How long do assets last during loss of income? WSI Distribution Report 2017 [original]

Tiefensee, Anita

Research Report

How long do assets last during loss of income? WSI

Distribution Report 2017

WSI Report, No. 37e

Provided in Cooperation with:

The Institute of Economic and Social Research (WSI), Hans Böckler Foundation

Suggested Citation: Tiefensee, Anita (2017) : How long do assets last during loss of income?

WSI Distribution Report 2017, WSI Report, No. 37e, Hans-Böckler-Stiftung, Wirtschafts- und

Sozialwissenschaftliches Institut (WSI), Düsseldorf,

https://nbn-resolving.de/urn:nbn:de:101:1-201801187904

This Version is available at:

https://hdl.handle.net/10419/225398

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REPORT

WSI Report No. 37e, November 2017 page 1

No. 37e, November 2017

HOW LONG DO ASSETS LAST

DURING LOSS OF INCOME?

WSI Distribution Report 2017

Anita Tiefensee

AT A GLANCE

A key function of assets is securing the level of

consumption during loss of income. In Germany,

30 % of households can secure their current level

of consumption from their assets for a few weeks

or months at the most. These households have no

appreciable assets at their disposal, or are even in

debt. The median figure, which splits all house-

holds into two halves of equal size, is just under

two years. 10 % of households can secure their cur-

rent consumption for at least just under 13 years,

and 5 % can even do so for more than 21 years.

The securing of consumption in East Germany

is markedly lower than in West Germany. Broken

down into age groups, although the securing of

consumption rises with age, in every age bracket

at least 20 % of households could not secure their

current level of consumption at all or could so for

only a very short time by using up their assets. Sin-

gle parents in particular are reliant on their regular

income.

The results show that the majority of households

have only very limited private provision in the form

of assets at their disposal. Generally speaking, a

household’s consumption can be secured on a

private or state level. There should be securing of

consumption on one of the two levels, otherwise

major risks are not covered. There is a patent need

for political action on both levels.

WSI Report No. 37e, November 2017 page 2

Introduction . . . . . . . . . . . . . . . . . . . . 2

Definition of income, assets and consumption . . . . 3

Basis for calculation and methodology . . . . . . . . 3

How long do assets last to secure consumption? . 4

East and West Germany . . . . . . . . . . . . . . . . 4

Age and types of household . . . . . . . . . . . . . . 5

Different levels of consumption . . . . . . . . . . . . 6

Income and assets . . . . . . . . . . . . . . . . . . . 6

Conclusion and recommendations for action . . 8

Bibliography . . . . . . . . . . . . . . . . . . . 10

INTRODUCTION

In Germany, the distribution of household incomes

is at the heart of debates on inequality. This is justi-

fied, because income secures the current standard

of living: i. e. consumer spending, and savings to

generate assets.

Besides income distribution, however, the focus

must also be on the distribution of assets, because

only the two resources taken together adequate-

ly represent a household’s level of prosperity. If a

household has assets, they can be liquidated in

the event of loss of income, e. g. due to unemploy-

ment or protracted illness, enabling consumption/

standard of living to be secured. However: private

assets in Germany are manifestly more unequally

distributed than disposable income (Figure1). 1 This

means that not everybody has the option of this se-

curing function to the same extent. This year’s WSI

Distribution Report demonstrates how long the net

assets of households in Germany would stretch, in

the event of total loss of income, to secure their

current level of consumption.

The report is divided into three parts. The first

part defines the terms “income”, “assets” and

“consumption”, and describes the report’s bases for

calculation and the methodology. The second sec-

tion focuses on the question of how long a house-

hold’s assets would last to secure consumption in

the event of loss of income. This analysis is broken

down into different age groups of the head of the

household, different household structures, levels of

consumption and material endowments. The third

section summarises the core findings and outlines

the political implications derived from the results.

1 Comprehensive data on the distribution of income and

assets in Germany and other relevant economic policy

indicators are available on the WSI Distribution Monitor:

https://www.boeckler.de/wsi_47204.htm.

Figure 1

Income and asset inequality in Germany

Source: WSI Distribution Monitor, © WSI 2017

Gini coefficent of incomes

0,290

Source: WSI Distribution Monitor

Explanation: disposable household income equivalised with the new OECD

equivalence scale and per capita household net assets. The higher the Gini

coefficient, the more unequal the distribution. With a Gini of 0, every person

owns an equal amount. With a Gini of 1, one person owns everything and

everyone else nothing.

Income and asset inequality in Germany

Figure 1

0,2

0,3

0,4

0,5

0,6

0,7

20142012200720022000

Gini coefficient of assets

0,286

0,270

0,255

0,730 0,731

0,735

TABLE OF CONTENTS

WSI Report No. 37e, November 2017 page 3

Definition of income, assets and consumption

Income and assets are a household’s two cen-

tral material resources. Income is a flow variable,

usually disposable anew every month. Disposable

household income can comprise earned and capi-

tal income, state insurance benefits based on pre-

vious earned income (e. g. pension payments or un-

employment benefit), and transfer payments (e. g.

child benefit or unemployment assistance). Taxes

and contributions are deducted. Income usually

goes on consumer spending or (in part) is saved to

generate assets.

A household’s assets are stock. They comprise

tangible and financial assets (e. g. property and

shares). When liabilities (e. g. mortgages and loans)

are deducted, the result is net assets. 2 Projected

credits with a public pension fund are assets in a

broader sense, as they cannot be liquidated, but

only produce monthly pension payments once re-

tirement age is reached. Hence they are not includ-

ed in the calculation.

Assets fulfil various functions (see inter alia Lau-

terbach/Ströing 2014; Grabka/Westermeier 2014):

they can be generated through interest or rental

revenue, properties can be used themselves, but

assets can also enable a certain status in society.

They can be used to finance children’s education

or also be gifted and bequeathed. Considerable as-

sets can bestow power. Assets can also be used up

to secure the current level of consumption during

loss of income. In the long term this can be in the

retirement phase, as well of course in the short and

medium term during loss of income, for instance

during unemployment or a protracted illness. The

focus of this year’s WSI Distribution Report is on

the latter scenario.

Consumption comprises all household expendi-

ture on goods and services, e. g. food, electricity, or

visits to the hairdresser. It results from disposable

income minus expenditure on savings and repay-

ments to generate assets – for instance, transfers

into a savings account or into a fund, or paying off

a mortgage on a property.

2 In the report, the word “assets” is used synonymously

with “net assets”.

Infobox 1

Basis for calculation and methodology

The data on which all the calculations in the WSI Distribution

Report 2017 are based come from the German Institute for Eco-

nomic Research (DIW) Socio-economic Panel (SOEP) (Wagner

et al. 2008). Every five years, the representative household sur-

vey records data on the assets of private households in Germa-

ny – the last time was in 2012. 1 One disadvantage of the SOEP

data is that multimillionaires and billionaires are de facto not

included in the random sample (Grabka/Westermeier 2014). The

consequence of this is that the top one per cent of the income

and assets distribution cannot be analysed separately in this

report.

Below, the report studies how long the assets to secure the

current level of consumption last if the regular income is lost.

This means the net assets currently available are divided by the

current annual consumption, producing the consumption pro-

tection level expressed in years and months. This is based on

various assumptions:

– The level of analysis is the household, as decisions on con-

sumption and savings are usually taken in this context;

– All kinds of income are omitted, viz. also state insurance

and transfer payments or capital income;

– In the asset erosion phase, only consumption is taken into

account, and no other savings or repayments. 2

– Negative assets are set at zero;

– The current level of consumption is maintained;

– All asset values are liquidated, e. g. also (owner-occupied)

properties, business assets and private pension schemes; 3

– Projected credits with a public pension fund are not includ-

ed in the calculation, as they cannot be liquidated, but only

produce monthly pension payments once retirement age is

reached;

– For households that own a property and live in it, a fictitious

rental value is estimated and added to consumer spending,

as a sale of the property is assumed;

– In the case of all property owners with mortgages, interest

and repayments are deducted from consumption, as these

no longer have to be made because of the sale;

– Interest on the assets is calculated at a flat rate of 2 % per

annum. 4 Consumption is adjusted for inflation at a flat rate

of 2 % per annum;

– The term “lifelong” securing of consumption by using up

assets is applied when a household can cover a period of up

to 100 years with them.

1 Assets, income and calculated consumption refer in this year’s WSI Dis-

tribution Report to the base year 2012.

2 The exception is consumer credit, e. g. for televisions, furniture or cars.

This carries on being paid off, as there is no corresponding value record-

ed in the SOEP assets balance sheet.

3 The cost of liquidation varies, depending on the type of assets; however,

this cannot be taken into account here.

4 For households with few assets, this is a rather generous assumption;

for households with considerable assets, a rather conservative one.

WSI Report No. 37e, November 2017 page 4

If we classify households in groups (deciles) by

the consumption protection level 3 – measured in

years and months – we see that 30 % of house-

holds in Germany could secure their current level

of consumption 4 from their assets for a few weeks

or months at most (Table 1 and Figure 2). These

households have no appreciable assets, or are even

in debt, and are thus reliant on a regular income.

A further 20 % of households can compensate for

a loss of income for just under two years at the

most. The median for all households is 1 year and

11 months. A further 30 % can maintain their cur-

rent level of consumption for a maximum of just

under eight years. 10 % of households can secure

their consumption for at least just under 13 years,

and 5 % even over 21 years. The level of medium

consumption rises continually up to the 8th

decile and then tails off slightly again. The

reasons for this include the household and age

structure. The medium assets level rises

continually (Figure2 and Table A1 and A2 in the

Annexe). However, in (al-most) every

consumption protection decile there are some

households with a relatively high level

3 Definition: current net assets divided by current annu-

al consumption – for further assumptions behind the

calculation, see the section “Basis of calculation and

methodology”.

4 The median level for the calculations is € 2.000 a month

per household. Per capita this produces a median value

of € 1.110 a month. For the median consumption level of

the individual consumption protection percentiles, see

Table A1 in the Annexe.

of consumption and therefore relatively rapidly

dwindling assets, and some very thrifty households

whose assets would last for a long time because

of their restrained consumption. Some households

(the upper limit of the 10th decile - which corro-

spondents to the 100th percentile) could maintain

their current level of consumption until the end of

their life (defined as up to a period of 100 years) by

using up their assets. That is a summarising synop-

sis of the findings. Over and above that there are

some other important aspects, though.

East and West Germany

A striking difference between East and West Ger-

many becomes evident. (Table1) We can state cat-

egorically that the figures for West Germany are all

above the figures for Germany as a whole, and the

figures for East Germany are below them. The same

applies to the level of consumption and assets (Ta-

bleA1 and A2 in the Annexe). The median, which

divides the households in two halves of equal size,

is slightly more than two years in West Germany,

and less than one year in East Germany. 40 % of

households in East Germany could maintain their

current level of consumption for only a few weeks

or months (30 % in West Germany). 10 % of house-

holds in East Germany could secure their current

level of consumption for at least seven and a half

years; 5 % a little more than 11 years. In West Ger-

many, on the other hand, 10 % of households could

maintain their current level of consumption for

Infobox 1 (cont.)

Some of the assumptions may initially seem

extensive; others not extensive enough. For in-

stance, public pension payments will not sim-

ply be completely forfeited from one day to the

next; however, an illness resulting in inability to

work and thus a loss of earned income is per-

fectly feasible. Another objection is that there is

a certain amount of material cover in Germany

owing to unemployment assistance/basic pro-

vision in old age. To be entitled to this, however,

one first has to have dis-saved assets. 5 In the ran-

dom sample studied, though, there are relative-

ly few households that can secure their level of

consumption solely through their capital income

and thus support themselves indefinitely. More-

over, an owner-occupied property or a company

5 Because of certain allowances (protected assets), in

such a case not all of the assets have to be dis-saved,

as assumed here.

one has built up oneself would probably only be

sold very reluctantly, and also private pension in-

surance would certainly only be cancelled in the

most extreme emergency – but all constellations

outlined are possible. Excluding certain asset val-

ues from the calculation reduces the protection

of consumption. Whether in the event of a loss

of income a household would exactly maintain its

consumption constantly or make a slight down-

ward adjustment to it and thus draw on its assets

somewhat longer, also depends on the initial level

and is contingent on how long the loss of income

continues. Reducing the loss of income prolongs

the protection of consumption.

Altogether we can say that the calculation be-

low represents a possible scenario. Adjustments

to the assumptions in one direction or another, as

indicated, would result in a longer or shorter pro-

tection of consumption.

HOW LONG DO ASSETS LAST TO SECURE CONSUMPTION?

WSI Report No. 37e, November 2017 page 5

over 14 years, and 5 % even almost 23 years. That

is twice as long as the comparative figures in East

Germany. Both in East and West Germany there

are households which, in the event of a complete

loss of income, could maintain their current level of

consumption until the end of their life by using up

their assets.

Age and types of household

Broken down by the age of the head of the

household, the figures show that the securing of

consumption by assets rises with age (Table 1).

However, in every age bracket there are at least

20 % of households that could secure their current

level of consumption by using up their assets for

only a very short time, and are therefore reliant on

a steady income. Conversely, in each age bracket

there are households that could secure their cur-

rent level of consumption until the end of their

life through their assets. However, it is not possi-

ble here to make statements on mobility, i. e. how

these households have developed over time or to

what extent this will happen in the future, whether

for instance they ascend or descend.

Heads of household aged between 45 and 54

represent approximately the whole of Germany

figures of potential for securing consumption. The

figures for younger heads of household are below

that, those for older heads of household above that.

In the 80th percentile, the figure for heads of house-

hold between 25 and 34 years of age is below the

median for the whole of Germany. The median for

heads of household over the age of 65 is twice as

high as the median for the whole of Germany.

When we look at the securing of consumption

by household types, single parents stand out (Ta-

ble 1). Nearly half of these households have not

banked any assets at all and are totally reliant on

steady income to secure their consumption. Fig-

ures for single households are likewise below the

figures for the whole of Germany – figures for cou-

ple households are above them. 5 Couples with chil-

dren are likewise above the figures for the whole of

Germany up to the 80th percentile, after that just

below it.

5 Of course, this is also due to the average household con-

sisting of two people.

Figure 2

Securing of consumption (in years), consumption and assets (in euros)

Source: SOEP wave 29, own calculations WSI Distribution Report (2017)

Source: SOEP Welle 29, own calculations WSI Distribution Report (2017).

Securing of consumption (in years), consumption and assets (in euros)

Figure 2

Decile

10.

Decile*

Decile

Securing of consumption Consumption per yearAssets

Explanation: the households are classified from left to right by the hight of their consumption protection level (in years). They are subdivided into groups,

each equating to ten per cent of the households. The columns represent the highest protection of consumption in the respective group. The exception to this

is the 10th decile marked with * – here the column represents the median value (this corresponds to the maximum value of the 95th percentile). The highest

consumer protection value for the 10th decile is 100 years (not shown in the figure). The flat line shows the respective group’s median consumption

(in euros) per year. The steep line shows the respective group’s median assets per household.

100000

200000

300000

400000

500000

Years euros

WSI Report No. 37e, November 2017 page 6

Different levels of consumption

So far, a continuation of the previous level of con-

sumption has been assumed. Below, the same

level of consumption (per capita) is now allocat-

ed to every household, to establish how large the

differences from the current level of consumption

are. The median consumption per capita (€ 1110)

is specified as the middle level of consumption.

The low level of consumption equates to the 25 %

quantile and the high level to the 75 % quantile per

capita (€ 800 and € 1550) respectively. The number

of people living in a household was taken into ac-

count for calculating the securing of the level of

consumption.

The households in Table 2 are again classified

in ascending order by the consumption protec-

tion level, measured in years and months. For the

middle level of consumption, for the lower 60 % of

households there are comparable figures to those

for calculating the actual level of consumption. For

the percentiles above that, the figures for the mid-

dle level of consumption are higher, which means

that the actual level of consumption of these

households is higher. For the low level of consump-

tion, the figures are all above those for the actual

level of consumption, and for the high level they

are all below it.

Income and assets

In the previous scenarios, the households have

always been presented broken down into groups

by their current consumption protec-tion level –

measured in years and months. In an alternative

scenario, the households are now clas-sified by

the amount of their current income or assets, and

the consumption protection level is cal-culated

for the individual deciles. It is evident

Table 1

Protection of the current level of consumption (in years) by assets

Explanation: the households are classified from left to right by the hight of their consumption protection level (in years and months). They are subdivided into groups, each equating to ten

or five per cent of households. The years and months represent the highest protection of consumption of the respective group, viz. the lower limit for the next higher group. The highest

figure for the 100th percentile (not shown in the table) is always 100 years.

*Heads of household under 25 years of age are not shown, as the numbers of cases are too small.

Source: SOEP wave 29, WSI Distribution Report (2017) own calculations., © WSI 2017

Table 1: Protection of thecurrent level of consumption (in years) by assets

10th

percentile

20th

percentile

30th

percentile

40th

percentile

50th

percentile

(Median)

60th

percentile

70th

percentile

80th

percentile

90th

percentile

95th

percentile

All

Germany

3 M.

10 M.

1 Y. 11 M.

3 Y. 6 M.

5 Y 6 M.

7 Y. 11 M.

12 Y. 9 M.

21 Y. 1 M.

East

1 M.

4 M.

10 M.

1 Y. 8 M.

3 Y. 1 M.

4 Y. 9 M.

7 Y. 6 M.

11 Y.

West

4 M.

1 Y. 1 M.

2 Y. 5 M.

4 Y. 2 M.

6 Y. 3 M.

8 Y. 8 M.

14 Y. 3 M.

22 Y.

10 M.

By age of

the head of

household*

25-34 y.

1 M.

4 M.

7 M.

1 Y.

1 Y. 9 M.

3 Y. 5 M.

5 Y. 6 M.

35-44 y.

2 M.

7 M.

1 Y. 1 M.

2 Y.

3 Y. 3 M.

5 Y.

8 Y. 9 M.

14 Y.

45-54 y.

4 M.

11 M.

2 Y. 1 M.

3 Y. 6 M.

5 Y. 2 M.

7 Y. 6 M.

12 Y. 11

19 Y.

10 M.

55-64 y.

6 M.

1 Y. 9 M.

3 Y. 6 M.

5 Y. 2 M.

6 Y. 10 M.

8 Y. 7 M.

14 Y.

24 Y.

11 M.

From 65 y.

1 M.

8 M.

2 Y. 1 M.

3 Y. 11 M.

5 Y. 10 M.

7 Y. 9 M.

10 Y. 3 M.

16 Y. 3 M.

24 Y.

By type of

household

Single

3 M.

9 M.

1 Y. 11 M.

3 Y. 10 M.

6 Y. 10 M.

11 Y. 10

19 Y.

Couple

4 M.

1 Y.

2 Y. 3 M.

3 Y. 9 M.

5 Y. 6 M.

7 Y. 2 M.

9 Y. 6 M.

15 Y.

23 Y. 6 M.

Single-

parent

2 M.

6 M.

1 Y. 3 M.

3 Y. 4 M.

7 Y. 1 M.

14 Y. 4 M.

Couple with

child(ren)

2 M.

9 M.

1 Y. 7 M.

2 Y. 10 M.

4 Y. 1 M.

5 Y. 6 M.

7 Y. 7 M.

12 Y. 3 M.

22 Y. 9 M.

WSI Report No. 37e, November 2017 page 7

that the securing of consumption rises both on

average and in the median with (almost) every in-

come/assets decile (Table3 and Figure3 for assets).

This means that with increasing material resourc-

es the households can secure their current level of

consumption.

Both the average level of consumption and the

median likewise rise with the amount of income

and assets (TableA3 and A4 in the Annexe). Thus

households with more material resources spend on

average more money for consumption purposes,

yet could still maintain their level of consumption,

in the event of a loss of income, longer than house-

holds with fewer material resources. Households

with fewer material resources in turn spend on av-

erage less money for consumption purposes, yet

could maintain their level of consumption, in the

event of a loss of income, for a much shorter peri-

od than households with more material resources.

Of course, in every decile there are also households

that have a relatively high level of consumption and

therefore could secure their current consumption

only for a relatively short time.

Table 2

Securing a low, middle and high level of consumption (in years) by assets

Explanation: the middle level of consumption equates to the median consumption per capita (1110 euros) – viz. 2,220 euros for a two-person household. The low level of consumption

equates to the 25 per cent quantile, and the high level to the 75 per cent quantile (800 euros and 1550 euros respectively) – viz. 1600 and 3100 euros respectively for a two-person

household.

10th

percentile

20th

percentile

30th

percentile

40th

percentile

50th

percentile

(Median)

60th

percentile

70th

percentile

80th

percentile

90th

percentile

95th

percentile

Low

(25%)

4 M.

1 Y. 1 M.

2 Y. 7 M.

5 Y.

8 Y. 7 M.

13 Y.

21 Y.

11 M.

35 Y. 5 M.

Middle

(50%)

3 M.

9 M.

1 Y. 11 M.

3 Y. 8 M.

6 Y. 2 M.

9 Y. 5 M.

15 Y. 9 M.

25 Y. 6 M.

High

(75%)

2 M.

7 M.

1 Y. 4 M.

2 Y. 8 M.

4 Y. 5 M.

6 Y. 8 M.

11 Y. 3 M.

18 Y. 3 M.

Explanation: the households are classified from left to right by their consumption protection level (in years and months). They are subdivided into groups, each equating to ten

or five per cent of households. The years and months represent the highest protection of consumption of the respective group, viz. the lower limit for the next higher group.

The highest figure for the 100th percentile (not shown in the table) is always 100 years.

*Heads of household under 25 years of age are not shown, as the numbers of cases are too small.

Source: SOEP Welle 29, WSI Distribution Report (2017) own calculations.

Table 3

Securing consumption (in years) with assets by amount of income and assets

Explanation: the households are classified upwards by the amount of their income/assets. They are subdivided into groups, each equating to ten per cent of households. The years and

months represent the average/median securing of consumption of the respective group.

Median Average Median Average

By income By assets

1. decile 0 2 Y. 10 M. 1. decile 0 0

2. decile 4 M. 5 Y. 8 M. 2. decile 0 1 M.

3. decile 9 M. 4 Y. 4 M. 3. decile 1 M. 2 M.

4. decile 1 Y. 4 M. 4 Y. 8 M. 4. decile 6 M. 7 M.

5. decile 2 Y. 2 M. 5 Y 11 M. 5. decile 1 Y. 4 M. 2 Y. 1 M.

6. decile 2 Y. 4 M. 5 Y. 6 M. 6. decile 2 Y. 11 M. 4 Y. 9 M.

7. decile 2 Y. 7 M. 6 J. 1 M. 7. decile 4 Y. 7 M. 6 Y. 7 M.

8. decile 3 Y. 2 M. 7 Y. 7 M. 8. decile 6 Y. 9 M. 9 Y. 5 M.

9. decile 4 Y. 8 Y. 6 M. 9. decile 8 Y. 7 M. 12 Y. 9 M.

10. decile 4 Y. 10 M. 10 Y. 10. decile 16 Y. 5 M. 24 Y. 5 M.

WSI Report No. 37e, November 2017 page 8

Conversely in many income deciles – and for as-

sets in the upper half of the distribution – there are

households that could secure their current con-

sumption with their assets until the end of their life.

So below, it is not the highest figure of the respec-

tive decile that is evaluated (this would frequently

be 100 years) as hitherto, but the average or the

median.

Households in the top 10 % of the income/assets

distribution could on average maintain their cur-

rent level of consumption for ten years or over 24

years respectively. The median of the top 10 % is

just under five years and over 16 years respectively.

Household with a median income or median assets

could on average maintain their current level of

consumption for just under six years and two years

respectively. In the median, even only slightly over

two years and one year respectively. Some low-in-

come households have assets and could therefore

secure their consumption for a certain period of

time. Classified by assets, the lower 30 % of house-

holds possess no appreciable assets and are thus

permanently reliant on their income.

CONCLUSION AND

RECOMMENDATIONS FOR ACTION

The subject of the WSI Distribution Report 2017 is

the consumption-securing function of private as-

sets in the event of the loss of steady income. In

concrete terms, it is about the questions for which

households in the event of any loss of income the

previous level of consumption is secured by private

assets, and for what period of time existing assets

can compensate for the loss of regular income.

The conclusion is: in Germany, 30 % of households

can secure their current level of consumption from

their assets for a few weeks or months at the most.

These households have no appreciable assets or

are even in debt, and therefore reliant on a regular

income. Especially single parents and their children

are in that group. The median, which divides all

households into two halves of equal size, is 1 year

and 11 months. 10 % of households can secure their

consumption for at least just under 13 years, and

5 % for even over 21 years. Breaking this down by

the amount of income and assets, it is evident that

on average the more material resources house-

holds have, the longer they could secure their cur-

rent level of consumption, and on a higher level.

The results show that the majority of house-

holds have only a very limited private provision in

the form of assets. As soon as the regular income

stops, these households are very quickly reliant on

state support – which is usually below their current

level of consumption. Against the background of

these findings, the often-heard political appeal to

protect oneself better against the risk of loss of in-

Figure 3

Securing of consumption (in years) and consumption (in euros) by asset percentiles

Average Consumption per month

Source: SOEP wave 29, own calculations WSI Distribution Report (2017).

Securing of consumption (in years) and consumption (in euros) by asset deciles

Figure 3

500

1000

1500

2000

2500

3000

3500

Decile

10.

Decile

Median

Years euros

Explanation: the households are classified from left to right by the amount of their assets (in euros). They are subdivided into groups (deciles), each

equating to ten per cent of the households. The columns represent how long the respective group on average/in the median can secure its consumption

(in years). The line shows the respective group’s median consumption (in euros) per month.

WSI Report No. 37e, November 2017 page 9

able to save on a private level, households must

have a sufficiently high (earned) income. Being well

covered under collective wage agreements plays

a crucial role here both for middle and low wage

groups (Horn et al. 2017). Another precondition is

adequate and free childcare, to enable parents to

be employed at all. Assets are also generated by

paying off a loan (on property) (Grabka/Wester-

meier 2015). State funding in this area – geared to

lower and medium income groups – would enable

more people to have their own property. In addition

there is, for example, also a need for free informa-

tion and advice on forms of investment that can

still generate reasonable provision in times of low

interest rates.

With regard to state benefits for securing the

level of consumption, there is a need for earnings

replacement benefits and a living unemployment

assistance. This entails scrutinising standard rates

in a transparent procedure to define the sociocul-

tural subsistence level (Spannagel et al. 2017). It

is also important to increase protected assets. In

addition, the preconditions for access to reduced

earning capacity pension must be relaxed. There is

a need in conurbations for adequate investment in

public housing. And last but not least, guarantee-

ing the protection of consumption in old age ne-

cessitates a poverty-proof public pension system

(Blank 2017).

come through individual provision seems plausible.

However, adequate private cover of specific risks

is not always readily available, and is certainly not

possible for everyone.

The ability to make individual provision presup-

poses a regular, reliable income above immediate

subsistence. In view of the current distribution

of income, that is not the case for everyone by a

long chalk. There are also incalculable risks, such

as loss of earned income through job loss owing

to protracted illness. If there is no entitlement to

reduced earning capacity pension, and no private

occupational disability insurance was taken out to

cover this, the private assets must first be used to

secure consumption until class II unemployment

benefit can be claimed. Another factor to be tak-

en into account is that some households (out of

necessity) dispense with taking out private occu-

pational disability insurance for financial reasons,

since such insurance is only inexpensive when one

is young and healthy and does not have a high-risk

job. As soon as one of these factors changes, it be-

comes (very) expensive (DGB 2016).

That is why the appeal to the political players is

firstly to improve the general conditions for private

provision to secure consumption; secondly, direct

state measures to secure consumption must be

taken precisely when private provision is not pos-

sible for material reasons. As already stated, to be

WSI Report No. 37e, November 2017 page 10

Blank, F. (2017): Das Rentenniveau in

der Diskussion, WSI-Policy Brief Nr.

13.08/2017

DGB (Deutscher Gewerkschaftsbund)

(2016): Versicherung gegen

Berufsunfähigkeit: Darauf kommt

es an. URL: http://www.dgb.de/the-

men/++co++2074a036-48dc-11e6-

b93f-525400e5a74a. Accessed on:

12.10.2017.

Grabka, M.M./Westermeier, C. (2014): An-

haltend hohe Vermögensungleichheit

in Deutschland, DIW Wochenbericht

Nr. 9, S. 151–164

Grabka, M.M./Westermeier, C. (2015): Reale

Nettovermögen der Privathaushalte

in Deutschland sind von 2003 bis

2013 geschrumpft, DIW Wochenberi-

cht Nr. 34, S. 727-738

Horn, G.A./Behringer, J./Gechert, S./Rietzler,

K./Stein, U. (2017): Was tun gegen die

Ungleichheit?, IMK Report Nr. 129,

09/2017

Lauterbach, W./Ströing, M. (2014): Vermö-

gensforschung: Reichtum und seine

philanthropische Verwendung. URL:

http://www.bpb.de/apuz/181770/

reichtum-und-seine-philanthropis-

che-verwendung?p=all. Accessed on:

12.10.2017

Spannagel, D./Seikel, D./Schulze Buschoff,

K./Baumann, H. (2017): Aktivierungspoli-

tik und Erwerbsarmut, WSI Report

Nr. 36, 07/2017

Wagner, G.G./Goebel, J.,/Krause, P. /

Pischner, R. /Sieber, I. (2008): Das

Sozio-oekonomische Panel (SOEP):

Multidisziplinäres Householdpanel

und Kohortenstudie für Deutschland

– eine Einführung (für neue Daten-

nutzer) mit einem Ausblick (für

erfahrene Anwender), in: Wirtschafts-

und Sozialstatistisches Archiv 4/2008,

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