The latest report on how much ordinary Germans earn is a case in point for the government’s labor reform plans – a widening east-west income gap and soaring non-wage labor costs are some of the problems listed.
Experts blame falling net incomes for poor consumer spending in Germany.
It may not be the Forbes list of Germany’s super rich, but the country’s latest income report issued by the Federal Statistics Office on Tuesday allows a peek into the living standards of ordinary Germans. The glimpse, however, is far from reassuring and ties into a raging debate about the need to reform the labor market.
The study, which surveyed 27,000 companies hiring about 900,000 workers nationwide, found that the average gross salary in Germany for employees in industry, trade, credit and insurance sectors is €2,835 ($3,320) per month.
Though that’s an increase by 16 percent since 1995 when the last federal income survey was conducted, adjusted against inflation, the rise in income amounts to seven percent, while productivity for the same period climbed by almost nine percent. In other words, Germans have been working more for less money.
Growing east-west gulf in income levels
That wasn’t the only disheartening news that the income report contained. Over a decade after reunification, the gulf between income levels from the former communist east and the west has widened further at a record 30 percent, the study stressed.
The economically depressed east.
Gross wages among employees in the economically-depressed eastern half of the country averaged €2047, contrasted with €2,937 in western Germany. The figures are based on full-time employees in trade, industrial and insurance sectors.
Johann Hahlen, President of the Federal Statistics Office said the reasons for the income disparities between the east and the west chiefly had to do with the varying types of employees in both regions – more people in eastern Germany worked at blue-collar jobs as compared with the west and blue-collar workers earn less than white-collar ones.
More women workers in the east
Hahlen also pointed out that that eastern Germany had a much higher percentage of working women, and women -- whether in the east or the west -- earn much less than men. The study underlines that though gross salaries of women have risen by 20 percent since 1995 -- much faster than those of men -- they still earn 22 percent less than their male colleagues. "It’s well known that women often take up typically female professions, which pay less," Hahlen said
Udo Ludwig, economics expert at the Institute for Economic Research in Halle said though many trade unions had pushed for bringing incomes in the east in line with those in the richer western part of the country, the majority of companies weren’t following the collective wage agreements. Ludwig told German daily Berliner Zeitung, the companies were either raising wages only marginally, or not at all – a fact that was reflected in the harsh economic realities and low productivity in eastern Germany.
Rising social contributions choking growth
The study came to a further bleak conclusion that soaring non-wage labor costs were eating a large chunk of gross salaries and reining in consumer spending. The Federal Statistics Office said that while real net income had climbed by six percent in western Germany since 1995, it had risen by just 3.6 percent in the eastern half.
Net incomes in western Germany sank from 69 to 65.1 percent of gross income between 1990 and 1995, in October 2001 it fell further to 64.7 percent. The study underscored that at the same time, employee social security contributions rose from 16.4 percent in 1990 to 18.7 percent in October 2001 – a trend that has remained static since.
Board member of the German Confederation of Trade Unions (DGB) Heinz Putzhammer, put things in perspective. "The stagnation of the real net income is the central reason for Germany’s sluggish economic growth," he stressed. "Without rising consumer spending, companies won’t have their hands full with contracts, there will be no economic growth and no progress in tackling unemployment."