How your wages in Germany could depend heavily on where you live
The amount you can earn in a job could depend heavily on whether you live in eastern or western Germany, a new study has shown. But geography is not the only factor.
Although it’s more than 30 years since Germany was divided in two, the former East-West border is still visible in many economic statistics.
A newly published study by the Hans Böckler Foundation's Institute of Economic and Social Research (WSI), shows that, on average, 18.7 percent of all full-time employees across the whole of Germany are low-income earners.
But in the five former East German states of Brandenburg, Mecklenburg-Western Pomerania, Thuringia, Saxony-Anhalt and Saxony this average is at 29 percent.
Low-income earners are defined in the study as full-time employees who have to make ends meet with a gross pay of less than €2,284 per month. This is the value at which the Federal Employment Agency currently sets the nationwide upper limit of the lower pay range and is less than two-thirds of the average monthly gross pay of full-time employees (subject to social insurance contributions) in Germany.
Full-time workers in eastern Germany are the lowest paid
The study, which is based on pay data from the German Federal Employment Agency for 2020, shows that there are major differences by region and a stark contrast between incomes in eastern and western Germany.
While 6.4 and 8.3 percent of full-time employees in western cities such as Wolfsburg and Erlangen, respectively, worked in the lower pay range in 2020, eastern cities such as Görlitz and in the Saale-Orla district reached figures of more than 40 percent. The highest rate was in the Erzgebirgskreis in Saxony, where 43.2 percent of full-time workers earned a low wage.
According to the WSI’s findings, rates of more than 30 percent continue to be relatively common in eastern Germany, especially in rural districts. By contrast, in the western states, even predominantly rural regions remain below this mark, albeit only relatively close behind in some districts of Schleswig-Holstein and Rhineland-Palatinate. In general, full-time work in the lower pay range is more widespread in rural regions, where there are mainly small businesses and little industry.
But the WSI’s study isn’t the only indication of lower earnings in eastern Germany.
A study by career platform Stepstone from 2021 also showed that the states with the highest average incomes in Germany are all in the west, while the states with the lowest average incomes are all in eastern Germany.
A response by the federal government to a question from the Left Party in the Bundestag from March 2021, also showed that wages in eastern Germany still lag far behind incomes in the west in some sectors. The biggest difference was in the manufacture of clothing, where, in 2019, full-time employees in the western states earned 73 percent more than in the east.
The reply also revealed a large gap in earnings in the manufacture of cars, engines, bodywork, trailers and car parts. In this sector, the gross income was 45.1 percent more in the West.
Other factors influencing low pay
It isn’t just living in eastern Germany that will affect your wages. The report by the WSI also shows that factors such as gender, industry sector and qualification level also have a significant influence on income levels.
Nationwide, 25.4 percent of women have to get by with a low monthly income despite full-time work, while the same is true for only 15.4 percent of men.
Full-time workers under the age of 25 earned a low salary in 39 percent of cases, while 40.8 percent of those without vocational qualifications were also poorly paid.
According to the study, 17.8 percent of people with vocational qualifications were among the low-paid compared with just 4.9 percent of people with university degrees.
Low pay despite working full-time was particularly pronounced in the hospitality industry (68.9 percent), temporary employment (67.9 percent) and agriculture and forestry (52.7 percent). An above-average number of people also earned less than two-thirds of the average gross salary in the arts and entertainment and private household sectors (33.2 percent), logistics (28.3 percent) and retail (24.9 percent).
Is it all bad news?
The WSI's report does also indicate that some progress has been made. In 2011, 21.1 percent of all full-time employees were still low-wage earners and this figure fell to 18.7 percent by 2020. "In recent years, we have succeeded in pushing back the lower pay range," said Helge Emmler, one of the authors of the study, describing the trend. This is particularly true in eastern Germany, he said.
In order to further push back the lower pay range, the increase of the minimum wage to 12 euros per hour is "certainly a step in the right direction," Emmler explained. In addition, however, stronger collective bargaining coverage is also necessary. In eastern Germany in particular, this is still much weaker than in the west.