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Study – Inequality between poor and rich grows – “German certificate of poverty”

Despite the good economy and almost full employment: the gap between the wealthy and the lower income groups is widening.

Inequality in income in Germany has reached a new high, according to a recent study by the Economic and Social Sciences Institute (WSI) of the Hans Böckler Foundation, which is close to the union.

Despite the good economic situation and the favorable situation on the labor market, the gap between the wealthy and the lower income groups has widened further in recent years, according to the WSI distribution report. This is a “poverty certificate for Germany”.

More income for the very rich

Although inequality is currently growing much more slowly than at the beginning of the millennium, emphasizes WSI expert Dorothee Spannagel. And the development is no longer undermining the position of middle-income households. But the gap between the very poor and the very rich is getting bigger.

“More and more income is concentrated among the very rich,” says the study. Because the high income groups benefited from the bubbling capital and corporate income. In contrast, the 40 percent of households with the lowest incomes continued to decline – also compared to the middle class, which benefited from the good labor market situation and noticeable wage increases.

Households below the poverty line are getting worse

“More and more people are affected by poverty,” says the study. The number of households with less than 60 percent of median income and therefore considered poor according to the current scientific definition grew from 14.2 to 16.7 percent between 2010 and 2016.

And households below the poverty line are getting worse. The poverty gap – the amount that the average poor household lacks to get past the 60 percent hurdle – has grown considerably. In 2005, the shortfall was still 2,873 euros per year, but in 2016 it already reached 3,452 euros after adjustment for inflation – an increase of almost 30 percent.

Differences between East and West Germany

One of the strongest drivers of development is the increasing spread of wages in Germany. A growing population group at the bottom had lost touch with wage increases in the middle of society. The bottom ten percent of households in the income ranking would have had less income in 2016 after rising inflation than in 2010, the researchers report.

According to the WSI, incomes in East Germany developed much faster than in the West. At present, the income spread in the new federal states is still noticeably smaller than in the old ones. But the distance is getting smaller.

The wealth in Germany is also unevenly distributed

In order to counter growing inequality, the WSI experts recommend a whole range of government measures: from strengthening collective bargaining agreements to increasing the minimum wage and increasing the taxation of top incomes and very high inheritances.

A recent study by the German Institute for Economic Research (DIW) came to the conclusion that wealth in Germany is also very unevenly distributed. According to this, the richest ten percent of the population own more than half of the total wealth (56 percent). The poorer half, on the other hand, only has a share of 1.3 percent. However, wealth inequality has not increased further in the past ten years, according to the DIW study.

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