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Thursday, 8 December 2011

Social-Cultural Planning Bureau (SCP): Increased poverty in The Netherlands in 2012. PM Mark Rutte: Poverty?! No such thing as poverty in The Netherlands! Who is right?!

Ignorance is bliss
Problem solved with just one kiss

Is there poverty in The Netherlands? That’s a good question. Yes, there is, but you can’t compare it to poverty that people suffer from in a third world country in Africa, Latin-America or Asia.

Poverty is by no means a life-threatening situation in The Netherlands, as almost everybody receives a minimum income that a normal person or family can live from to a certain level. But the times that this income was enough to live from without any effort, are well behind us after years and years of austerity and missing indexation on welfare .

In The Netherlands in the past (until the nineties), the social-democrat opinion prevailed that every unemployed person (even the ‘professionally’ unemployed ones) deserved a minimum income that was enough for a normal life and a little amount of luxury. 

So after the relatively high Unemployment Benefit, people received a welfare that was enough to buy food, a few consumption goods and some durable goods. If an expensive durable broke down, some extra welfare was supplied to replace it.

But this situation had a big disadvantage: It happened at that time that somebody found a simple job with low wages and subsequently lost some subsidies and allowances due to this job and the increased income that came with it. And this person eventually had to pay more taxes too. 

Then this person could  end with LESS income than when he received welfare. This was called the ´poverty trap´, as working in a simple, underpaid job yielded negatively compared to being unemployed and receiving welfare. People almost couldn´t escape from this poverty trap.

There were two solutions for this poverty trap: lowering the taxes that people with small jobs pay, or lowering the amount of welfare, subsidies and allowances that people received. The Dutch government mainly chose for the second solution.

People that received welfare were often marked by the conservative parties (VVD, CDA) as ´spongers´ and people that were too lazy to work. This has indeed been true in a substantial number of  situations. However, in many occasions it were single, divorced mothers with a number of small children or people that couldn´t find a job for various other reasons. These people received less and less income over the last 20 years and are now sometimes beneath the official poverty standard.

Two other categories that do drop beneath the poverty line are ZZP-workers (freelance professionals) that don´t have assignments for a long time and little, unsuccessful entrepreneurs whose business does not yield enough income. As these people are often notoriously underinsured and don´t receive welfare or other subsidies before they ´eat´ their possessions (hence: their home), they can easily drop into poverty too.

This week the Social-Cultural Planning bureau (SCP) released a report on poverty in The Netherlands, called Armoedesignalement (i.e. Poverty Picture). Although the report itself is in Dutch, here are the main conclusions from the English press release that can be found under the link (there is also a English summary available):

No reduction in poverty in 2010, increase expected in 2011 and 2012
  • The risk of poverty in the Netherlands did not reduce in 2010, despite the slight economic recovery. 
  • The poverty rate is expected to increase in 2011 and 2012. 
  • Poverty commonly affects single-parent families, single persons aged under 65 years, social assistance benefit recipients and children. 
  • The working poor are increasingly found among the self-employed. 
  • A quarter of Dutch households with a low income own their own home.

In 2010, the Dutch economy recovered somewhat from the deep recession. However, this was not translated into a reduced risk of poverty. 529,000 Dutch households (almost 1.1 million persons) were living below the low-income threshold in that year; that is equivalent to 7.7% of the total Dutch population, the same as in 2009.

The share of households living on a low income for four years or longer showed a slight fall in 2010 compared with 2009 (2.4% versus 2.6%).

The forecasts suggest that the proportion of households living below the low-income threshold will increase by 0.4%age points in both 2011 and 2012.

Taken over both years together, this means an increase of almost 60,000 households. This will take the number of low-income households in 2012 to an estimated 588,000 (8.5%).

The increase in 2011 and 2012 is expected to be comparatively large among children and benefit claimants aged under 65 years.

Single-parent families with only young children had to live on an income below the low-income threshold relatively most often (26%) in 2010. They also had the highest relative risk (8%) of being in long-term poverty. In earlier years, single-parent families were also consistently at the highest risk of poverty, though there is a clear downward trend in the proportion who have a low income.

Single persons aged under 65 years also relatively often have an income below the low-income threshold (17%). Broken down by principal source of income, 65% of households in receipt of social assistance benefit were at risk of poverty in 2010; 37% of the social assistance households had been on a low income for four years or longer.

One in ten children below the age of 18 (327,000) lived in a family with an income below the limit for adequate living in 2010, a third of the total poor population. This is projected to increase in 2012 to 11.1% (367,000 children), the highest level since the start of the century.

There were 317,000 working poor in the Netherlands in 2010, i.e. adults with employment as their principal source of income. Half of them (159,000) were self-employed. The share of this category of workers among the working poor (50%) is substantially higher than in 2000 (41%); the main reason for this increase is the rise in the total number of self-employed persons.

Let one thing be clear: people living beneath the poverty line in The Netherlands can still live from their income (albeit just) and won´t become ill or starved due to too little food or unhealthy situations. But these people go through a rough time, just like the people in the US that receive food stamps. And the basis of civilized countries is that nobody should starve, due to lack of food or beverages and nobody should be in a dead end alley with their life.

Although poverty is still a moderate problem in The Netherlands, this can easily change for the worse if the economy continues to deteriorate in the coming years.

Mark Rutte, the Prime Minister of The Netherlands, however,  doesn´t see any problem whatsoever. In an article in Dutch De Telegraaf, he states that he doesn´t like the expression poverty’.

PM Mark Rutte objects against the expression ‘poverty’ in The Netherlands. This was stated on Wednesday, December 7, in a debate with MP Sadet Karabulut of the Socialist Party (SP) on the social state of the country. Karabulut wants the cabinet to do something about the waiting lists at food banks and against starvation in our country.

The Prime-Minister pointed out that the level of the social minimum is among the highest in Europe. He mentioned that it is ‘awkward’ to live from welfare, but that ‘there was no need to send development aid immediately’.

Rutte was not willing to act on Karabulut’s request to talk with the food banks about better help for people that have too little money to buy food and beverages themselves. According to the PM ‘it is the job of municipalities to take action when people sink beneath the social minimum’.

And in an article in Het Financieele Dagblad ( there was more news from the Dutch PM.

Cabinet and opposition each collected their own story out of the report of the Social-Cultural Planning Bureau (SCP) on the social state in The Netherlands.

PM Mark Rutte pointed out that the scores on virtually every indicator improved over the last ten years. The combined opposition pointed continuously on the dark clouds that are hanging above The Netherlands, now also according to the SCP.

Rutte could find all kinds of data on every terrain that supported his positive look on The Netherlands;absolutely as well as relative to foreign countries.

The Socialist Party and Groenlinks (Leftwing Eco-party) addressed the MP on the growing poverty. The SCP forecasts increasing problems when all austerity measures are continued. One in ten children would grow up in poverty. Rutte:’ I take it seriously that many people must live from a low income and that this is hard, but I object to the expression ‘poverty’. It is a low income’.

MP Jolande Sap of GroenLinks asked if Rutte was ‘blind with his eyes open’. The whole world objects to the Dutch Mortgage Interest Deduction, it even threatens the credit rating of The Netherlands, but the cabinet doesn’t see this chance to withdraw the austerity measures for the lowest incomes in exchange for a reduction of the MID. Rutte reacted by declaring this topic a taboo.

According to PM Rutte, the unemployment is mainly increasing due to extra supply of workers on the labor market. The unemployment rate is with 5% not even half the amount of the eighties. The policy with nine economic peak areas and a small government helps to keep unemployment low in The Netherlands.

PM Mark Rutte is an optimist. This optimism, together with his joviality is his driver and his charm, as he seemingly smiles and laughs every problem away.

But ‘ignorance is bliss’; Rutte's almost arrogant attitude towards the growing problem of poverty might politically destroy him next year. He is right: in the past poverty and unemployment have been bigger problems than currently. But will the same apply in 2012 or 2013? And will the current Euro-crisis not reinforce the negative consequences of the current recession and the austerity measures of this cabinet for 2012 and 2013? I’m convinced it will.

Currently, there is definitely a wave of mass lay-offs hitting the shores and it is my conviction that this wave will gather momentum in the coming months. All these factors together could create a kind of perfect storm for poverty in The Netherlands.

And I’m sorry to say, but concerning the Mortgage Interest Deduction (MID) and the Dutch mortgage debt of 120% of GDP, Rutte acts like an ignorant fool, standing in the ostrich position: see no evil, hear no evil. 

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