According to calculations by economic researchers, the inequality of income distribution is increasing in Germany. Higher incomes in particular are likely to grow this year, while the plus for low earners will be smaller.
The inequality of income distribution in Germany will continue to increase this year: in 2023, as in the previous year, higher incomes in particular are likely to increase, while the increase in lower incomes will be smaller. This is the result of a model calculation published today by the German Institute for Economic Research (DIW).
“Overall, the inequality in labor income may even have increased slightly in the course of the economic recovery after the pandemic and will also increase somewhat this year,” the Berlin researchers concluded. This is likely to increase the impact of the energy crisis, which in any case is primarily affecting poorer households.
Top earners with higher wage increases
According to the scientists’ calculations, the bottom 40 percent should only see a wage increase of 2.55 percent this year, while the “top ten” could achieve a plus of 2.81 percent. The picture was already similar in 2022: In the lowest income groups, the increase was 5.96 percent below that of the top 6.85 percent. The high inflation last year “led to a real decline in the low-income, while top earners are likely to have benefited from slight real income increases”.
The so-called Gini coefficient, which measures inequality and makes it internationally comparable, also shows that inequality is increasing again. While it fell from 0.39 to 0.37 in the past decade, the researchers are now expecting an increase of around one percent for the current year. The Gini coefficient ranges from 0 to 1: the higher the value, the greater the inequality.
Results often delayed
The DIW uses a variety of current data as a basis for estimating and forecasting the distribution of labor income, from the development of gross domestic product to the proportion of people on short-time work to a representative survey of private households in Germany.
The new forecast model therefore allows statements to be made about the current level of inequality in the monthly gross income of dependent employees. Relevant data for the calculation are usually only available with a delay of more than two years, which is why previous studies are mostly directed into the past.