It is hardly believable, but in Germany every 6th person lives at or below the poverty line, every 5th child lives in poverty – although we are a rich industrial country. While on the one hand, in recent years poverty has increased, on the other hand also the rich got richer: In 2018, Der Spiegel headlined that 45 super-rich own as much wealth as the poorer half of the population. In 2021, it is only two families that have more wealth than 41.5 million people.
Nobody in Germany has to fear starvation; we live in a welfare state that also helps those who barely make ends meet on their own. But the gap between rich and poor is widening and harbors the danger to divide the societal cohesion. Social mobility (Social mobility measures how permeable the social ascent or descent from one generation to the next is.) has decreased, incomes have unevenly grown and the concentration of wealth is extreme.
On this page we deal with country-specific forms of economic and social inequalities and show how deeply they affect our society.
Addressing wealth inequality first and before income is a conscious decision, as Germany’s wealth inequality is much more extreme than income inequality. However, according to a recent survey by the “Politics of Inequality” cluster of excellence, most people believe that incomes are distributed more unequally. But that’s not the case: The richer half owns 99.5 percent of the total capital, whereas the poorer half owns 0.5 percent.
Der Spiegel made headlines in 2018 that 45 German “over-rich” (Martin Schürz coined the term Überreiche (over-rich) in his book “Überreichtum” (2019). Schürz uses over-wealth and over-rich as an antithesis to poverty and poor as to describe excessive wealth that violates fundamental principles of justice.) own as much wealth as the poorer half of the German population as a whole. However, the German Institute for Economic Research (DIW) has now closed data gaps for very large wealth and has shown that the concentration of wealth is actually more extreme than previously assumed (the richest 1 percent owns 35 percent instead of 22 percent), while the poorer half owns less than assumed (about 0.5 percent instead of 1.4 percent). Furthermore and despite the overall economic downturn caused by the coronavirus pandemic, the fortunes of the wealthiest families have continued to multiply. In consequence, in 2021 two families own more than the poorer half of the German population.
The calculation is easily made: According to the Federal Statistical Office, total German net worth amounts to 13 trillion euros, 0.5 percent of of which makes 65 billion euros – and thus less than the fortunes of the two richest families in Germany: 38.4 billion euros for Beate Heister and Karl Albrecht Junior (Aldi heirs) and 33.2 billion euros for Klaus Michael-Kühne (Kühne heir). Taken together, these heirs possess 71.6 billion euros and thus more than 41.5 million people in Germany.
When we talk about income inequality, we usually mean income after all taxes and social transfers. Before taxes and social transfers (such as Hartz IV or child benefit), income inequality in Germany is quite high, having a Gini index (A statistical measure that indicates the degree of inequality: 0 = everyone has the same; 1 = one has everything) of around 0.5. After taxes and social benefits, the income Gini falls to 0.3, meaning that income inequality gets reduced by 40 percent.
Over the last 30 years (since 1991) the levels of income have changed significantly – but not equally for everyone. While the top 10 percent increased their income by 40 percent, income for the bottom 10 percent fell slightly by 0.4 percent. Overall, the higher the household income, the more income has grown (i.e. the income growth of the top 10 percent, also known as the 10th decile, has been higher than that of the 9th decile, etc.). Income divergence continued from 2000 to 2015; since then, all income groups have experienced a small upswing. Except for the richest 10th decile: their upswing was not small but enormous.
It is appaling when income is not enough to escape poverty – in 2019 this applied to every twelfth employed person. The poverty rate of working people has been between 7.7 and 9.9 percent for the past ten years. Most of the working poor work in the low-wage sector (Low-wage sector means that the wage is less than two-thirds of the median (hourly) wage, i.e. 11.50 euros in 2019) with an hourly wage of less than 11.50 euros. In Germany, every fifth employee works in the low-wage sector, expressed in absolute numbers: 7.2 million people. And while on the one hand, we have a persistent risk of poverty despite work and a growing proportion of the poor population group, on the other hand the proportion of high earners has grown.
Incomes of the board members of the largest corporations (DAX) are now in the millions. DAX board members earn 48 times more than their employees. In 2020, the average total remuneration of a member of the Management Board was around 3.4 million euros. At the top of the high earners is the CEO of VW, Herbert Diess, with 9.9 million euros. As of 2019, Herbert Diess earned 20 times as much as former Chancellor Angela Merkel. Merkel’s annual income in 2019 was 473,040 euros. To put these amounts in comparison: the (annual) average salary in Germany in 2019 was 45,560 euros, while someone employed full-time with a minimum wage of 9.50 euros earned 19,968 euros.
The President of the DIW (German Institute for Economic Research) Marcel Fratzscher names inheritances as the most important reason for the immense wealth inequality in Germany. In his opinion, we need a radical reform of the inheritance tax – and maybe an inheritance for all. According to estimates, the German inheritance volume amounts to around 250 to 400 billion euros per year. This roughly corresponds to the total annual economic output (i.e. the gross domestic product, GDP) of Austria.
The problem with inheritance in regard to inequality is that inheritance increases existing and already immense wealth inequality. The top half of Germans already owns 99.5 percent of all fortunes, while the poorer half only owns 0.5 percent. More than half of all wealth in Germany is not earned, but inherited or received through donations. So whenever you see a house, there’s more than a 50/50 chance that someone just was lucky at the “Spermalotto” rather than that this person worked for it.
Speaking of real estate: these days, hardly anyone can afford own property without parental support. What we observe is “inequality by birth” (Prof. Jens Beckert). An inequality that is not based on different abilities, but on the different bank balances of the parents.
The age structure (also called demographics) of the German population shows that the question of inheritance will become even more pressing in the near future, because most of the rich and over-rich in our country are over 65 years old. As early as 2013, it was said that we were experiencing “the largest wave of inheritances in history”. But the wave of inheritances is getting bigger and bigger – and thus also the wealth inequality.
Germany’s credo? “We are a meritocracy.” While in the USA there is the saying “from dishwasher to millionaire”, we have the saying “everyone is the architect of his own fortune”. This narrative transcends borders and is deeply rooted in societal beliefs. But in recent years the debate about the idea of a meritocracy has been controversially discussed. Some argue that this narrative is not only wrong, but one of the causes of our growing inequality.
What do we understand by meritocracy? A meritocracy can be defined as a society in which one’s own personal achievement determines which job and which reputation one will enjoy – regardless of the origin and educational level of the parents.
The extent to which social background determines life chances can be illustrated using social mobility: social mobility measures how permeable social advancement or decline from one generation to the next is. The higher the social mobility, the greater the equality of opportunity and the more important is the performance of the individual. The lower the social mobility, the more important is the social background. Or simply put, what are the chances that someone from a poor background and with low-educated parents will find a way out of poverty?
In hardly any other country is social origin as important as in Germany. Two aspects that testify to low social mobility are the following: First, it is easy to see that academic children much more often achieve much higher educational qualifications – this speaks for the importance of the educational level of the parents. However, performance is particularly important in relation to income. But when speaking of life chances, income is less important than wealth. And since more than half of all wealth is now inherited and received through donations, both poverty and wealth are passed on from generation to generation.
According to the economist Thomas Piketty, every society needs its legitimation for existing inequalities. While in feudal times (when the nobility ruled) inequality was legitimzed by birth, today we need a narrative that explains our existing inequalities: Our society believes in the principle of merit. Indeed, merit was crucial for the older generations; people over 40 have found that diligence and income made their ascent possible. But the tide has turned. In this context, the sociologist Oliver Nachtwey even speaks of the social decline. But even though research, literature, and art show us that the idea of ”prosperity through work” is outdated and wrong, most people cling to the myth.
This is problematic insofar as this narrative traces both poverty and poorer living conditions as well as over-wealth back to the responsibility of each individual: only the individual performance counts. However, the narrative fails to recognize structural problems and discrimination. Politics and the system are not viewed critically in this way. This narrative was written at the same time that the economy as a whole was being portrayed as apolitical – as if globalization and economic interdependence were something God-given or followed a law of nature. This is false: Inequality is a political phenomenon.
Although citizens are equal according to the constitution, the reality is different. Whether in terms of income, wealth or chances of realisation: more than 100 years after the introduction of women’s suffrage (1918), gender inequalities are still large. This is also the case in parliament: the Bundestag is a long way from equal representation of women and men. The proportion of women has increased only slightly compared to 2017 from 31 percent to 34 percent. The AfD has the fewest female MPs (13.3 percent), followed by the Union (23.5 percent) and FDP (23.9 percent), the SPD is also more male (41.8 percent), while the left ( 53.9 percent) and Greens (58.5 percent) have more women than men within their own ranks.
Unfortunately, the Bundestag is no exception. The higher women rise in the hierarchy of the respective area – whether in political, social, economic or academic spheres – women are less represented. A study by the University of Rostock showed that 66 percent of all television appearances are dominated by men. When it comes to expert knowledge, in 74 percent, men are invited. Even when it is about professions in which mostly women work.
This gender gap is also reflected in income, represented by the so-called Gender Pay Gap. The difference in earnings can be stated either unadjusted or adjusted. In 2020, unadjusted, women earned 18 percent less than men. On average, gross salaries of women are 1,192 euros less than those of men. If structural factors such as industries and professions are included in the calculation, we get the “adjusted” gender pay gap of 6 percent.
The salaries of top earners are particularly unevenly distributed: 79.5 percent of all high earners (over 5,100 euros per month) are men, with incomes over 12,100 euros the figure is even 87.3 percent. This figure also reflects the proportion of women on the executive boards of DAX companies: Even if the proportion has risen sharply since 2008 (at that time it was 0.5 percent), only 14.6 percent of the top positions are occupied by women.
But not only the inequalities between men and women represent a social grievance. The General Equal Treatment Act guarantees citizens the same rights, regardless of gender and sexual orientation, and thus also for LGBTQIA*. LGBTQIA* is a collective term (or acronym) for lesbian, homosexual, bisexual, trans, queer, intersexual, asexual and everything else. Marriage and adoption have also been open to same-sex couples since 2017. This makes Germany one of 29 countries in the world where homosexual couples can marry. But there is still a struggle to achieve recognition and acceptance of LGBTQIA*.
More than 30 years after the reunification of Germany, the disparities in the living conditions as between East and West are still huge. The inequalities run through all areas. In terms of income, employees in the East earn 17 percent less than in the West – having the same qualifications. When it comes to wealth, the difference is even greater: the median(median halves the population: half have more, half have less.)-total net wealth in the West is over 60,000 euros and is therefore three times as high as the wealth in the East, where it is only 21,000 euros.
There are also glaring inequalities in inheritance: East Germans receive fewer and smaller inheritances. Regarding financial assets, West Germans inherit more than East Germans, the average inheritance is 92,000 euros in the West and only 52,000 euros in the East. Real estate represents another unequally distributed factor: while in the West real estate is part of every second inheritance, this only applies to every third inheritance in the East. In addition, real estate in the West is on average far more valuable than that in the East.
The existing inequalities are not only purely economic, but also politically problematic. The Hans Böckler Foundation establishes a direct connection between the economic uncertainty, the associated fears of relegation and the higher election results for the right-wing party AfD (Alternative for Germany). And these are large: while in the 2021 federal election in western federal states the AfD received an average of 7.9 percent, in the East the AfD gained 22.4 percent of the votes.
In a guest article for the Süddeutsche Zeitung, the writer Ingo Schulze describes the inequalities between East and West as “scandalous”:
“Today there is no country in Europe in which a population owns so little land, property and businesses as the East Germans in East Germany, there is no population that holds as few managerial posts as East Germans do where they live, be it in companies, in media, in administration and banks, in the military and police, or in the courts and universities .
Inequality is not a natural but a political phenomenon. The question is then: How do political parties frame and problematize inequality – or don´t they?
In order to compare the positions of the parties represented in the Bundestag, the different electoral programs are juxtaposed as to show what the framing (how is inequality represented?) and the plan to reduce inequality (how to tackle inequality?) look like. Whether the governing coalition – consisting of SPD, Greens and FDP – will ultimately keep the promises made in their programs is another matter.
Inequality can be found in the election program of the left in almost all subject areas: Social issues, gender-specific issues, health, climate, refugees, as well as culture, sports and development policy. Existing inequalities in all areas represent injustices that must be combated. Both in this country and on the international stage, “inequality is increasing … and inhibits economic and social development.”
According to the Left, there would be far less injustice and enough for all if wealth were better distributed (pp. 115-116). No other party represented in Parliament uses the term inequality as frequently and extensively in its program as Die Linke.
The Left wants to tackle the growing trend of inequality through taxes: large fortunes and inheritances are to be taxed with a progressive tax rate of up to 5 percent; in addition, the tax allowances are to be raised in income tax, so that low and middle incomes would be relieved. Various reform plans of various taxes are explained on several pages (wealth tax, inheritance tax, wealth levy, corporate taxes, income tax, tax on the wealthy) and are structured in such a way that poorer and middle incomes are taxed less, while the wealthy and companies should pay more taxes (p. 85-89).
The increased tax revenues would also be used to deal with the costs of the pandemic crisis and help to finance permanent support programs in culture. Barriers to health care should be dismantled and a school for everyone established (pp. 36, 48).
Social justice is understood as a worldwide and systematically issue which goes beyond the German borders. In order to create a real paradigm shift, the focus should be laid on solidarity and cross-border cooperation: “We do not just want to overcome the crisis for Germany or Europe, but globally. No one is safe until everyone is safe. We want to overcome neoliberal capitalism, which is characterized by deregulation, privatization and social cuts” (p. 139).
Bündnis 90/Die Grünen
For the Greens, inequality is geographical (urban/rural), economic (income and wealth), social and environmental. They take the position that it is possible and necessary to reduce these inequalities in order to establish a happier society (p. 10, 59).
In addition, wealth inequality is an urgent problem: the fact that Germany has among the highest concentration of wealth in the EU is “among other things due to the fact that it is possible for very rich people to avoid taxing their wealth almost completely, for example by the inheritance tax” (p. 92).
On the one hand, the corona pandemic has exacerbated existing inequalities, and on the other hand it has shown how important it is to have a “dense social network” that has so far prevented “the corona pandemic from developing into a profound social crisis” (p. 257).
One focus of the fight against inequality is on the tax policy: “High incomes and assets should … contribute more to financing our community and low incomes should be relieved” (p. 59). In addition, tax avoidance opportunities for wealth should be reduced and large fortunes should be taxed more heavily again (p. 92).
A Just Transition Fund is to be increased and expanded for the ecological turnaround. (p. 72) Considering children and the youth, equal opportunities in life should be made possible through joint learning and individual support from daycare until graduation (p. 142).
The SPD frames existing inequalities as a social problem that leads to dwindling cohesion in society (pp. 3-4). In addition, the “extremely unequal distribution of income and wealth … is not only problematic in socio-political terms, it is also economically unreasonable” (p. 22). With regard to inequality between women and men, the SPD speaks of unequal opportunities, which have been shown once again by the corona pandemic (p. 42).
When it comes to taxes, the SPD has taken up the cause of taxing lower and middle incomes (up to 500,000 euros) less, while taxing higher earners more (p. 22). In addition, the wealth tax should be reintroduced at 1 percent for “very high fortunes” and the so-called Soli (which only top earners pay) should be retained (p. 23).
The Pay Transparency Act is intended to eliminate wage inequality in the interests of gender equality (p. 42).
At the international level, the SPD wants a “multinational investment court that intervenes in cases of discrimination, i.e. unequal treatment between trading partners” (p. 42).
Source: Link, https://www.spd.de/zukunftsprogramm/.
Framing: None. Inequality is not mentioned at all in the election manifesto.
Source: Link, https://www.csu.de/common/download/Regierungsprogramm.pdf.
Framing: None. Inequality is not mentioned at all in the election manifesto.
Framing: None. Inequality is not mentioned at all in the election manifesto.
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