Financial Crisis Has Minimal Effect on Income and Wealth in Germany

Neither the financial crisis of 2008 nor the ensuing economic crisis have had a noticeable impact on the distribution of income and wealth in Germany. Though income inequality did dip slightly and the poverty risk rose over the course of the crisis, these were only minimal changes. The effects of the financial crisis on the distribution of wealth were also marginal, with wealth in Germany remaining overall relatively unevenly distributed. These are the results of a study carried out by the Mannheim Centre for European Economic Research (ZEW) together with the Institute for Applied Economic Research (IAW), Tübingen, and the University of Tübingen. The study was conducted as part of the report on the Analysis of the Distribution of Income and Wealth (AVEV) produced on behalf of the German Federal Ministry of Labour and Social Affairs.

Researchers analysed data from the German Socio-Economic Panel (SOEP) and the Income and Consumption Sample (EVS) pertaining to changes in the distribution of income and wealth between 2005 and 2011. Changes in the labour market, the demographic make-up of the population and the organisation of the tax and transfer system all had no notable effect on the distribution.                                            

Despite the financial crisis, the distribution of the net equivalent income, in other words the needs-adjusted household income, developed at a fairly steady rate between 2005 and 2011. Even just looking at the annual earned household income reveals that the trend towards increased inequality halts in 2006. The crisis also had relatively little influence on German household wealth. Though both the inequality and concentration of wealth in Germany went down somewhat in the years following the crisis, wealth in Germany still remains fairly unevenly distributed.

The results of the study on the general development of wealth in Germany suggest that wealth is most strongly concentrated in the top 5.4 per cent of households in Germany. On average, only around half of all households have net assets of more then 32,000 euros.

The number of households without property also significantly increased from 14 per cent in 2003 to 19.5 per cent in 2013. The number of households in debt experienced an even more dramatic increase, almost doubling from 6.6 per cent to 11.5 per cent.

Wealth in Germany remains more highly concentrated than in other countries

Researchers also compared the net wealth of German households to that of households in other countries. "Medium-level household wealth in Germany in particular is much lower than in other European countries. Medium-level households, not only in neighbouring countries like France and Belgium, but in places like Spain as well, have higher net wealth," says Martin Ungerer, a researcher in the ZEW Research Group “International Distribution and Redistribution” and author of the study.

The study also points to a continued extremely unequal distribution of wealth in Germany in comparison to other nations. This is indicated by a high Gini coefficient, a measure of unequal distribution, as well as a large discrepancy between the most and least wealthy households. "High levels of household wealth are concentrated in a small section of German society. While the share of wealthy households in Germany is rather small, these households are comparatively wealthier than those in other countries," says Ungerer.

For further information please contact

Martin Ungerer, Phone +49(0)621 1235-303, E-mail ungerer@zew.de