Germany: ifo Institute Wants Better Training for Low Earners

“Any discussion around the alleged growing inequality of disposable incomes simply distracts from the really important problems. If we want to improve equal opportunities, we need to invest more in early education, not just in childcare,” Peichl adds.  “In addition, the way social policy is targeted must be improved. In the case of low earners, the combined effect of a loss of social benefits at the same time as rising taxes and levies is such that time and again, higher gross salaries mean lower net income. That’s absurd.”

“A decision now to raise the top tax rates and the minimum wage will do nothing but increase redistribution, because it doesn’t address the root causes,” Peichl continues. “We now face a situation where there is a whole new group on low or zero incomes, namely immigrants. An overall increase in inequality is an inevitable consequence of adding them to the equation.”

Peichl points out that in absolute terms there are now fewer poor people in Germany than there were in 2013. “Between 2013 and 2017, there was also a decline in the proportion of households that lack the financial resources to afford important expenditure on housing and consumer goods.” Compared to other countries, Germany is in a good position, he says – especially regarding the development of middle incomes.

In addition, Peichl calls for the quality of German data on income and wealth to be improved in order to better assess the actual development of inequality in society.