: 5. What factors determine the perception of inequality in Germany?

Are estimates of the extent of inequality in Germany wrong? A recent study by Niehues (2016) concludes that perceived inequality correlates only negligibly with actual income inequality. In the study, perceived inequality is measured by a choice of five diagrams, each describing a different societal type. The majority of Germans (52.8 per cent) understand the shape of society to be like a pyramid, at the top of which there is a small group, whereas the overwhelming part is concentrated at the bottom end. The actual distribution of income, on the other hand, is more onion-shaped, with a marked middle tier. So, are Germans wrong? Probably not, because the basic survey is not geared explicitly to income distribution, but quite generally to the perceived state of society.

According to the UN and OECD, besides income there are other significant factors of inequality such as education, assets and health. These factors substantially determine people’s perception of their own position in society. If this subjective status is recorded on a scale of 1 to 10, it is evident that income can explain only 18.5 per cent of a person’s own perceived status in society (Poppitz 2016). Education, assets, professional status and family affiliation are similarly important at 23.1 per cent. This leads to the conclusion that in assessing inequality many people include more factors than just income. At the same time, a large proportion of self-perception remains unexplained (58.5 per cent) despite the additional factors, also because many of those surveyed tend to classify themselves in the middle of society, irrespective of the factors stated.

Thus the answer to the question whether estimates of the extent of inequality in Germany are wrong depends on the definition of inequality and the particular survey method. And although the “pyramid structure” does not accurately describe income distribution, this shape does more or less approximate to that of the distribution of wealth from the data.

References

Niehues, J. 2016. Ungleichheit: Wahrnehmung und Wirklichkeit – ein internationaler Vergleich. Wirtschaftsdienst 96, Nr. 1 (22. März 2016): 13–18.

Poppitz, Philipp. 2016. Does self-perception and income inequality match? The case of subjective social status. IMK Working Paper