One in Eight Germans Are Caught in Poverty Trap

from Blooomberg

By Brian Parkin and Thomas Bauer

One in every eight residents of Germany lives at or below the poverty-line, after expansion in Europe's biggest economy in 2006 and 2007 did little to improve bottom-rung incomes, according to a Labor Ministry report.

About 13 percent of Germany's 82.5 million people are poor, defined as living on 781 euros ($1,217) or less per month, Labor Minister Olaf Scholz told reporters in Berlin today. A quarter of the population would fall within the definition of poor if state benefits were excluded, Labor Minister Olaf Scholz said.

Social Democrats such as Scholz are pressing for universal minimum wages, pension growth and higher taxes on top incomes to compensate for the erosion of real average incomes. That's exacerbated tensions with their coalition partners in Chancellor Angela Merkel's Christian Democratic Union, who oppose the minimum wage.

``We need to ensure that wages are adequate,'' Scholz told reporters in Berlin today, adding that the number of poor had ``stagnated'' since an earlier review in 2005.

The first poverty report, published in 1998, found that 12 percent of Germans were poor. By the time of the second report in 2005, when growth was 0.8 percent and unemployment reached a post-World War II high, that figure had risen to 13.5 percent.

Private consumption contracted by almost 1 percent last year even as the economy grew 2.5 percent and unemployment fell to a 15-year low. The economy grew 2.9 percent in 2006, the fastest pace since 2000.

``What's particularly depressing for me is that the number of people is growing who are in work yet face the risk of poverty,'' Scholz said in an interview published yesterday in the Bild-am-Sonntag newspaper.