Mon Mar 10th, 2008 at 07:30:52 AM EST
Ever since the German economic recovery started three years ago, there is confusion about how to spin it. Some paint it as Merkel's success, some credit the Grand Coalition. The SPD's reform wing points out that the recovery started before the elections, and credit Schröder's reforms (Agenda 2010, of which the most (in)famous element was the Harz IV labour reform). Those more committed to the Church of the Economic Faith than parties have been seeing signs that that growth will soon fizzle out, for lack of further reforms...
Meanwhile in the real world, certain disparities get noticed. Namely, that this recovery resembles that in Dubya's USA: growth for the well-off, more (crap) jobs but less income for the rest. A just released study says real income fell by 3.5%.
How a successful economy looks like, European edition.
This recovery was covered in several diaries on ET (see the new Germany Occasional Series directory). I pick out a few:
On Wednesday 5 March, the Deutsche Institut für Wirtschaftsforschung
(DIW, German Institute for Economic Research, a not completely hopelessly marketista institute) released its latest
[pdf!] on the development of the income distribution. It begins:
|Schrumpfende Mittelschicht - Anzeichen einer dauerhaften Polarisierung der verfügbaren Einkommen?||Shrinking middle class - signs of a lasting polarisation of available income?|
| Die Schicht der Bezieher mittlerer Einkommen ist in Deutschland in den vergangenen Jahren deutlich geschrumpft. Ihr Anteil an der gesamten Bevölkerung ging von 62 Prozent im Jahr 2000 auf 54 Prozent 2006 zurück. ||The segment of those with medium income in Germany shrank significantly over the past years. Their share in the entire population fell back from 62% in the year 2000 to 54% in 2006.|
For this study, the medium income group (in terms less scared of Marx, middle class) is defined as people with income between 70% and 150% of the median.
The following diagram shows the development of the arithmetic mean (higher) and median (lower) real income. It's rather clear that for the majority, real income continued to fall even during the 2005-6 German recovery:
The next diagram shows the development of the ratio of median and mean separately for East (higher) and West (lower). East Germany is still more egalitarian, but the downwards trend is the same.
To get a better picture of the distribution, DIW didn't look at quintiles or deciles, but the population share of people in certain income segments relative to the median (see key at bottom). The share of the poorest (below 50% of the median; in black) is steadily growing, and so does that of the richest (more than 200% of the median; in white).
What about social mobility?
DIW evaluated movements from and to low (up to 70% of median), medium and high (above 150% of median) income segments from 2002 to 2006, and also from 1996 to 2000. I'll put the latter numbers into parantheses.
- Low-income rising to medium-income: 31.6% (44.2%)
- Low-income rising to high-income [rags-to-riches]: 2.2% (2.2%)
- Medium-income falling to low-income: 14.4% (11.0%)
- Medium-income rising to high-income: 11.1% (9.6%)
- High-income falling to low-income: 3.9% (3.9%)
- High-income falling to medium-income: 27.6% (32.6%)
Clearly, it has gotten more difficult for the poor to rise from poverty, while the rich have it more easy to stay so -- and the middle class slips down more easily than rises.
There are a lot more interesting data in the study, but I will show only the (updated) trend for something in dvx's earlier diary: satisfaction with one's income. Here, separately according to income group (low-medium-high), and until 2007 (the rest of the study is until 2006):
Here, the glaring fact is that money does make one happier, yet, the relative changes show that just the richest group, which benefitted most, is the only with still decreasing satisfaction: can they ever be pleased?...
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Two days after the release of the DIW real income study, a German paper reported that calculations by the rival Institut für Wirtschaft und Gesellschaft (IWG, = Institute for Economics and Society) showed that pensioners' real income will fall 7.5% below the 2003 level by the end of this year.