On the verge of resilience
The middle class is shrinking at the edges
08/07/2023, 11:25 am
Perception and reality are far apart: while a large majority in this country count themselves among the middle class, it is now less than two thirds. In a European comparison, Germany falls behind.
According to a study by the IFO Institute for Economic Research, the middle class in Germany has shrunk slightly over the past ten years. While 65 percent of the population still belonged to the middle class in 2007, it was only 63 percent in 2019. That was 26.1 million households in Germany. According to the study commissioned by the Hanns Seidel Foundation, the reason for the decline is that the edges of the center have shrunk both through social advancement and social decline.
“Although the decline since 2007 appears to be relatively moderate, it is considerable compared to other European countries. While Germany’s middle class was still in ninth place in 2007 and thus in the top third due to its size, in 2019 it was only in place 14 and thus in the middle,” said IFO researcher Florian Dorn. In a European comparison, the middle class in Germany bears the highest tax burden.
“With a marginal burden of around 50 percent of gross income in the German tax and transfer system, people with middle incomes effectively only have half of the next euro they earn,” says Andreas Peichl, head of the IFO Center for Macroeconomics and Surveys. “More work and more performance therefore only pay off to a very limited extent in the middle class.” Middle-income people are on the edge of their resilience. At the same time, overtime hardly pays off for people with low incomes in the German tax and transfer system.
More than 80 percent of Germans classify themselves as middle class. The authors use the OECD definition for the IFO calculations. Accordingly, anyone who has between 75 and 200 percent of the median income belongs to the middle class.
For single people, this corresponds to a disposable net income including transfer payments of between 17,475 and 46,600 euros in 2019. For couples without children, the range is between 26,212 and 69,900 euros. Statistically, couples with two children belong to the middle class if they have an income between 36,698 and 97,860 euros.