Riester pension flop, Hartz 4 and child poverty – In what direction is Germany heading? What path is the EU on?
Dialogue forum on 4 April 2019
In Germany, there are more jobs today than ever before. But that is only one side of the coin. Old-age and child poverty are growing threats, and the gap between rich and poor is steadily widening. How does our society approach these issues? How effective are our measures to combat poverty?
Pension gap between men and women
If you do not have enough money to live on, whether before or after you retire, the only option you have is to apply for welfare. The Hartz IV System that was introduced in the early noughties, with the twin principles of supporting and demanding, is seen by many politicians today as a thorn in the side. One of them is Robert Habeck, leader of the political party Alliance ‘90/The Greens. “There are a large number of aspects we need to discuss,” he said, “whether it is the level of protected assets, or the question of sanctions or freedom from sanctions.” He added that Hartz IV had deliberately created a low-wage sector that had reduced the wage levels. He explained one of the consequences: “Since then, apart from the last two years, there has been negative wage growth for the lowest 40% of incomes.”
More additional income under Hartz IV
Habeck also believed that the attempt to prevent a slide into old-age poverty using the private Riester pension in addition to the public one had been a failure. Instead of this approach, he said the government should be organising fully funded pension provision, such as they have in Sweden. “A government fund into which everyone could make voluntary payments up to a specified amount, and which then invested the money sensibly, would achieve a broad participation in social welfare,” the Green politician maintained.
Because the statutory pension remains the key support for the majority of Germans, Vaillant argued in favour of remodelling the system along the lines of the Dutch model. This basically consists of a basic pension for all, with a supplementary company pension for employees, complemented by private pension plans. “The Dutch model illustrates that you can create a pension system that is truly poverty-proof,” she underlined. Habeck pointed out that the SPD and Greens had already made proposals oriented towards the Dutch model. He said that this was ultimately a discussion about basic income, a subject that was contentious even in his party.
United States of Europe needed
A further problem he mentioned was the unequal distribution of assets in Germany. There are repeatedly calls in this context for a redistribution. Habeck believed one reason for the unequal distribution lies in tax avoidance and tax evasion: “Digital corporations, hedge funds and investment brokers have developed such sophisticated models that politicians are unable to keep up with them,” he said. As a first step, he therefore suggested working to make tax-saving schemes transparent so that the government could respond accordingly. “According to EU estimates, German tax authorities lose some €160bn each year,” he explained. The Green party leader would not be opposed to a reintroduction of the wealth tax, but said he was fully aware of how difficult that would be to achieve. “Some people would fight it tooth and nail,” he conceded. As a former minister of the state of Schleswig-Holstein, he said he was aware that the art of politics always involved being prepared to compromise, and that for every argument there was a counterargument. “But at the present time, we sense a sea change occurring in politics, and that things are changing, so why not for the better?”
The last dialogue forum in the 2019 series will be held on 9 May 2019. The topic will be “Poor in the rich city – Living and surviving in Munich”.
17 April 2019