: 3. Is Germany an unequal country?

The richest ten per cent of households in Germany own nearly 60 per cent of the total household wealth. This figure is well over the OECD average of 50 per cent.

The lower 20 per cent in Germany have no assets at all. The objection of critics is that these statistics do not include vested pension rights, which can represent a significant part of wealth. If they were to be taken into account, Germany would come off better. The objection is unconvincing, though. Ultimately, it is precisely those people with little wealth and low income in an international comparison who have relatively few vested pension rights. What is more, such entitlements are of little use when money is short in everyday life.

And the Gini coefficient – a common measure of inequality – confirms that in practically no other country in the Eurozone is wealth inequality as great as in Germany. Only in Lithuania is there greater wealth inequality. The Gini coefficients for wealth in Lithuania and Germany are 0.79 and 0.76 respectively. The closer the Gini figure is to 1, the greater the inequality.

In terms of income distribution, Germany comes off somewhat better in a European comparison. With a Gini coefficient of 0.3, the Federal Republic is just below the EU average. The inequality of disposable household incomes is greater in nations affected by the euro crisis and in Central and Eastern European countries. Most Western and Northern European countries have a low level of inequality (Heidenreich 2016). In practically every European country, incomes drifted apart in the first half of the 2000s; in Germany, though, the drift was disproportionally severe. This correlates with the increase in atypical employment – part-time work, temporary employment or mini-jobs – in this period (OECD 2015).

Conclusion: Compared to countries with a similar level of prosperity, Germany is a rather unequal country.

 

References

Eurofound: Recent developments in the distribution of wages in Europe, Luxemburg 2015

Heidenreich, Martin : Der Pyrrhussieg des Egalitarismus. Einkommensungleichheiten in Europa, WSI-Mitteilungen 01/2016

OECD: In It Together – Why Less Inequality Benefits All, Mai 2015

Rehm, Miriam, Schnetzer,Matthias : Piketty revisited: Vermögensungleichheit in Europa, in: Peter Bofinger, Gustav A. Horn, Kai Daniel Schmid, Till van Treeck (Eds.): Thomas Piketty und die Verteilungsfrage. Analysen, Bewertungen und wirtschaftspolitische Implikationen für Deutschland, 2015