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In Germany, Rising Inequality Is All in the Mind

Income divide has remained broadly unchanged over last decade, study finds

In German popular belief, the rich are getting richer, and the poor are getting poorer. But a recent study by the Cologne Institute for Economic Research finds that the gap is not as dramatic as it seems.

Wages of the weakest earners have risen faster than those of the top, meaning that inequality over the past decade — rather than increasing — has actually remained more or less the same, according to an economic research team led by Hans-Peter Kloes and Judith Niehues. Germany’s introduction of an 8.50 euro minimum wage from January 2015 may have strengthened this trend, they say, although such recent data is not yet available.

“There is a mantra-like assumption that real wages in Germany have not been rising for many years,” the economists write. “But if one looks at the wage settlements and takes into account the extremely low inflation, this gap seems to be one of the mind rather than an actual gap between the poor and rich.” 

Income Inequality

True, a gauge measuring income distribution — the so-called Gini coefficient — ranks the country 17th out of 28 European Union members. But with pensioners making up around a quarter of Germany’s population, the picture of existing inequality is exaggerated because their livelihood is mostly provided by the state and isn’t reflected in market-income statistics, the researchers say. Calculations adjusted for state pensions, subsidies, and taxation bump Germany up to the 10th place on the list.