picture: iStock

Income and Wealth

picture: iStock

From the middle of the 1990s inequality in Germany seemed to be increasing inexorably. Recently, however, the income gap has closed again somewhat.

Companies are constantly on the look out for qualified employees and pay them good wages. The low skilled, on the other hand, must compete with workers from low-wage countries and with computers capable of performing ever more tasks. As a result of these trends, in the last two decades the income gap in Germany - as in all industrial nations - has widened. Unlike most other countries, however, Germany has recently managed to slow down this the income drift, and even reverse it to some degree. Economic growth and an unprecedented reduction in unemployment have improved the economic circumstances of millions.

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.

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Martin Beznoska

Dr. Martin Beznoska

Senior Economist for Financial Policy and Tax Policy

Tel+49 221 4981-736

Mailbeznoska@iwkoeln.de

@mbeznoska

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Judith Niehues

Dr. Judith Niehues

Head of the Research Group Microdata and Method Development

Tel+49 221 4981-768

Mailniehues@iwkoeln.de

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Maximilian Stockhausen

Dr. Maximilian Stockhausen

Economist for Income and Wealth Distribution

Tel+49 221 4981-862

Mailstockhausen@iwkoeln.de

@StockhausenEcon

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