Study Shows Slight Decline in Wealth Inequality in Germany Over 15 Years

A recent study by the Cologne Institute for Economic Research (IW), commissioned by the Vereinigung der Bayerischen Wirtschaft (VBW), reveals that wealth inequality in Germany has slightly decreased over the past 15 years, contradicting common perceptions of rising disparities. The study highlights that while inequality grew from the late 1990s until the 2008 financial crisis, it has since declined marginally. Key factors influencing this trend include the disproportionate impact of the financial crisis on wealthier individuals, sustained economic growth, rising real incomes for workers, and low interest rates that helped reduce debt and increase net wealth among normal earners.

The COVID-19 pandemic initially contributed to wealth accumulation due to reduced spending on entertainment; however, subsequent inflation has offset some of these gains. Despite improvements among lower-income groups relative to the top 10%, significant regional disparities persist. The average net wealth in southern Germany stands at €442,100, more than two and a half times that of eastern Germany, which averages €169,100. Median wealth figures further accentuate this gap, with southern regions at €189,000 compared to just €36,000 in the east. The IW attributes these disparities to the delayed wealth-building start in the east after reunification in 1990 and low homeownership rates.

Instead of higher taxes on the wealthy, the research suggests supporting the broader population through wealth-building measures such as reducing taxes and fees on home purchases to foster greater equity.