Poor in a rich city? - Social cohesion versus economic prosperity

Dialogue forums „Munich 2030“

Poverty is an issue that leaves no one indifferent, even in a city like Munich, which is one of the most prosperous in Germany. However, merely defining poverty gives rise to controversy.

This was evident at the third “Munich 2030” dialogue forum, organised by the Munich Re Foundation on 21 February. The distinguished panellists were Prof. Meinhard Miegel, Director of the IWG Bonn institute for economic and social research and Friedrich Graffe, Director of Social Services with Munich City Council.

Prof. Miegel’s opening statement that “we are among humanity’s wealthiest 20%” set the scene for the debate on being “poor in a rich city”. This means that half of humanity has to exist on a maximum monthly income of €40, whilst for a further 30% the figure is €620. Only 20% of people are in a better position financially.

Historical comparisons also put poverty into perspective: currently, a one-person household living on social benefits has the purchasing power of a four-person-employee household in 1950. Since then, social benefits have increased threefold in real terms, and they have more or less followed the general trend in incomes since 1980,” the Professor explained. However, the number of people classed as poor has increased sharply in recent years, due to changes in the value creation process caused by globalisation and the unequal distribution of assets. Summing up the situation, the Director of the IWG Bonn commented: “those who only have work to contribute are badly off.” Without political intervention which, he said, was however a thorny issue, such trends would be further exacerbated.

There were signs not only that poverty among the elderly would increase but also that the prosperity of broad sections of the population would be under threat. Prof. Miegel believes that “our prosperity cannot be defended – it even conflicts with the earth’s capacities for provision and disposal”, and he called for a show of solidarity within society.

Friedrich Graffe, Munich’s Director of Social Services, spoke of the various manifestations of poverty in the city. Compared with other cities, Munich was in a fortunate position with regard to Hartz IV payments. However, if relative poverty were included, which is less than 50% of the population’s average national net income per head, 2004’s poverty potential amounted to no fewer than 177,000 people in Munich. This was some 30,000 more than in 2000.

What was striking about the age structure of those receiving social benefits was the large number of children, young people and over-65s. Mr. Graffe pointed out in particular that “the number of children affected has risen in recent years”. This supported the theory that children were a poverty risk. The large number of elderly people, on the other hand, was due to changes in the law intended to reveal hidden poverty among the old. He said that the third group which was disproportionately affected was immigrants without a German passport.

Like Prof. Miegel, the Director of Social Services was under no illusions as to the fact that poverty among the elderly would soar as a result of patchy occupational biographies, low wages and part-time work. He feared “that it will put local authorities under tremendous financial pressure”. The costs of Hartz IV also continued to rise because many people were no longer able to support themselves from their work alone and only remained in the system because they drew so-called supplementary benefits. Mr. Graffe stressed that dissatisfaction over social differences had increased in the city.

This confirmed Prof. Miegel’s contention that the problem was not absolute poverty but the growing gap between rich and poor.” Are we discussing the disparity or real poverty?” he asked, adding that “today’s poverty profile corresponds to the average standard of living in 1965. The current overall lifestyle has no economic basis because standards are too high.” He cited as an example the fact that many parts of society were no longer able to keep pace with the fashion for buying branded goods.

Mr. Graffe considers such ideas to be justified but the reality in the cities was different: “The queues are getting longer at the Münchner Tafel soup kitchen, which provides hot meals for those in need. And more and more parents are withdrawing their children from school lunches because they are no longer able or willing to pay for the meals.” Mr. Graffe feared the consequences in terms of social cohesion if some sectors of society were left behind financially. He quoted former mayor of Munich, Georg Kronawitter: “Being poor is bad enough but being poor among rich people is intolerable.”

Prof. Miegel also sees problems ahead if social systems are no longer able to offset the growing discrepancy. However, there were no easy solutions. The Director of the IWG believes “the choice is between arsenic and strychnine”. More redistribution stultified motivation, so that in the end everyone was worse off. Moreover, there was no going back from globalisation, with its negative consequences for the labour market.

Looking ahead, Mr. Graffe said that Munich would do everything possible to prevent segregation in the future as well. “Whilst it is true that communities like Milbertshofen, Hasenbergl, Perlach and Riem have particularly high poverty potential, they are nevertheless by and large still intact and Munich does not have no-go areas.

The Director of Social Services focused on three important issues from a Munich 2030 perspective: Can we keep families with children in the city? Are we getting to grips with poverty among the elderly? And will we succeed in integrating the city’s foreign population? Mr. Graffe advocates an active education policy, a reversal of pension cuts, greater social commitment and a minimum wage. He believed this would “relieve the strain on the social security system”.

For Prof. Miegel too, the key lay in education. “Money is not the only thing that buys happiness,” he asserted. It was more a matter of airing the problems and changing people’s perceptions. There was also need to switch to a different social approach based on greater personal responsibility. At the same time, Prof. Miegel warned that we should not harbour false illusions concerning our future. “Pension levels cannot be maintained due to demographic trends and people’s increasingly irregular occupational biographies.” The 70s era with its full employment was well and truly over.

Prof. Miegel responded to a question from the floor about whether it would be possible to fund the necessary transfer of benefits in 2030 with a clear no. “Material living standards will fall. We have to get away from the idea of being well provided for in old age.” However, the Professor did have some words of comfort for society’s younger members: “Once the lean patch is over the pensions system will stabilise. From 2060 onwards, things will start to improve again.”

21 February 2008