Income Inequality in Germany, Part 2: The Role of Redistribution

Germany is a country that practises strong top-down redistribution within households through taxes and transfers, as well as the provision of public goods. Germany boasts the greatest difference between gross and net wages than almost any other country. The living situation of workers is not defined by what their employers pay them in gross wages, but by what is left in disposable income after taxes and transfers. The development in net income inequality at a household level has not increased since 2005. Moreover, Germany is one of the OECD countries with a particularly low level of income inequality. This does not take into account the fact that the state not only redistributes via taxes and transfers, but through providing public goods like education and health services too. These factors also need to be taken into consideration in a solid assessment of inequality.