Long and Short Term Poverty: Is Germany a Two-Thirds Society?

Abstract

Social scientists and media commentators have expressed concern that Western countries are becoming “two-thirds societies” in which two-thirds enjoy the benefits of affluence, while one-third are locked into poverty or near-poverty. This paper, based on economic panel data, tests the two-thirds society hypothesis in the case of (West) Germany 1984–89. The main finding is that poverty (defined as receiving less than half of average household income) is mostly short term and that nothing like one-third are locked into poverty. On the other hand, far more people than had previously been thought are at risk of poverty. In 1984–89 only 3% were poor every year but about 25% were poor in at least one year. Germany appears to be a 75-15-10 society: 75% not poor, 15% occasionally poor but with generally adequate incomes, and 10% frequently poor or near-poor with incomes that may be considered inadequate. Analysis is based on the German Socio-Economic Panel Study (SOEP) and relates to the 8,000 people who were interviewed each year from 1984 to 1989.