How has Income Inequality shifted in Germany from 1992 to 2019?
- From Xhulia Likaj
- Reading duration 2 min
Inequality economists Stefan Bach, Charlotte Bartels, and Theresa Neef added a new piece to the puzzle of income distribution in Germany. Their newly released study "The Distribution of National Income in Germany, 1992-2019" combines data from tax returns, household surveys, and national accounts using the Distributional National Accounts (DINA) method, offering insights into pre-tax income distribution over nearly three decades.
Key Findings:
Income inequality in Germany rose sharply from the 1990s to the late 2000s. During this period, real labor incomes for the bottom 50 percent of earners declined, while the incomes of the top 10 percent increased. The top 10 percent saw their share of national income grow significantly, peaking at 35 percent in 2007. In contrast, the bottom 50 percent experienced a decline in their income share, which hit a low of 17 percent the same year.
However, post-2007, the trend reversed. Labor incomes for the bottom 99 percent of earners started to rise, contributing to a more balanced income distribution. By 2019, the share of the bottom 50 percent stabilized at 20 percent, and the top 10 percent share returned to 35 percent.
The study also highlights the role of business income in shaping inequality. In Germany, the top 1 percent of earners - dominated by non-corporate business owners - have seen stable income shares. Many of these earners operate in labor-intensive fields such as legal, IT, and consulting services. This contrasts with the U.S., where capital income plays a larger role across the top decile.
Aging is another factor shaping inequality. Top earners in Germany are increasingly older, with those under 50 making up just 30 percent of the top 1 percent in 2019, down from 40 percent in 1992.
Read the whole study here.