BASIC STRUCTURES IN EUROPE AND GERMANY – LONG TERM REGIONAL DISPARITIES Professor Lothar EICHHORN Statistical Office of Lower Saxony, Germany Summary A. The Statistical Office of Lower Saxony has, since 1998, been calculating, on an annual basis, poverty and wealth rates in the Bundesland of Lower Saxony on the basis of the microcensus, whereby net equivalent incomes are calculated using graded income data for various types of household. The threshold values for poverty and wealth have, since 1998, been 50% and 200% respectively of the net equivalent income. However, there has always been a need for more detailed regional data, as Lower Saxony (a NUTS I region) covers a very varied territory, ranging from dynamically growing areas in the west to areas with shrinking economies in the south and east. There are very wealthy areas, mainly around the big cities, and – at least by German standards – rather poor ones. For this reason, the last calculation, for 2004, was also carried out for the 11 regional conversion strata in the Land microcensus – these are larger regions or combinations of several smaller NUTS III regions. The question arose as to which average to use for calculating the poverty threshold. The average income in Germany, in Lower Saxony or in the region in question? This is important, since there are considerable regional income disparities, as the following table shows. In the table, the poverty rate is calculated on the basis of the relevant regional ("regional concept") or national ("national concept") average income. Ostfriesland Lower Saxony Germany Net equivalent 1032 € 1145 € 1150 € income 2004 Poverty rate 12.7 % 14.5 % 14.5 % "regional concept" Poverty rate "national 19.0 % 14.7 % 14.5 % concept" If the poverty rate in Ostfriesland is calculated using the regional average, it is the lowest in Lower Saxony, but if it is calculated on the basis of the German average income, it is the highest in Lower Saxony. So is Ostfriesland – a peripheral coastal region in the north–western corner of Lower Saxony – the region with the lowest or the highest poverty rate? Calculating poverty and wealth rates using percentage–based thresholds measures poverty in terms of income inequality. Most central regions around big cities have a high degree of social disparity, with both high poverty and high wealth rates. The opposite applies in peripheral, mainly rural regions such as Ostfriesland. Here, earnings are generally lower and there is less social inequality. The gap between rich and poor is not as wide as in the urban centres. Lower incomes are offset by lower living costs and the fact that most people own their own homes. The regional concept thus makes a better calculation basis than the national concept. B. Regional disparities in Europe are the result of the very fine geographical breakdown of the continent, e.g. into islands and peninsulas, and a very longstanding centre–periphery structure . Europe's centre of gravity stretches from London to Milan along the Rhine axis; to the west and the east of this line are semi–peripheral and peripheral regions with their own centres. Some of the most important regional "fault lines" in Europe which determine these structures date back to Late Antiquity and the early Middle Ages, for example the boundaries of the Roman Empire along the Rhine and the Danube which, from around 100 AD onwards, divided Europe into a civilised Roman south–west and a barbarian north–east, or the border between the Eastern and Western Roman Empires (395 A.D.) or the line of the Great Schism of 1054 between Rome and Constantinople, which divided Europe into a Latin west and an Orthodox and later partly Islamic/Ottoman east. These lines still have economic, social and political significance today. The centre–periphery structure in particular still exists, and the regional distribution of economic power and, as a result, income is very unequal. This is the result not only of the division of Europe from 1945 to 1990 but also of much older structures. "Changing Europe" also means a return to regional structures that existed before the Second World War. The peripheral and semi–peripheral regions of Europe cannot compete with the centre in terms of income, but that does not automatically mean that they have to be less prosperous. Lower incomes can be offset by lower living costs, more stable social networks and an income based not only on the market and state subsidies but also on households' production. 2 C. What does this mean for statisticians and statistical methods? 1. Studying income disparities is not enough to properly record the extent of regional poverty. Regional price levels, the existing wealth of the population (in particular, ownership of houses and gardens), the denseness of social networks and households' production are just as important). 2. Regional income disparities are considerable within Lower Saxony and within Germany. The "inner periphery" of a very rich and central country such as Germany has much lower incomes than the central regions of this country. The disparity is even greater between the central regions of Europe and the European periphery: per capita disposable income in the richest region in Europe (Inner London) is almost nine times higher than in the poorest regions of Romania (north–east), but this does not mean that poverty in north–eastern Romania is nine times higher than in London. It is important to look much further beyond income disparities. At detailed regional level (NUTS III), data on home ownership, household and subsistence production and the solidity of social networks are also required. 3. We must consider how permanent certain structures are, because we need Europe–wide historical regional statistics. * * * * * 1. Reporting on poverty and wealth in Lower Saxony Since 1998, the Niedersächsisches Landesamt für Statistik ( NLS – Statistical Office of Lower Saxony) has been reporting annually on poverty and wealth in Lower Saxony 1. The main source of data for these calculations is the microcensus. This comprehensive annual population sample – the German version of the EU labour force sample – is very large (sampling rate 1%) and has long provided annual results relatively early. Although this survey tends to underestimate the income of households, it is, due to its size and its wide range of parameters, well suited to depicting social disparities and differences in circumstances, also in regional terms. 1 Most recently for the year 2005 in: Lothar Eichhorn, Jessica Huter, Lara Kandziora und Dirk Soyka, Niedersächsischer Armuts– und Reichtumsbericht 2006, in: Statistische Monatshefte Niedersachsen 12/2006, pages 621ff. 3 When reporting started, the threshold values for poverty and wealth of members of private households were already set at 50% and 200% respectively of the needs–weighted net equivalent income, based on the arithmetic mean for income 1. These threshold values have been adhered to in order not to jeopardise the long–term comparability of data on the development of poverty. Data are now available for the years from 1986 to 2005. All the calculations were carried out for Lower Saxony, Germany, and recently also for the Land Bremen, which adjoins Lower Saxony. The main results of this reporting exercise are as follows: a) There is a long–term trend towards an increase in poverty and wealth rates, i.e. a slow contraction of the “social centre”. In 1986, the poverty rate in Lower Saxony was 10.4% but in 2005 it was already 14.9%. The wealth rate rose from 4.0% to 5.9% over the same period. b) There is a clear connection between poverty and the number of children to be cared for. There have always been low poverty rates (2005: 7.7%) for two–person households comprising married – and generally dual–earner – couples and very high poverty rates for large households with five persons and more (2005: 33.7%). At present, people with many children still run the risk of poverty in Germany, largely because at least one parent's opportunities for gainful employment deteriorate. Problems with regionalising reporting on poverty, taking East Friesland as an example The possibility of reporting on poverty in greater regional detail was considered right from the start. This was done for the years 1998 and 2004 and produced similar results. The data available make it simple to divide the Land into the 11 “conversion strata” in the microcensus. As a Land of the Federal Republic of Germany, Lower Saxony is a European NUTS I region. It is divided up into four statistical regions (NUTS II), which were previously the administrative districts of the Land2. These in turn are broken down into 46 rural districts and urban districts (NUTS III). The 11 “conversion strata” in the microcensus combine a maximum of seven rural districts and urban districts to form continuous areas with at least 500 000 inhabitants. These 11 areas can be assigned to the four statistical regions of the Land without any problem. 1 Due to the data available – from the microcensus and the income and consumption sample survey every five years – extremely high incomes which could distort the arithmetic mean are not even recorded. For this reason the arithmetic mean was preferred to median earnings. 2 Government districts were discontinued as administrative units on 1.1.2005. 4 The need for regional information mainly arose because Lower Saxony is a very heterogeneous Land . Cloppenburg, Vechta and Emsland are the youngest rural districts in Germany with the most children and Goslar and Osterode are the oldest. Poor, hitherto sparsely populated, peripheral regions in the west of the Land have been growing dynamically for decades whilst densely populated traditional industrial regions in the southern uplands have been steadily losing inhabitants and jobs for some years.