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Real Wages in Germany: Numerous Years of Decline

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  • Karl Brenke

Abstract

Net real wages in Germany have hardly risen since the beginning of the 1990s. Between 2004 and 2008 they even declined. This is a unique development in Germany-never before has a period of rather strong economic growth been accompanied by a decline in net real wages over a period of several years. The key reason for this decline is not higher taxes and social-insurance contributions, as many would hold, but rather extremely slow wage growth, both in absolute terms and from an international perspective. This finding is all the more striking in light of the fact that average employee education levels have risen, which would on its face lead one to expect higher wage levels. In contrast to the prevailing wage trend, income from self-employment and investment assets has risen sharply in recent years, such that compensation of employees makes up an ever shrinking percentage of national income. Inflation-adjusted compensation of employees as a share of national income reached a historic low of 61% in 2007 and 2008. As in previous recessions, however, investment income has been under greater downward pressure in recent months than wages.

Suggested Citation

  • Karl Brenke, 2009. "Real Wages in Germany: Numerous Years of Decline," Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 5(28), pages 193-202.
    • Handle: RePEc:diw:diwwrp:wr5-28
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.342371.de/diw_wr_2009-28.pdf
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Lauding the German labour market
      by (author unknown) in Ferraris for all on 2011-08-05 20:43:37
    2. Germany’s failing prosperity model
      by (author unknown) in Ferraris for all on 2011-08-31 23:27:28
    3. English text of Novo article
      by (author unknown) in Ferraris for all on 2012-02-22 16:49:22
    4. The German Model: Myths & Reality
      by duncanseconomicblog in Duncan's Economic Blog on 2011-03-25 16:37:53
    5. Global imbalances – caused by the free market?
      by Dirk in econoblog101 on 2010-11-18 15:35:44

    Citations

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    Cited by:

    1. Axel Börsch-Supan & Irene Ferrari, 2017. "Old-age Labor Force Participation in Germany: What Explains the Trend Reversal among Older Men? And What the Steady Increase among Women?," NBER Working Papers 24044, National Bureau of Economic Research, Inc.
    2. Axel Börsch-Supan & Irene Ferrari, 2018. "Old-Age Labor Force Participation in Germany: What Explains the Trend Reversal among Older Men and the Steady Increase among Women?," NBER Chapters, in: Social Security Programs and Retirement around the World: Working Longer, pages 117-145, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Development of wages in Germany;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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