• Growing Income Inequality and Increasing Concentration of Property in Austria: How to Reverse?

  • Peter Fleissner | 08 May 12 | Posted under: Austria
  • The increasing inequality of wages and the extremes in the distribution of property in Austria inspire the disgust of the majority of people. More and more it has become evident that the political class in Austria is not interested in creating appropriate legislation to protect the poor and offering them a decent life. The political class decides regularly to worsen the standard of living of the people. Its main interest is in enriching itself. Corruption has become a dominant feature of Austrian politicians. It did not help at all that last year the Austrian government (together with the United Nations Office on Drugs and Crime and the European Anti-Fraud Office) founded the International Anti-Corruption Academy (IACA) in Laxenburg near Vienna. IACA intends substantially to contribute to the global fight against corruption by addressing shortcomings in knowledge and practice in the field. The Austrian political class is crying “Stop thief!” while feeding future political or financial collaborators with gifts and smaller or larger sums of money (“Anfüttern”). 

    Recently a research report by the economist Friedrich Schneider estimated damage of about 27 billion Euros to the state.

    While certain managers in Austria receive hundreds of thousands of Euros without any performance in return on their part (they do not even know what their payment is for), about one million people live at the threshold of poverty.

     

    The poor become poorer…

    As in other countries of the European Union there is a distinct trend of a declining wage share. While it was about 66% in 1978, in 2007 it reached its lowest point at 58%. Because of the crisis in which profits sharply declined, it increased in 2009 reaching about 61%.

    In addition, unemployment increased considerably. At present the unemployed number more than 200,000. In 1972 there were only 40,000. But even for people with a job it is becoming ever more difficult to earn enough money to survive. In particular, women are increasingly working part time (more than 40 % are), and thus suffer from a growing loss of income. It is one more scandal that the median income of women in real wages is 30 % less than that of men (see figure as a documentation on the right). And this relation has remained stable over more than 30 years – although there was much ado about the gender income gap in the public. But nothing substantial was done up to now to close it.

    As in Germany, the Austrian social partners tried hard and very successfully to keep wages low. While the real productivity of labour increased by more than 30 % between 1997 and 2008, real wages remained more or less constant (see figure). It is not hard to guess what absorbs the difference between turnover and the sum of wages: It forms the basis for the explosion of speculation and floods financial markets with liquidity.

    In addition, wages are unequally distributed. For several decades the inequality is continuing to increase. For instance, in 2006 the poorest 20 % of the working population received 2.2 % of the total wage sum, while the richest 20 % got 46.7 %. In 1976 the poorest got a share of 4.8 %, the highest income group receiving 40.2 %. The poorest group lost more than 50 % of its share of the total wage income.

     

    …the rich become richer

    On the other hand, we can see the situation of the wealthy. Only 19 families have 75 billion euros at their disposal. In Austria there are 74,000 millionaires with assets of 230 billion euros. The total property held by private households amounts to 1,400 billion (composed of 880 billion in real estate and 440 billion in financial assets). Only one seventh of this amount would be needed to pay off the national debt. The distribution of wealth is – as you would expect – very strongly tilted towards the minority of the rich. One percent of the population owns 27% of total financial assets and has 22% of real estate at their disposal, 10% owns more than 50% of financial assets and 61% of real estate, while the poorer half holds 8% of financial assets and only 2% of houses, apartments and land.

    Inequality and political decisions – key causes of the financial crisis

    As everyone can see, Austrian politicians and top managers do not want to understand that economic activities must be balanced and must allow participation for everybody. If this simple guideline is heavily violated, sooner or later the economy will undergo a state of crisis and collapse. As we could see at the end of the 1920s, increasing inequality is the precondition. It seems as if the concentration of wealth in the hands of only a few people is now approaching the level of shortly before the Great Depression in the United States.

    Instead of a political decision to bring private banks under the control of a qualified democratic authority, the European Commission and the national politicians continue to save them with billions of tax payer’s money. Also the recent moves of the European Commission to implement a fiscal pact without asking the population is just another step toward creating a recession in Europe and shifting the burden onto the majority of people.

     

    Resistance is emerging

    In January 2012 the Austrian “Social Fairness Forum”, launched the initiative “Tax Fairness Now” (“Steuergerechtigkeit – jetzt!”) in the building of the training centre of the Vienna Chamber of Labour to organise the resistance against the developments outlined above. The Forum consists of intellectuals, artists and political activists, among them representatives of trade unions and religious communities. Freda Meissner-Blau, the well-respected founder of the Austrian Green Party and former candidate for the Austrian federal presidency, also participated in the meeting.

    In a transparent and democratic process the initiative “Tax Fairness Now” was chosen over three other issues that could be objects of a political campaign – (1) “Shortening of the Work Week”, (2) “Precarious Labour and Care Work”, and (3) “Unconditional Basic Income” and won an absolute majority of votes.

    In the meantime a booklet was printed to explain the social situation to the public and provide arguments for increased taxation of private property, financial assets and very high income groups. The brochure can be downloaded from the homepage of the “Social Fairness Forum”,  or from the homepage of transform!at.

    The Social Fairness Forum and transform!at are not the only groups engaged in this issue. For instance, Rudolf Fussi initiated a referendum in favour of “Fair Taxes” with a very similar list of demands. Already in 2002 he had organised a first referendum against interceptor aircraft for the Austrian Air Force, and a second one in 2006 with the help of the Social Democratic Party. Fussi recently left the Social Democratic Party under protest. The “Social Fairness Forum” and transform!at will cooperate with Fussi to get the necessary number of signatures. Within the Austrian Trade Union there is also an interest group called “Tax Initiative”.

    The “Social Fairness Forum” demands the following 12 measures for a fair tax system

    1. Progressive taxation of property. Real estate has to be evaluated at market prices and no longer at the much lower so-called “assessed value”. Stocks and bonds of a value of more than 700,000 Euro should be taxed with a progressive rate between 0.5 and 1.5%. (This proposal was taken from the Austrian Federal Trade Union.)
    2. (Re-) introduction of a progressive inheritance tax (from 4 to 20%) with a tax exemption of up to 400,000 Euro (This proposal was taken from the Printers Trade Union.)
    3. The maximum tax rate should become higher; the tax rate for the lowest taxable incomes should be lower. Labour should become cheaper.
    4. The difference beween the brackets has to be increased.
    5. And it should be adapted to the inflation rate.
    6. The upper limit for paying social security contributions should be removed.
    7. The value-added tax should be introduced (as demanded by the former Minister of Social Affairs, Alfred Dallinger).
    8. Abolition of the group tax system for enterprises, which allows them to choose the lowest taxrate from among the countries in which they operate.
    9. Abolition of private foundations which are not in the public interest.
    10. No more money for private pension funds.
    11. Introduction of a financial transaction tax to prevent speculation.
    12. Transparency in banking.

    These taxes could yield a total tax revenue of about 11 billion Euros. The money should be used for the improved financing of the welfare state and for public capital investment in ecological and socially sound infrastructure.

     

     

    Sources

    Produktionswert zu Herstellungspreisen nach ÖNACE-Abteilungen, lfd Preise, Tab. 46_7609; verkettete Volumenindizes, Tab. 47_7609;

    Erwerbstätige (Inlandskonzept, Vollzeitäquivalente) nach Wirtschaftsbereichen

    Tab. 11_7609. Volkswirtschaftliche Gesamtrechnungen 1978-200.9

    Nettojahreseinkommen der unselbständig Erwerbstätigen 1997 bis 2009 (online)

    Reallöhne mittels harmonisiertem VPI (2005 = 100) berechnet.

     


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