New study: The middle class in Germany is crumbling

Status: 01.12.2021 10:31 a.m.

In Germany, many people of working age have slipped into the lower income bracket and are at risk of poverty. That is the result of a study by the OECD and the Bertelsmann Foundation.

In recent years, many people in Germany have fallen out of the middle class and slipped into poverty, as a study by the Organization for Economic Cooperation and Development (OECD) and the Bertelsmann Foundation shows. According to this, in 1995 70 percent of the population belonged to the middle income group, in 2018 it was only 64 percent. Although the share essentially fell until 2005, the middle did not recover, although the German economy grew by an average of around two percent per year between the financial and corona crisis and unemployment fell.

The lower end of the middle class with lower incomes is particularly hard hit by the decline. This includes singles with a net disposable income of between 1500 and 2000 euros as well as families with two adults and two children and an income of 3000 to 4000 euros.

The pandemic has intensified the contraction course

According to the authors of the study, around 22 percent of people of working age between 18 and 64 years of age slipped into the lower income bracket between 2014 and 2017 alone – and, according to the study, were poor or at risk of poverty. There are signs that the contraction rate has worsened due to the pandemic. Because people with middle incomes also lost their jobs in the recent crisis: In this group, eight percent who were still working before the start of the pandemic were no longer gainfully employed in January 2021, according to calculations by the foundation and the German Institute for Economic Research .

Compared to 25 other countries in the industrialized nations group (OECD), the middle class only shrank more sharply in Sweden, Finland and Luxembourg than in Germany. Young people were particularly affected in this country: the proportion of 18 to 29 year olds who belong to the middle income group fell by an above-average rate of ten percentage points. This is also shown by the generation comparison: While 71 percent of baby boomers (born 1955 to 1964) made it into the middle class after starting their professional life, only 61 percent of so-called millennials (1983 to 1996) did so. In addition, East Germans manage to get into the middle income bracket or to stay there less often than West Germans.

Bad pay and education

Education is becoming more and more important. The proportion of 25 to 35-year-olds with a low or medium level of education who make it into the middle class has fallen significantly. “The educational deficits that have arisen as a result of the pandemic must urgently be made up, otherwise the arduous rise to the middle class will be made even more difficult for many,” warn the authors of the study.

Another reason for the shrinking middle class is the wage dumping that has been going on for years in many areas of work. One sixth of the full-time employees who live in middle-class households now work in the low-wage sector. For employees in the lower income group, the proportion is even four times as high. “The large low-wage sector also weakens the situation of the lower income groups, since low-wage jobs are rarely a stepping stone into better-paid employment,” it says.

In order to strengthen the middle class, the OECD and the Bertelsmann Foundation are calling for barriers to be dismantled on the labor market. Part-time workers and mini-jobbers should have more opportunities for further training. In addition, the scope and quality of women’s jobs should be improved. Professions in which the majority of women work, such as care, would also have to pay higher wages. They work more often than before, but often with fewer hours and in jobs for which they are overqualified. In order to belong to the middle class, a second good earned income is increasingly needed. “If we want to strengthen the middle class, the scope and quality of women’s jobs should be improved,” the authors conclude.

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