Experts warn of rising inequality in Germany

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Experts warn of rising inequality in Germany
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Income inequality has leapt in Germany since 2000, a new study shows, with the lowest earners having less money in their pockets than 15 years ago despite sustained economic growth.


The study by the Kreditanstalt für Wiederaufbau, a government-owned development bank, shows how unevenly the fruits of prosperity have been divided over the past decade and a half.

Whereas in 2000 Germany had arguably the lowest income inequality in the world, it has now fallen behind the Czech Republic, Sweden and Denmark.

The report does however emphasise that Germany is still one of the most equal countries in the world when it comes to disparity in earnings, due to its progressive tax system.

The figures show that, whereas in 2000 the top 20 percent of earners were taking in 3.5 times the amount of those in the bottom 20 percent, that ratio has now increased to five times.

Earnings in the bottom ten percent of German society actually decreased significantly in real terms across this period, with an increase in earnings of 6 percent clearly being outpaced by a 24 percent rise in consumer prices.

In contrast the top of German society saw earnings increases of 39 percent.

A tweet from broadcaster ARD, shows that income among top earners has increased by 39 percent while those among bottom earners increased by only 6 percent.

Germany’s Gini coefficient - a widely used indicator of economic inequality - has grown significantly over the past 15 years.

A Gini coefficient of zero represents absolute equality, while one represents absolute inequality. Eurostat figures for Germany show the country's Gini coefficient rose from 0.25 to 0.31 between 2000 and 2014.

Now the Czech Republic has claimed the title of the country with the lowest income inequality globally, having achieved a 0.25 Gini rating in 2014. But at 0.31, Germany has fallen into line with the EU average.

According to the report the cause of this growth in inequality is to be found in the different speeds at which salaries have increased.

Sixty-two percent of German income is provided by salaries, 23 percent come from redistribution programmes such as welfare and pensions, and 10 percent comes from returns on assets.

In the top-earning group (€5,000 to €18,000 after tax per month) more than 70 percent of income comes from salaries.

But in the lowest-earning category (after-tax earnings of up to €1,300 per month) 65 percent of household income is made up by welfare payments.

This has a huge effect on disposable income. While top earners are able to save 40 percent of their income each month, bottom earners do not take in enough to cover living costs and fall into debt.


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