From the middle of the 1990s inequality in Germany seemed to be increasing inexorably. Recently, however, the income gap has closed again somewhat.
In Germany, moreover, the state plays a more active role in income distribution than in many other countries, narrowing the gap between the extremes. However confusing the effects of redistribution may be in detail, the result is clear: As people’s market income increases, they receive less from the state while their tax burden steadily grows. Conversely, the less they earn, the more payments they receive from the state.
The bottom line, however, is still a considerable concentration of financial resources: The upper 10 per cent receive 30 per cent of total income. Wealth is even less equitably distributed, with the richest 10 per cent of the population accounting for 60 per cent of the total. This upper class is not quite as remote from the rest as these numbers suggest, though. With a large portion of their assets tied up in companies, many of the well-off are investing their money in jobs.
As a result, when all incomes rise, but those of the rich rise by more than those of the poor, poverty increases, even though the poor have more than they had before. Poverty is also relative for another reason: somebody who is regarded as poor in one country might be considered wealthy in another.
Although the level of prosperity is higher in Germany than in most other European countries, the proportion of poor people is below the European average. The reason for this lies in state subsidies. With social assistance, a safety net for the elderly and a minimum unemployment benefit even for the long-term employed, Germany has effective instruments against material poverty.
However, upward mobility can only be achieved if those affected find a job. In Germany this is particularly difficult for single parents and immigrants. If more people are to be able to get by without public assistance, two things must happen. Firstly, it must be made easier to combine employment with bringing up a family. Secondly, joining the workforce must become a more attractive option. Low earners who continue to receive the lowest level of unemployment benefit as an income supplement should be allowed to retain more of the extra money they earn.
Der soziale Aufstieg kann jedoch nur gelingen, wenn die Betroffenen einen Job finden. Dies fällt in Deutschland vor allem Alleinerziehenden und Migranten schwer. Damit mehr Menschen ohne staatliche Hilfe auskommen, muss sich zum einen die Vereinbarkeit von Beruf und Familie verbessern, und zum anderen muss die Aufnahme einer Beschäftigung lohnender werden. Geringverdiener, die ergänzend Arbeitslosengeld II beziehen, sollten deshalb mehr von ihrem Hinzuverdienst behalten dürfen.
As in many other industrialised nations there is a trend in Germany towards greater income inequality. However, state intervention in income distribution is so extensive that there can be no talk of German society drifting apart.
However, increasing redistribution has an undesirable side-effect. Those with a will to work are hardly going to exert themselves if the state then robs them of their just wage. Only when hard work and superior knowledge are rewarded is there an incentive to invest in one’s own and one’s children’s education. In the end, even those with low incomes benefit when the will to work is sustained. In a growing economy the lot of the lowest earners improves even when their relative share shrinks. However, stifle motivation and the whole increase in prosperity is smaller. Those with low incomes then receive less than before although their share increases.
The state corrects the income distribution of the market by means of taxes and social transfers. But too much redistribution inhibits motivation.
In Germany wealth is highly concentrated: as a rule, the more educated people are, the more they can save. Compared with their European neighbours, Germans have very little put away for a rainy day.
Compared with the other Eurozone states the difference between the median and the average in Germany is striking, and indicates that the wealth in this country is distributed relatively unequally. By contrast, wealth in France, Italy and Spain is more evenly spread across the population. Moreover, the wealth of the median French person is more than twice that of the median German. The main reason why Germans fare so badly in this comparison is the low level of property ownership. More than half of personal assets in the Eurozone consist of real estate, a category in which the Germans have little to offer.