

The “3. Armuts- und Reichtumsbericht der Bundesregierung, Lebenslagen in Deutschland” shows that there are more and more handicapped people are employed. The next table displays the development of the employment quota of handicapped people.

Table 2: Employment Quota of Handicapped People. Source: 3. Armuts- und Reichtumsbericht der Bundesregierung

illustration not visible in this excerpt

The trend of employment of handicapped people is positive.

Politicians are asked to strengthen this development also in future. A lot of handicapped people live on pensions and governmental aid. If they can work within their possibilities they will earn their own living.

6 The International Day for the Eradication of Poverty

Every year, on October 17th on is the “International Day for the Eradication of Poverty”. The UNO introduced this day in December 1992 to make aware that poverty has to be overcome all over the world (http://www.oct17.org/Too-many-men-women-and-children,1320.html).

There are a lot of actions on this day to show how many people are affected by poverty. The aim of this year’s “International Day for the Eradication of Poverty” of VENRO - Verband Entwicklungspolitik deutscher Nichtregierungsorganisationen e.V. was to remind all people of the “Millennium Development Goals, MDG” for the year 2015. The Millennium Development Goals are derived from the UNO-Millennium Declaration from the year 2000. It is a declaration where all member states of the UNO agreed on an international action plan for the 21st century. The „Millennium Development Goals“ are exactly defined. There are exact timetables and guidelines defined to reach these goals. These make the goals very special and make it easy to review the progress (http://www.deine-stimme-gegen-armut.de/aktiv-werden/aktionstage.html).

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Figure 1: „Stand Up“. Source: http://www.deine-stimme-gegen-armut.de/aktiv-werden/aktionstage.html

Poverty is not only a matter in third world countries; poverty is also an actual topic in industrialised countries. There are a lot of initiatives to fight against poverty around the world. This assignment brings poverty in Germany into focus. It shows which policy options are there in Germany and how they work in reality.

7 Poverty in Germany

We defined poverty at the beginning of this assignment in general. In the European Union somebody is at risk of becoming poor when he or she has less than 60 % of the equivalence income available (EAPN, p. 7).

7.1. The Risk-of-Poverty-Line in Germany

The risk-of-poverty-line in Germany was 10.274 Euro per year (or 856 Euro per month) in the year 2004 (Statistisches Bundesamt 2006a, LEBEN IN EUROPA, p. 17). These are equal to 60 % of the median equivalence income. Every person who has less than 10.274 Euro available per year was at risk to become poor in the year 2004. The rate of these persons in comparison to the whole population of Germany is called risk-of-poverty-rate. The risk-of-poverty-rate in Germany was 13 % in the year 2004.

The latest study of the Statischtische Bundesamt Deutschland published in January 2008 is based on figures of the year 2005. It shows that the risk-of-poverty-rate changed from 13 % to 12,7 % from 2004 to 2005.

Additional to the risk-of-poverty-rate of 60 % of the median equivalence income there are often shown further limits of 70 %, 50 % and 40 %. The 70 % risk-of poverty rate is called “jeopardised” prosperity. It means restriction in central areas of life. Persons with an income below the 50 % limit are no longer at risk of becoming poor, they are already relatively poor of income.

For a better understanding please look at the following table:

Table 3: Different limits regarding the risk of becoming poor 2004 and 2005. Source: Statistisches Bundesamt, Leben in Europa 2005 und 2006a

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If you want to interpret the risk-of-poverty-rate you will have to consider that the basis of it is the equivalence income. That’s why we only compare the risk-of-poverty-limit for single households. For calculating the risk-of-poverty-limit for households with more persons it is not possible just to multiply the amount for single households by the members of the household. The EU definition says that you have to use the equivalence value for the multiplication.

Table 4: Examples of risk-of-poverty-limits of different households. Source: Statistisches Bundesamt, Leben in Europa 2005

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7.2. The Present Situation in Germany

A OECD study published in October 2008 shows that the gap between poor and rich ones is more rapid grown in Germany than in other industrial countries. Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Rate of persons in % with earning an income lower than 50 % of the median income. Source: OECD 2008

The gap of income and the share of poor people of the society increased in Germany from the year 2000 to the year 2005 faster than in any other country of the OECD. The high unemployment in the year 2005 and a significant gap of income are the causes.

The next figure shows the number of the society who is living in an unemployed household in the year 2005.

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Figure 3: Share of the society who is living in an unemployed household in the year 2005 in %. Source: OECD 2008

The German Institute for Economic Research (DIW) added to the OECD study that it only shows the period up to the year 2005. The last year shows that the upward business trend influenced the rate of unemployed people positively. That means that 1.2 Millions of people are not affected by poverty anymore (Financial Times Deutschland, p. 9).

The DWI forecasts for the year 2009 an increase in income poverty. Markus Grabka from the DWI announced that this is caused by changes of the structure of the job market such as the increase in temp work and the economic downswing.

The OECD study shows that there is an every time bigger gap between poor and rich ones in Germany. Gustav Horn, director of the IMK (a close ties to unions institute) demands minimum wages in Germany because of this development

The IW (a close ties to employers institute) demands more efforts in employing low educated people (Financial Times Deutschland, p. 9).

8 Prospective Poor People

We learned about different groups of poor people. But who will become poor in future. Is there a special group of people who will become poor in future without fail?

8.1. Outsiders of Today are the Poor of Tomorrow

Heinz Bude (2008, p. 128) said “that the outsider of today will become the poor of tomorrow.” First it concerns the redlined youngsters who are badly educated. The multicultural youngsters are bored of learning in schools they think that they can learn everything they need in the street. They are very proud of learning about the “real” life. They disavow because of their loftiness that they are the outsiders of the society. So they “optimize” their lack of education and have only the chance to earn money from simple services or illegal dealing with e. g. drugs.

Simple jobs are low-paid. People without education have often several jobs at the same time. But they earn not enough for their life. In this context we talk about “working poor”. This means impoverishment although full employment, even full employment through several jobs.

Apart from the youngsters there are elderly people who lost their jobs and cannot find a new one. Here we talk about permanently unemployed people with no business in the black economy. We do not talk about the craftsman with his craft without invoices. Here we talk about elderly people who lost their jobs because of the commercial pressure on their employer’s companies. Reaching a certain age they become a provision event. They are disappointed and without hope. They get “One-Euro-Jobs” with no perspective to get a normal employment.

Individualists are also among the prospective poor people. They live from heritage, additional irregular income and government aid. Though they have a high levelled education nobody will employ them because of the lack of self-organisation. The “happy unemployed” will become older and will have no old-age pension. So they will become poor.

8.2. An Income Above the Average is No Relaxing Situation

Perhaps it is also possible that the today above average earners without children become poor. First they may be proud of what they have earned in their lifetime and now they can afford a self paid assisted living. But what happens when they need more help? There are no children who will care for them. They cannot afford 24-hours care. The savings are soon gone when they are in need of care. As everyone else they can only afford normal care and not the personal nurse who comes along with them when they want to visit the park. What is the use to have a high old-age pension when you are lonesome and you have to pay for every help you need?

The next part of this assignment deals with policy options against poverty. How can policy options protect people from becoming poor?

9 Policy Options Against Poverty

In Germany poor people without employment are dependent on social benefits to manage their lives. The federal government defines two major types of basic social transfer benefits the so called basic social care (i. e. Grundsicherung). According to the receiver of the benefits it is separated in different books of the social security code (SGB).

1.) basic social care in old age and by reduction of working ability – defined in SGB XII

It is an independent social benefit, which guarantees the basic needs to maintain life.

Or in other words: a minimum standard of human existence is given to people, who are not or no longer able to work, especially pensioners, long-time unemployed or handicapped people.

2.) basic social care for people looking for employment (e. g. Hartz IV, Arbeitslosengeld II) – defined in SGB II

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Figure 4: Survival at the Bottom. Source: Hans-Böckler-Stiftung

The Federal Employment Office proclaims this benefit is granted to support people looking for employment.

Although unemployment is no precondition it should be used for employability measures to ease the access in the fully employment. Depending on the attendances at these trainings the benefits are paid. Especially long-time unemployed people should be motivated by this measure.

9.1. Actions to Avoid Poverty

Prevent poverty before it starts is the best way to help people!

In 2007 16.5 % of all households in Germany were threaded by poverty (Süddeutsche.de 2008). A lot of risks to drift into poverty a well known. For the government and society in total it’s much cheaper to help people to stay out of these risks. Often only a little help is needed.

9.1.1. Minimum Wages

Secretary of State for Employment Olaf Scholz stated: “Minimum wages are an important contribution to social stability!” (FocusOnline 2008).

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Figure 5: Olaf Scholz, Secretary of State for Employment. Source: Federal Ministry for Employment and Social Welfare

Not many topics were discussed in that controversy in the last month in Germany. At the moment we have minimum wages for three occupational groups: Building cleaning, letter carriers and the building and construction industry. That means that about 1.8 million people are protected by minimum wages. Eight other lines of businesses have currently applied to get minimum wages as well.

Olaf Scholz is convinced that “the state has to intervene to prevent wages to brake in the basement. A hairdresser in Saxony earns only €755 a month, a security guard in Brandenburg only €1.000” said the SPD-politician. The FDP-politician Ralf Brauksiepe, on the other hand, said: „An increase of minimum wages is a strategic incorrect decision.”

But numbers are not lying: The Department of Employment calculated that a nationwide minimum wage of €7.50 / hour would relief the Social Security Fund by 1.5 billion Euros.

In summer 2007 the coalition of CDU and SPD agreed to reform the “Arbeitnehmerentsendunsgesetz” as well as the “Mindesarbeitsbedingungsgesetz” to get a new base to establish minimum wages in other lines of business easier. Currently the Federal Ministry for Employment and Social Welfare is preparing new bills concerning this topic. These are presently discussed in the Federal Government (Bundesregierung 2008a, p. 176).

9.1.2. Securing Pensions

The population in Europe – and in Germany in particular – is declining.

In 1972 – for the first time – was the number of deceased higher than the number of newly born children (Bundeszentrale für politische Bildung 2008, p. 36). Since then the number of children per woman in Germany has steadily decreased. At present every women is, statistically, having only 1.33 children. This is in the midrange of Europe. Birth rate is, by trend, lower in Eastern Europe, in the Scandinavian states it is higher (Welt-Online 2006). But for preservation a birth rate above two is necessary.

In the future the number of people younger than 20 will decline even more. Therefore we will have less young workers. The range of people over 60 will increase due to the higher life expectancy.

In the table on the next page you can see how the population is aging more and more in the next decades.

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Figure 6: Demographic Change in Germany. Source: Bundeszentrale für politische Bildung

Due to this fact it is even more important to secure pensions sustainably!

It seems that the trend – to start pension early – is stopped. A pleasant development is the increasing retirement age. In the elapsed years it has risen lightly but steadily.

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Figure 7: Pension Age in Germany. Source: Deutsche Rentenversicherung Bund

In 2007 women retired in average at an age of 63.0 years, men at an age of 63.3 years.

For people born in 1947 and after, the standard retirement age will rise gradually up to 67 years.

That means that the first effect will take place in 2012.

But the public old age pension will not be enough. It’s necessary for all employees to make provisions for themselves.

In Germany the Federal Government promotes the so called “Three-Layer-Concept” (i. e. Drei-Schichten-Modell) which is set down in the “Alterseinkünftegesetz”.

This consists of:

1. Layer: Public Old-Age Pension

The public old-age pension is a compulsory insurance. It is the basis of every old-age pension.

2. Layer: Private Old-Age Pension (“Zusatzversorgung”)

As Mr. Franz Müntefering, former Secretary of State for Employment and Social Welfare, said: „The public old age pension remains the core of old-age provisions in this country. Core means: It must be supplemented.” (Bundesministerium für Arbeit und Soziales 2006, p. 1).

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Figure 8: Franz Müntefering, former Secretary of State for Employment. Source: SPD

There are two main types of private old-age pensions:

- occupational pension schemes and
- private pension scheme with “RIESTER-Förderung”

Occupational Pension Scheme

The occupational pension scheme is usually a voluntary benefit of the employer. Since 2002 all employees have the right to convert a part of their salary to a pension plan (i. e. Entgeltumwandlung) (Bundesministerium für Arbeit und Soziales 2006, chapter 7). The employer has to comply this demand.

There are five different ways to do so:

- direct benefit (i. e .Direktzusage)
- benevolent fund (i. e. Unterstützungskasse)
- pension fund (i. e. Pensionskasse)
- pension scheme (i. e. Pensionsfonds)
- direct insurance (i. e. Direktversicherung)

The contribution can be generally paid by the employer, the employee or both.

Private Pension Scheme with “Riester-Förderung”

Since 2002 the state promotes– under particular terms and conditions – a capital based old-age pension. The so called “Riester-Förderung” is carried out in two ways:

- with financial benefits
- with special tax reduction.

The government benefits are available for all compulsory insured in the public old-age pension and civil servants as well. For married people only one of them has to meet these requirements and the second can benefit also.

A sufficient old-age pension is indispensable to prevent elderly people to drop into poverty!

3. Layer: Capital investments

Capital investments are a supplementary form of old-age pension. E. g.:

- cash-value life insurance
- investment funds
- stocks etc.

9.1.3. Tax Policy

Tax policy is the whole of tax actions of a state with policy objectives. Through tax policy the state pursuits the aim to generate income to cover all expenditures.

The state is able to pursuit socio-political aims through tax reduction or tax increase.

An effective instrument to even the income differences is in particular a progressive income tax rate. Within the tax reform of 2000 the Federal Government decreased the income tax rate radically.

According to the judgement of the Federal Constitutional Court that the minimum living wage must be tax free (LVZ online 2008), the German government increased the tax free level virtually every year. This goes along with a decrease of the marginal tax rate from 25.9% in 1998 to 15.0% in 2005 (Bundesregierung 2008a, p. 185).

9.1.4. Asset Accumulation

Having savings in the bank is a good way to avoid poverty. In times of unemployment citizens are able to draw money from the bank and cover the financial gaps without being dependent on public benefits.

The Federal government offers mainly two types of investment (Bundesregierung 1990):

- savings
- acquisition of shares

These are both appropriate to accumulate assets on a long range.

9.1.5. Prevent Excessive Indebtedness

Debts are always a fast way to cross the poverty line!

Therefore is very important to prevent indebtedness before it begins. In 2002 approx. 9% of all households in Germany were over-indebted (Bundesministerium für Familie, Senioren, Frauen und Jugend 2008b, p. 177f). Debtors are often not able to solve the problem on their own. For that reason they need help. The government financed debt counselling and measures for debt relief. This came along with a programme to educate indebted people (Bundesregierung 2008a, p. 186).

9.1.6. Education

The significance of education to prevent poverty is indisputable. School education and vocational qualification are the best way to participate on the job market as well as the best protection against unemployment and poverty (Bundesregierung 2008a, p. 187). The European Union regards a graduation from secondary school as minimum qualification to participate in modern knowledge society and for the best prospects on the job market (Bundesregierung 2008a, p. 59).

In January 2008 the Federal Cabinet approved the draft law for the qualification initiative (i. e. Qualifizierungsinitiative).

It mainly contains actions to:

- improve education opportunities for children younger than six years of age
- improve the permeability in the education system
- improve the way to be promoted
- improve the options of further education

(Bundesregierung 2008, p. 198)

9.1.7. Basic Education

Education does not start in school. Potentials of children should in fact be developed earlier and dependent on their age. Kindergartens, beside the family, have as places for infantile education a particular duty. In kindergartens talents – even from children of underprivileged families – may foster at an early stage and learning difficulties may be discovered early (Bundesministerium für Bildung und Forschung 2008a, p. 11).

Primary schools cover the first four years of schooling (in Berlin and Brandenburg six years). They are attended by all children and provide basic education, preparing children for secondary schools. At the end of primary school parents and teachers have to decide which type school the pupils should attend further on.

Available are:

- Secondary general schools (i. e. Hauptschulen)
- Intermediate schools (i. e. Realschulen)
- Grammar schools (i. e. Gymnasien)
- Comprehensive schools (i. e. Gesamtschulen)
- Special schools (i. e. Förderschulen)

This affects the life and future job options of the child profoundly. Therefore promotion of primary school pupils is essential.

One out of eleven pupils in a grammar school lives in poverty, but every second in a secondary general school. Poverty is one causal reason for bad education. Out of 100 children who were considered to be poor during kindergarten only four manage to archive the entry qualification for grammar school – compared to 30 in well-off families. These are the results of a long term study by the Workers Welfare Federal Association from 1997 to 2005 (Arbeiterwohlfahrt Bundesverband e.V. 2005).

[...]

Details

Seiten
96
Erscheinungsform
Originalausgabe
Jahr
2009
ISBN (eBook)
9783842808706
Dateigröße
1.6 MB
Sprache
Englisch
Katalognummer
v228225
Institution / Hochschule
FOM Hochschule für Oekonomie & Management gemeinnützige GmbH, Düsseldorf früher Fachhochschule – Volkswirtschaftslehre, Master of Business Administration
Note
2,3
Schlagworte
armut deutschland arbeitslosigkeit ausbildung mindestlohn

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Titel: The Fight Against Poverty – Policy Options and Reality