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Squeezing the Middle

DW staff (jam)May 5, 2008

A new study has found that by the year 2020, the number of people belonging to Germany's middle class could fall below 50 percent of the population if economic growth rates don't increase substantially.

Homeless person on the street
Does Germany's future feature more homeless on the streets?Image: dpa

The study, by the consulting group McKinsey, found that in 12 years, 10 million fewer people could belong to the middle class than did at the beginning of the 1990s if economic growth levels do not surpass the forecast 1.7 percent, according to the German newspaper Welt am Sonntag, which had seen the report.

"The economic growth that we have experienced over the past 15 years has not been enough to reach the citizens," Frank Mattern, head of McKinsey's Germany operations, told the newspaper. "For people in the middle-income range, small growth rates are equivalent to losses."

A family in front of their house
Endangered species?Image: picture-alliance/dpa

For the report, called "Germany 2020," people are considered middle class if they earn between 70 and 150 percent of the average yearly wage in Germany, which according to McKinsey in 2006 was around 25,000 euros ($38,515).

The researchers painted two scenarios for Germany. In the first, economic growth would proceed as predicted and almost 30 percent of Germans would fall out of the middle class.

A second, more positive scenario has the German economy growing at a more dynamic rate, around three percent annually. According to that forecast, average per capita income could rise some 40 from 2006 to around 36,000 euros. McKinsey based its calculations, according to the article, on research into eleven industrial sectors which make up more than 50 percent of the German economy.

The last time Germany experienced growth rates of three percent was in the middle of the 1980s, but McKinsey researchers have said reaching those levels again is not unrealistic.

"We are proceeding on the assumption that we can reach a growth rate of three percent and well before 2020," Mattern said. "The world economy is growing at four percent."

The ends are growing

Louis Vuitton store
The rich are getting richerImage: dpa

The numbers correspond to a report put out the DIW economics institute at the beginning of March that found the group of middle-income earners was shrinking while substantial growth was occurring at the two ends of the income spectrum: the rich and the poor.

While the number of middle-income earners remained stable from 1992 to 2000 at 62 percent of the population, it had fallen to 54 percent by 2006, researchers found. That corresponds to a decrease from 49 to 44 million people in the middle-income range.

In the period from 1996 to 2006, the number of wealthy people earning more than 200 percent of the average income level went from 6.4 to 9.2 percent and the number of poor earning less than 50 percent of the average increased from 7.3 to 11.4 percent.

Old-age poverty

An older person in a soup kitchen
Poverty among the elderly is a big concern for womenImage: dpa

According to a survey by the Emnid research institute published in the Bild am Sonntag newspaper, almost three-quarters of Germans think that in a few years, poverty among the elderly will be the biggest problem the country faces.

The poll found that 73 percent thought the days of expecting a comfortable retirement with a state-provided pension were soon to be a thing of the past. The concern is especially acute among women and those between 50 and 64 years of age, the paper said.