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Here's where the biggest wealth divisions are in Germany

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Here's where the biggest wealth divisions are in Germany
Image: DPA
10:39 CEST+02:00
A new study into differences in disposable income levels has revealed the significant wealth inequality across Germany. We break down where the differences are.

While the differences between the former east and west of the country remain strong, new gaps are opening up between the south and the northwest of the country.

In particular, areas around Munich, Frankfurt and Stuttgart are now some of the wealthiest in Europe – while regions in the east and the former industrial Ruhr area rank among the lowest. 

Read more: Almost half of Germans want legal maximum wage

Read: What you need to know about Germany’s tax system

The enduring legacy of the Wall

Although the Berlin Wall may have fallen almost 30 years ago, income disparities remain strong between the former east and west. 

Just six of the counties or cities in the former east have an average annual disposable income level above €20,000. By comparison, 284 out of 324 districts in the former west exceeded the threshold. 

Overall the report shows a slight increase in earning capacity in the former east, with disposable income at 84.7 percent of western levels in the study - up from 81.5 in 2000. 

Germany’s solidarity tax (Solidaritätszuschlag or Soli), which goes to bridge the gap between east and west, has come under fire in recent years for failing to effectively bring eastern economic levels up to those of the west - while also funding a range of unwanted and unnecessary infrastructure projects. 

Despite revenue from the solidarity tax increasing year after year, less and less is being spent on the former east – indicating that the structure of the tax rather than the tax itself may be the problem. 

Rich Germany, poor Germany

The wealth disparity is also highlighted between German cities. 

Munich is the richest city according to the study, with an annual household disposable income of €29,685. Three former western cities follow on the list including Stuttgart (€25,012), Düsseldorf (€24,882) and Hamburg (€24,421). 

Berlin on the other hand has an average of €19,719. The former industrial city of Duisburg and Leipzig - the biggest city in the former east outside of Berlin - have an average of €17,770.

The picture was much the same in regional areas and districts. Halle (Saale), Gelsenkirchen, Vorpommern-Greifswald and Frankfurt (Oder) all have an average below €18,000, which is roughly the same as the average earnings of Italy. 

Gelsenkirchen, in Germany's former industrial heartland, has seen incomes bottom out. Image: DPA

Conversely, Starnberg in southern Munich, Heilbronn (north of Stuttgart) and in the Hochtaunus district near Frankfurt all averaged over €30,000 - more than the highest income EU country (Luxembourg). 

Disposable income?

The study, commissioned by the Economic and Social Sciences Institute of the Hans Böckler Foundation, sought to look beyond earnings data and find out how much money German households had after bills – taxes, social security contributions and other state obligations – were taken care of. 

Housing costs such as rent or mortgage payments are to be paid out of the so-called ‘disposable income’, meaning that the actual differences may be more stark than the report indicates. 

SEE ALSO: High costs, long queues and discrimination: What it's like to rent in Germany

While Berlin’s household disposable income of €19,719 is almost €10,000 less than that of Munich (€29,685), rent increases in the capital mean that there is likely to be even less money to spend once housing is taken care of. 

The rent-burden ratio in Berlin is 41.3 percent - meaning that housing costs in relation to income are thus much higher than in Frankfurt, Munich or Hamburg. 

Starnberg, south west of Munich, is one of Europe's richest areas. Image: DPA

The authors note that housing costs should not exceed one third of overall income, meaning that making ends meet in Germany’s largest city is becoming more difficult. 

"Since housing costs are also paid from disposable income, rising rents, especially in growing metropolitan areas, are likely to limit the financial ability of many residents,” they wrote. 

Wealth inequality in Germany

Despite the establishment of significant programs to minimize wealth inequality – most notably the solidarity tax  – and a comprehensive tax system, wealth inequality is on the rise in Germany. 

A 2014 study showed that Germany had the greatest wealth gap in the Eurozone, while a 2016 report indicated that the gap was widening. 

This gap has grown despite Germany’s strong economic position and positive rebound from the 2008 global financial crisis.

 
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C.LI - 24 Apr 2019 12:55
By comparison, 284 out of 324 districts in the former east exceeded the threshold.
Should be in the former “west", right?
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