Middle class shrinking

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Middle class shrinking
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Germany’s middle class has been steadily shrinking since the late 1990s, a leading economics think tank has found.


The German Institute for Economic Research (DIW) has calculated that, despite falling unemployment, the proportion of individuals and families living on roughly average incomes has dropped, weekly Die Zeit reported in advance of its Thursday edition.

The share of middle income earners as a proportion of the population fell from 59.2 percent to 58.7 percent over the course of 2008 – the last year for which reliable figures are available. Ten years earlier, the figure had stood at 64 percent.

“The trend is clear,” said DIW researcher Markus Grabka. “Since 1999, the middle class has shrunk continuously.”

The DIW defines “middle class” as people who have at their disposal between 70 percent and 150 percent of the average after-tax income. For a single person, that means between €1070 and €2350 per month.

Grabka’s calculations contradict recent research by the Roman Herzog Institute, a Munich think tank named after the former German president and committed to economic reform. The RHI has declared the shrinking middle class to be a “myth.”

Grabka argued his calculations were more comprehensive: he studied annual income rather than monthly income and therefore incorporated investment income as well as periods of temporary unemployment.

His findings correspond to figures released Tuesday by the Federal Statistics Office (Destatis) which revealed that the proportion of Germans at risk of poverty had risen from 12 percent in 2004 to 15.5 percent in 2008. Still, Germany’s poverty risk rate is lower than the European Union average, which is 16.3 percent.

The EU defines a person as being at risk of poverty if they are forced to live on less than 60 percent of the average income, including state transfers such as welfare payments. In Germany, this amounted in 2008 to €11,151 per year for a single person. Some 62 percent of unemployed people and 37.5 percent of singles are regarded as at risk of poverty, along with 14.9 percent of pensioners.

The highest risk of poverty in the EU is in the Baltic state of Latvia with 25.7 percent. Its neighbours also have high rates – Lithuania with 20.6 percent and Estonia with 19.7 percent. Romania has a rate of 22.4 percent and Bulgaria 21.8 percent. Countries hit by the eurozone crisis are also at high risk, with Greece on 19.7 percent and Spain – which some experts predict may also need a bailout – on 19.5 percent.

The lowest rate is in the Czech Republic, where just 8.6 percent of the population is at risk of poverty.

The Local/djw


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