The gap between low and top earners in Germany has narrowed somewhat due to the significant increase in the statutory minimum wage. In April 2023, higher earners received on average 2.98 times the gross hourly earnings of low earners, as the Federal Statistical Office announced. In April 2022 it was 3.28 times. Previously, the gap had hardly changed between 2018 and 2022. Higher earners received 3.27 times as much in April 2018.
“The driver for this development was the comparatively strong increase in earnings among low earners due to the increased minimum wage,” the statisticians explained the decline in the so-called wage spread. The lower wage limit was raised from April 2022 to April 2023 from 9.82 euros to twelve euros an hour. As a result, the earnings of the lowest group increased by 12.4 percent, while those of the upper group only increased by 1.9 percent. In April of last year, a person earning up to 12.25 euros per hour was considered a low earner, i.e. in the bottom ten percent of the wage scale. Those who received an hourly wage of at least 36.48 euros were among the higher earners and therefore in the top ten percent.
The employer-related Institute of the German Economy (IW Cologne) sees a decreasing wage spread as a contribution to reducing income differences, which could counteract social division. “The best way to get there is good educational and qualification opportunities as well as low unemployment,” said IW expert Christoph Schröder.
On the other hand, excessive artificial compression, for example through a minimum wage that is too high, should be viewed critically. “If, for example, the wage differences between unqualified temporary workers and more qualified and professionally experienced regular employees are reduced too much, this can lead to discontent among the workforce and to the wage distribution no longer being perceived as being in line with performance,” said Schröder. This could force a company to adjust the entire wage structure upwards. This would increase the risk of a wage price spiral. “That could in turn make it more difficult to loosen monetary policy and put a strain on the economy,” said the IW expert.
The changes in the wage gap have recently been similar in western and eastern Germany. The earnings gap fell in both the West and the East. Nevertheless, the wage gap in the West remains significantly larger than in the East: In April 2023, higher earners in West Germany received 3.04 times the gross hourly earnings of low earners, while in East Germany they earned 2.49 times. In April 2022, the earnings gap in the west was 3.34 and in the east it was 2.8, according to the Federal Statistical Office.