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Real Wages in Germany: Numerous Years of Decline

  • Karl Brenke
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    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.

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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.342371.de/diw_wr_2009-28.pdf
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    Article provided by DIW Berlin, German Institute for Economic Research in its journal Weekly Report.

    Volume (Year): 5 (2009)
    Issue (Month): 28 ()
    Pages: 193-202

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    Handle: RePEc:diw:diwwrp:wr5-28
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