Numbers published by the Federal Statistics agency showed that huge disruption to working life caused by the pandemic and the resultant lockdowns led to a drop in pre-tax earnings (nominal earnings) of 0.6 percent last year.
“Unlike during the financial and economic crises of 2008/2009, workers in Germany had to accept a drop in nominal earnings in 2020,” the statistics agency commented.
At the same time prices went up by an average of 0.5 percent over the year, leading the agency to conclude that real wages sunk by one percent.
Real wages have only twice dropped over the past 13 years. Following the financial crisis there was a slight decrease of 0.1 percent in real earnings in 2009; and in 2013 a similar decrease of 0.1 percent was recorded in the midst of the Greek debt crisis.
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The drop in wages interrupts years of strong wage growth, with six years of consecutive growth of over one percent between 2014 and 2019 while the German economy as a whole was booming.
A central cause of the wage reduction was the massive Kurzarbeit (furlough) programme that the government introduced during the first wave of the pandemic. At the high point in April some 6 million people were on the Kurzarbeit, meaning that they were either not working or were placed on reduced hours.
The state paid a percentage of people’s wages while they were on Kurzarbeit. This money was not included in the statistics agency’s calculations, but is likely to have had a considerable impact on the overall financial picture in German households.