Bloomberg News

Merkel’s Working Poor Pose Election-Year Dilemma as Divide Grows

March 05, 2013

Every Saturday, about a hundred people arrive in a silent procession at a small church in the north of Berlin, armed with empty shopping carts.

Some smoke, others play with their children as they wait patiently to be called for the packets of noodles, vegetables and cans of soup that are handed out. They are Germany’s poor, come for out-of-date food that has been collected from supermarkets by the Laib und Seele charity.

“It’s scary, nearly every week more people sign up who can’t make ends meet,” Antje Grund, a local coordinator for the charity, said in a Feb. 23 interview while preparing some of the 900 kilograms (2,000 pounds) of food that are doled out each week. “There are pensioners and unemployed, but even people who have a job and a regular income come to us to get food.”

While Chancellor Angela Merkel is blamed in countries such as Greece and Spain for insisting on austerity that has deepened public suffering, a growing number of people at the heart of Europe’s biggest economy are also in need. Merkel’s Cabinet is due to discuss the subject in Berlin today as they take delivery of the government’s “poverty and wealth” report.

As Germany enjoys unemployment near a two-decade low and growth is forecast to outstrip the 17-nation euro-area average this year, the reforms that sparked the country’s economic revival are also eating away at a certain strata of population.

Of Germany’s 82 million-strong population, 15.8 percent are at “at risk of poverty,” according to a 2012 study by the European Union’s statistics office, Eurostat. That compares to 14 percent in France and a 27-nation EU average of 16.9 percent.

Campaign Theme

While the depths of poverty seen in crisis-wracked euro countries like Greece are still rare in Germany, a burgeoning low-wage sector and shrinking middle class are emerging as one of the battlegrounds upon which Merkel’s chances of a third term may be decided. The main opposition Social Democratic Party has taken up the income gap as a campaign theme for federal elections on Sept. 22, announcing plans to initiate legislation to introduce a minimum wage of 8.50 euros ($11.09) per hour.

“A lot of people don’t feel like they’ve profited from Germany’s growth in recent years,” Ulrich Deupmann, a former German government adviser who is now a partner at management adviser Brunswick Group Inc. in Berlin, said by telephone. “The SPD realized this and knows that its minimum-wage proposal allows it to differentiate itself from Merkel’s party,” the Christian Democratic Union, or CDU.

U.K. Comparison

The percentage of the population classed as on low incomes is on the rise, a German Institute for Economic Research study showed in 2012. Germany’s share of low-wage earners, defined as earning less than two-thirds of the median wage, is now more than double the 8.8 percent in France and, at 22.2 percent in 2010, edged past the 21.6 percent in the U.K., according to separate figures compiled by Eurostat.

The flexibility that allowed that to happen can be traced back to a set of labor-market reforms and associated welfare cuts pushed through 10 years ago this month by Merkel’s SPD predecessor, Chancellor Gerhard Schroeder. Known as Agenda 2010, the package is credited by the Paris-based Organization for Economic Cooperation and Development for helping to reduce the German jobless rate to 6.9 percent at present from a post-World War II high of 12.1 percent in March 2005. Unions say the measures created a pool of jobs that don’t pay enough to live.

Schroeder’s Reforms

“Schroeder’s reforms helped compensate the loss of middle income jobs in the 1990s by introducing a low-income sector,” Andreas Scheuerle, an economist at Deka Bank in Frankfurt, said in an interview. “The drawback is some find it harder to earn sufficient income for a family.”

Merkel’s Social Democratic challenger in this year’s election, Peer Steinbrueck, is attempting to capitalize on the mood of “social injustice” with a campaign program focused on narrowing the income divide through higher taxes for the wealthy and the promotion of affordable housing. The proposals for a minimum wage can help “correct mistakes” made by the SPD in the Agenda 2010 program, said Deupmann of the Brunswick Group.

Under pressure in an election year, Merkel’s party has said it wants to make employers and labor unions agree on minimum pay levels in sectors where none exist, while continuing to oppose a basic minimum wage as advocated by the SPD. Merkel too called for “fair wages” in January.

No Bleak Desert

“The minimum wage issue is the symbol of the theme of justice, and I understand that,” Karl Schiewerling, the CDU’s labor-market spokesman, said in the lower house of parliament on Feb. 28. “But we must avoid giving the impression that Germany is a sort of bleak desert of impoverishment where everyone is living on the edge of hunger.”

To be sure, the Berlin church where people gather for food is no urban jungle: the surrounding streets are lined with family homes with garages and neat gardens.

Even if rising rents, electricity and water bills are most commonly cited as the source of financial trouble, a child’s trip to the dentist, which is not covered by health insurance, can be all it takes to tip a household into debt, Bettina Heine, a debt-management counsellor in the western Berlin district of Charlottenburg, said in a telephone interview.

“We’re definitely seeing a rise in cases with the young, pensioners and people with precarious employment contracts,” Heine said. “There is no archetype of an over-indebted person.”

To contact the reporter on this story: Joseph de Weck in Berlin at jdeweck@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus