28 percent of people with subjective income losses fell back on savings, only a small proportion borrowed something from family and friends or took out a loan from the bank. Volkshilfe director Erich Fenninger also observes that the number of people struggling with everyday expenses is increasing in the advice and distribution centers of his organization: “The gap between rich and poor is widening and widening,” he reacted to the reports from Eurostat and Ministry of Social Affairs funded survey “This is how we are today”.
The same people have been interviewed in four tranches since the fourth quarter of 2021. For the most recent survey in the third quarter of 2022, responses from around 3,100 people between the ages of 16 and 69 were evaluated. The focus was on personally experienced loss of income, the subjective coping with the cost of living as well as well-being and satisfaction. Loss of income does not necessarily mean an actual nominal income reduction, but can also be a perceived loss of purchasing power due to inflation.
life satisfaction decreased
Although the number of those who reported a loss of income in the past 12 months has recently fallen slightly, a third of all respondents now expect their household income to fall in the near future. For example, the proportion of those who are preparing for a loss of income in the coming year increased from 22 percent (fourth quarter of 2021) to 33 percent (third quarter of 2022).
Conversely, slightly fewer expected an increase in income – at the beginning of the survey it was still 18 percent, at the end just under 16 percent. According to the Ministry of Social Affairs, more than a million people stated that they had difficulty covering their current expenses.
Life satisfaction decreased over the course of the survey period. The proportion of people with a high level of satisfaction fell from 57 to 53 percent. “Even though many of the government’s measures will take effect at the beginning of the year, inflation will remain a major challenge this year,” said Social Affairs Minister Johannes Rauch (Greens) in a broadcast.
The government has largely offset the effects of inflation for many people on low incomes, Rauch said. SPÖ vice club leader Jörg Leichtfried, on the other hand, saw the “one-off payment policy as a failure”.
Social benefits valued for the first time
In September, the federal government decided to adjust social benefits to the rate of inflation for the first time as of January 1st. Benefits such as family allowance, child care allowance, study allowance and others are now valued annually. This was already the case with nursing allowance and social assistance.
However, the valorization is below the annual inflation rate of 8.6 percent for 2022 calculated by Statistics Austria. For the current year, it should be 5.8 percent, which corresponds to the average inflation rate from August 2021 to July 2022. However, inflation did not fully hit until later, reaching a high of 11.0 percent in October last year and 10.2 percent in December.
“Devil in the details”: rate remains below the inflation rate
The momentum institute, which is close to the trade unions, recently criticized that “the devil is in the detail” here, since the adjustment rate is thus well below the actual current inflation rate and the price increases are only compensated for with a significant delay. Despite the adjustment, the social benefits paid out each month are still losing value this year.
The institute calculated a loss of purchasing power of 5.4 percent for recipients of social benefits. For 2023, the forecast is another 0.9 percent due to inflation expectations. There is only an actual plus in the case of a compensatory allowance (minimum pension) and study aid, both of which have already been increased in 2022.
With a calculated 11.5 percent, they lost “particularly drastically” in value or lost unemployment benefits and emergency assistance, which are not automatically valued. The danger, warned the institute, according to its own definition “the eco-social think tank of the many”, that “even more people will slip into poverty”. Every second long-term unemployed person is already at risk in this regard.
Upcoming “price shock” in rents
According to the Statistics Austria survey, around 30 percent of the population expect payment difficulties for housing costs in the next three months – a sharp increase compared to the previous quarter. FPÖ building spokesman Philipp Schrangl sees the “residential policy failure of black-green now even statistically proven in detail” with the survey.
Rents will rise again significantly, which will hit low-income people and families particularly hard again. Based on the annual inflation rate for 2022, the benchmark rents will be 8.6 percent higher in April and May, affecting around 776,000 people in private old buildings, with the additional costs for a 65 square meter apartment amounting to 490 euros per year, with 90 square meters in According to the Chamber of Labour, it is 620 euros per year in Vienna and 960 euros per year for the same size in Vorarlberg. She calls for a “rent cap at two percent and away with the time limits”.
14 percent more in two years
The rents, which are subject to the reference value according to the Tenancy Law Act (MRG), are usually adjusted to the rate of inflation every two years on April 1st. The Federal Government had postponed the last scheduled adjustment in 2021 by one year due to the burdens caused by the coronavirus pandemic with the Pandemic Consequences Alleviation Act (MPFLG). Valorization was then carried out in 2022, and rents rose by almost six percent. This year, the new value adjustment is imminent, in April for new contracts, in May for existing contracts – the bottom line is an increase of around 14 percent in two years.
Anyone who signed a contract in the old building built before 1945 after March 1, 1994 and has an adjustment clause in this contract is subject to the benchmark system. The benchmarks vary from state to state. They are currently around EUR 5.61 in Burgenland, EUR 6.15 in Vienna and EUR 9.44 in Vorarlberg. In addition to the guideline, there are various surcharges and deductions.
Living in itself the largest chunk
According to Statistics Austria, the total costs for living, including energy, rose by an average of 12.6 percent last year – three and a half times as much as in 2021 (3.6 percent). The price hikes for household energy in general (up 36.8 percent), specifically for heating oil at 89.7 percent and for natural gas at 80.8 percent were even more pronounced than for rents. Solid fuels became more expensive by 58.4 percent, district heating by 31.9 percent, and electricity cost an average of 11.1 percent more than in 2021.
