Reply #41: Relevant quote: "a third of the German population receives almost no market income, [View All]

and the share of market income going to the middle deciles sharply declined since the early 1990s. Consequently, median market income declined substantially, both in absolute terms and relative to mean income."


More on this subject: 2008

Germany: The shrinking middle class and the rise of inequality

A recent study of income distribution carried out by the German Institute for Economic Research (DIW) has unleashed a debate in Germany. The study concludes that the middle class in Germany has shrunk from 62 percent of the population in 2000 to just 54 percent in 2006.

The researchers define the middle class purely from an economic standpoint, according to household income, taking no account of education, occupation or other social indicators. The research data is calculated using the median, which divides incomes into two halves: 50 percent in Germany receive more than this value, 50 percent receive less...

Using this definition, the middle class in West Germany in the 1980s encompassed approximately 64 percent of the total population. Following German reunification in 1990, the middle class in West and East Germany were still approximately of the same order. In 1992, it comprised almost 62 percent, corresponding to somewhat more than 49 million individuals. This figure remained largely stable for the next eight years until 2000. Since then, however, this middle-income layer has fallen to approximately 54 percent o f the total population in 2006—approximately 44 million people, or some 5 million fewer than six years earlier.

The DIW researchers point out that far more people have fallen below this middle layer than have risen above it. “Available real incomes increased only moderately in Germany since reunification; from 2003 to 2006 they have clearly decreased.” The spread of incomes has increased. In particular, family households comprising parents with children under 16 years have fallen below this middle-income level. Compared with 2000, more than 3 million people in such households in 2006 are no longer counted in this middle layer.

Within the middle layer, the DIW researchers noted that the contraction could be found above all in the group it defined as “average earners,” those with an income of between 90 and 110 percent of the median. This group alone has shrunk in the recent past by around 5 percent. Accordingly, the bounda ry values of this income distribution curve have gained in significance.

The DIW registered a clear increase of the lowest layers. In 2006, those with an income of less than 70 percent of the median constituted more than a quarter of the entire population. The proportion in this category has risen since 2000 by nearly 7 percent.

In 2006, the proportion of those with an available income of more than 150 percent of the median was over a fifth, approximately 2 percent higher than in 2000. Interestingly, this increase is limited “exclusively to the group of those with the highest incomes (more than 200 percent of the median).” This constituted approximately 9 percent of the total population in 2006.

The incomes of those in the top 50 percent have risen more rapidly than those in the lower half. Income inequality has increased, and this is substantially more pronounced in West Germany than in the former East Germany.

The DIW study also ex amines so-called “income mobility.” Politicians, and most recently Social Democratic Party (SPD) Chairman Kurt Beck, like to speak about equality of opportunity, by which they mean the possibility for anyone to rise up the ladder socially and financially. But this has become increasingly more difficult, according to the study, which finds there has been a “clear hardening of the income brackets.” “Only at the bottom is it stable,” according to Spiegel on-line.

http://www.wsws.org/articles/2008/mar2008/germ-m22.shtml.