Nothing worries the population as much as the social gap between rich and poor in Germany. When asked what is the most pressing issue for economic and social policy, the most common answer is inequality of income and wealth. In the SPIEGEL economic monitor, this topic consistently ranks first from the beginning - even more so than the compatibility of the economy and environmental protection, which also includes the fight against the climate crisis.
The concern for social cohesion in Germany is well founded. Inequality in incomes has increased significantly recently and has now reached its highest value since reunification. In particular, the poorest fifth of households is increasingly losing connection economically.
This is shown by the new distribution report from the Economic and Social Sciences Institute (WSI) of the union-friendly Hans Böckler Foundation. The WSI researchers Dorothee Spannagel and Katharina Molitor have used the data from the long-term survey SOEP, which provides information for 16,000 households annually, and which shows the development of incomes up to and including the year 2016.
The overall situation is quite pleasing: The many years of good economic conditions and the boom in the labor market have had an effect. The disposable income of households in Germany has increased significantly on average. "Available income" simply means the money a household can actually spend. Taxes and social security contributions have already been deducted. Components of income are not only wages, salaries or profits of a company, but also social benefits such as child benefit, housing benefit or Hartz IV.
Financial crisis lowered inequality - but only briefly
However, different population groups have benefited very differently from the increase in income. This can be seen in several different units of measure that the WSI researchers calculated from the SOEP data:
The Gini coefficient is the most common measure of inequality. If it is zero, all households in a society have an equal income. If he is at 100 percent, the entire income flows to a single household, all others get nothing. If one looks at the time since reunification, it rose sharply, in particular in the period from 1998 to 2005 - from just under 25 to almost 29 percent. Thereafter, it tended to stagnate and even fell slightly during the financial crisis. However, the latest data shows that it has been rising significantly since 2010, albeit not as fast as 20 years ago. Most recently, however, he reached the record level of 29.5 percent.
However, the Gini coefficient has the property of depicting changes in the middle class particularly strongly. The WSI researchers therefore calculated two more units of measurement that are particularly responsive to developments at the margins - ie the richest and the poorest income groups. Both assume higher values as their inequality increases:
- The Palma index clearly reflects changes in the income-rich. He also rose to a record high of 1.07 in 2016. Previously, it had reached its peak in 2005 at 1.06, dropped to 0.99 four years later, and has since then shown a clear upward trend.
- The Theil Index is particularly sensitive to changes in the lowest income bracket. At 0.161 in 2016, it almost reached the previous record of 0.163 in 2007. It has also risen sharply since 2010.
Just how much the bottom fifth of households are threatened with losing their economic connection to German society is illustrated in the following chart. It shows the inflation-adjusted development of middle incomes in different strata since the year 2005. In addition, the researchers divide the households into ten equal groups depending on the income. The five poorer tenths are colored red in the graphic, while the five richer tenths are blue.
The lowest ten percent of them actually had lower real incomes in 2016 than in the starting year of 2005 - it is the only group with a real loss of purchasing power. The second-poorest tenth in 2016 had a 3.1 percent higher income than in 2005 - an increase after all, but a very weak one. The largest increase in real income, however, at 11.9 percent compared to 2005, the third-highest tenth. The richest tenth was able to increase income comparatively moderately with 6.2 percent.
However, the respective trend is important: While the bottom tenth could increase the income significantly during the financial crisis recession of 2009 and 2010, that of the top tenth even fell below the level of 2005. This can be said with the sharply falling stock market prices and corporate profits resp explain. losses of that time. In the recent years of the stable upswing, on the other hand, the bottom tenth fell sharply, while the income of the top tenth increased sharply.
More and more money is missing until the poverty threshold
In fact, the bottom tenth was the only group whose real income dropped during that time. In all other groups, the boom in employment and wages was reflected in sharply rising household incomes - even in the poorer half of the population except for the lowest tenth. However, even under these very favorable conditions, inequality in income has not been reduced.
Recently, the situation of the income poor has even sharpened significantly. This becomes clear at the so-called poverty gap . This refers to the average amount of euro that is missing from households below the poverty threshold in order to reach this threshold. (The threshold is 60 percent of median income). To make the sums comparable over the years, they are all converted to the 2010 price level. It turns out that in recent years, this poverty gap has grown significantly:
Why has income inequality increased so much? The WSI researchers cite several reasons:
- An important role is played by the wage spread - in other words, the fact that particularly well-qualified, collectively insured employees were able to record much higher wage increases than those in the low-wage sector. This sector had already grown to its current size until the mid-nineties and has not shrunk since then.
- The upper layers, in particular, have benefited from rising capital incomes - profits from investments or corporate ownership. Only in the years of the financial crisis did these incomes fall.
- At the same time, the policy has weakened the redistribution that could smooth out these effects - specifically, for example, through the cuts in income tax at the end of the 1990s, which primarily benefited high earners. But also the inheritance tax reform of 2016 falls below, which leaves most of the business assets virtually untaxed to the heirs.
- The strong immigration of refugees in 2015 also plays a certain role. After all, most of the refugees initially had to rely completely on social benefits. A recent study by WSI from last year had revealed that the increase in the poverty rate was ultimately due exclusively to immigration. However, this effect plays at most a subordinate role for rising income inequality, emphasizes WSI researcher Dorothee Spannagel. For the rehearsal, the researchers performed the calculations for the distribution report a second time - without the data of the immigrants. There were only slight deviations from the original results. The trends described in the distribution report would have been observed even without immigration.
In order to fight the growing income inequality, the WSI researchers therefore plead for higher taxation of top income and to increase the standard rates in Hartz IV. In addition, the poorest people in particular should receive more support according to their needs - in particular through German courses for migrants or through debt or addiction counseling, but also through tailor-made retraining and further education. This would not only give the long-term unemployed the chance of gainful employment. As long as just under a quarter of employees work in the low paid sector, the gap between low income and wealthy people will not narrow.
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