Germany is a wealthy country - actually. Because wealth is particularly unequally distributed. The poverty rate is nearing a new record while the number of high-income households is rising. A study shows reasons and at the same time issues a warning.
The gap between rich and poor in Germany is larger than it has been for years. Income inequality is at its second highest level since 1992, and the poverty rate has risen by 45 percent since then. This is shown by the distribution report from the WSI, the institute of the union-affiliated Hans Böckler Foundation. The spread in hourly wages has decreased since the mid-2010s due to the introduction of the minimum wage.
The Gini coefficient, the standard measure of income inequality, rose to 0.307 in 2024. In 1992 it was 0.252, and since then it has only been higher in 2021 at 0.312. The value ranges from zero to one: at zero, all people in Germany would have the same disposable income, at one, the entire income belonged to a single person - so there would be an extremely unequal distribution.
The poverty rate is also close to its highest level. According to WSI, the proportion of poor households rose from 11.9 percent in 1992 to 17.3 percent in 2024. Only in 2021 was it higher at 17.4 percent. Anyone who has less than 60 percent of the average income (median) is considered poor. For people living alone, that's less than 15,673 euros net per year.
A mixed picture emerges at the top. Households with more than 200 percent of the median income are considered high-income; for people living alone, this is more than 52,244 euros per year. Their share fluctuated: it rose from 5.7 percent in 1992 to around 8 percent and was 7 percent in 2024.
On the other hand, the proportion of very high-income households has increased noticeably, with more than 300 percent of the median, and for those living alone from 78,366 euros per year. It grew from 1.1 percent in 1992 to 1.9 percent in 2024.
The study explains why incomes are drifting apart despite equalized hourly wages with two main developments. Taxes and social transfers have tended to compensate less over the past decade. In addition, more people are working part-time, often due to a lack of childcare.
Poverty and inequality increase even when unemployment is low, said WSI director Bettina Kohlrausch: "At the same time, even in times of low unemployment, we have observed an increase and deepening of poverty and a growth in income inequality." This shows that certain groups do not benefit.
The old promise that a job ensures participation and integration no longer applies, says the sociologist. The AfD benefited from this in its recent election successes. This doesn't just affect poor people, but everyone. “This has the potential to destabilize this society and this political system.” If current debates about cuts lead to more social cuts, this will further exacerbate inequality, warned Kohlrausch.
The study authors Dorothee Spannagel and Claus Schäfer recommend, among other things, strengthening collective bargaining and increasing the minimum wage. In addition, child care must be expanded and benefits such as basic security increased. “Poverty has deepened, the lower middle has come under pressure, wealth is increasingly concentrated at the top,” is the conclusion of the study authors Dorothee Spannagel and Claus Schäfer.
For the report, the WSI uses, among other things, income data from a representative survey of the so-called SOEP panel. For this purpose, 23,000 people from 17,000 German households were surveyed. The study is based on the latest data for 2024.
