Is Germany's middle class shrinking?

While 65 percent of the population still belonged to the middle class in 2007, the figure stood at only 63 percent in 2019, according to the Ifo Institute study.

The decline may appear moderate, but it’s actually considerable in comparison to other European countries, Ifo researcher Florian Dorn said in a statement.

While Germany's middle class was still ranked ninth and thus in the top third in 2007, it had slipped to 14th by 2019 and had therefore falling into middle place, Dorn said.

"So in the years following the financial and economic crisis, Germany was not able to keep up with the development of an increasing middle class in many other European countries and was overtaken by Belgium, Finland, France, Poland and Greece, for example."

READ ALSO: How much do you have to make to be considered rich in Germany?

However, the Ifo Institute did not initially give an assessment of how the situation is likely to have changed over the course of the Covid-19 pandemic or following Russia’s invasion of Ukraine, when energy prices and inflation shot up. 

The German government helped companies and consumers through the economic downturn with several aid packages. But because of high inflation, which rose to over 10 percent in 2022, many people had to cut back on their consumption and had little or no savings reserves.

Why is the middle class declining?

Both "both social decline and social advancement have shrunk the margins of the centre," according to the study, meaning there are both more higher and lower earners, and fewer people belonging to the middle class.

In a European comparison, the middle class in Germany bears "one of the highest tax and contribution burdens," it stated.

"With a marginal burden of around 50 percent of gross income in the German tax and transfer system, people with middle incomes effectively have only half of the next additional euro they earn."

"More work and more performance therefore pay off only to a very limited extent in net terms for the middle class," said Andreas Peichl, head of the Ifo Center for Macroeconomics and Surveys.

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The Ifo Institute therefore sees people with middle incomes in Germany "at the edge of their ability to bear the burden." 

The future of the social market economy in Germany could thus be at risk, the study added.

How Germans perceive themselves

More than 80 percent of Germans classify themselves as belonging to the middle class: that means that around 26.1 million households in Germany statistically belonged to the middle class in 2019, corresponding to less than two-thirds of all households.

The authors based their calculations on the OECD definition, which states that a person belongs to the middle class if they have between 75 and 200 percent of the median income at their disposal. 

For single people, this corresponded to a net disposable income of between €17,475 and €46,600 per year in 2019.

For childless couples, the range was between €26,212 and €69,900. Couples with two children statistically belonged to the middle class if they had an income of between €36,698 and €97,860 a year.

READ ALSO: German middle class shrinking 'as rapidly as USA's'

Vocabulary

middle class - (die) Mittelschicht

overtake - überholen

ability to bear the burden - (die) Belastungsfähigkeit 

performance - (die) Leistungsfähigkeit

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