The Evolution of Income Inequalities in Germany

Since 10 years income inequalities have been rising in Germany. While the living standards of the poorest households have stagnated, those of the richest have strongly increased.

The income inequalities are sharply increasing in Germany since the turn of the millennium: the Gini-coefficient [1] has gone up from 0.25 in the year 2000 to 0.29 by 2010. This index was quite stable for a while, oscillating at around 0.25 between the middle of the 1980s until the end of the 1990s. Generally, income inequalities in Germany are always a little lower than in most other rich countries, however they are higher than in France (see our article “The rise of income inequality amongst rich countries”)

All Germans have benefited from an increase of their incomes (see box at the end of the article) between the end of the 1990s and 2000s. But the incomes of the richest people have increased a lot more than those of the other income groups: the median income [2] of the richest 10 % of the population has gone up from 32 000 to 41 000 Euros between 1997 and 2008 (+ 9 000 Euros, thus an increase by 28 %), while the one of the poorest 10 % has only increased from around 6 300 to just below 7 300 (+ 900 Euros, thus an increase by 15 %). Consequently, the inequalities between the two categories have increased: in 1997 the gap was 26 000 Euros, against 34 000 Euros in 2008, with the ratio passing from 5.09 to 5.68.

The presented figures correspond to the incomes of persons within households. The declared disposable incomes for each household have been weighed according to the consumption units present in households, so that they illustrate the real income which persons in a household dispose of. The head of the family is weighed with a coefficient of 1, while all other persons aged 14 or older with 0,5 and all children below 14 years with 0,3. For example, for an income of 30 000 Euros, the “real” income according to the type of household would be 20 000 Euros for a couple without children and 12 500 Euros for a couple with three children under 14 years of age. The figures take into account employment earnings (salaries and exceptional payments such as bonuses at the end of the year) and capital income after tax and social benefits. The figures are calculated on the basis of a representative panel that is questioned every year.

Footnotes

[1The Gini-coefficient compares the real distribution of incomes with perfect equality (everyone has the same income). The more the coefficient approaches 0, the more equal the distribution is - the closer it comes to 1, the more unequal.

[2The median income is the amount that divides the income scale into two halves within a category. One half earns more than this amount while the other half earns less.


Photo : Thomas Wolf, www.foto-tw.de


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4 June 2012

Themes : • Western Europe • Summary Data

Data

In partnership

The German Socio-Economic Panel Study (SOEP) is a wide-ranging representative longitudinal study of private households, located at the German Institute for Economic Research, DIW Berlin.

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