Where income in Germany is increasing the most

reGermany is becoming more and more colorful. If you want to draw a map of the most economically successful regions today, you need many more shades, more colors than ten or 20 years ago. Above all, it is no longer possible to draw a clear east-west border economically. This becomes particularly evident when analyzing the dynamics of income, that is, the evolution of wages and salaries and other types of income.

Europe’s largest economy has seen the rise and fall of entire regions in recent years and decades, but until before the Crown, the improvement in living conditions clearly outpaced regions. In only eleven of the 401 rural and urban districts, the increase in per capita income lagged behind inflation. In contrast, wages and salaries plus capital income increased in 390 rural and urban districts, representing 97 percent of all regional units.

Particularly nice in terms of German unity: the new federal states are over-represented among municipalities with above-average growth. If you look at market income, that is, gross income from labor and capital assets that are not distorted by transfer payments, no fewer than six cities and districts in East Germany are among the top 15 areas with the greatest improvement.

In the Altmark district of Salzwedel and in the district of Salzland, both in Saxony-Anhalt, per capita income increased by 40 percent in ten years. The increase in prosperity per capita across the country was only greater in five municipalities, namely the Lower Saxony regional units Wolfsburg, Gifhorn and Helmstedt and in the Baden-Württemberg municipalities of Lörrach and Waldshut Baden-Württemberg. In absolute terms, profits and capital inflows in the Southwest were notably higher until recently, but growth is clearly no longer a purely West German problem.

The most up-to-date data from the district level statistical offices extends to 2017. However, economic development since then suggests that the trend has at least continued, if not intensified. This is mainly supported by the labor market, which during the pandemic proved to be more robust in the east than in the west.

Analysis of the relative losers between 2007 and 2017 confirms the trend. The cities and districts that lagged the furthest behind the general development of prosperity in the ten-year period are in the west of the republic: the Hessian cities Offenbach am Main and Darmstadt, for example, have not registered any real increase per capita in prosperity for a long time. take it to a plus of eleven and twelve percent, below the inflation rate of just under 14 percent.

Erlangen-Höchstadt in Bavaria and Heilbronn in Baden-Württemberg also score poorly in terms of income dynamics, although it should be noted that income here is at a higher level. The average per capita income in Heilbronn of € 38,300 is one of the highest in Germany. The national average is 27,500 euros per inhabitant.

Average values ​​may be skewed for high-income individuals. It should attract even more attention if the workplaces of top managers and billionaires do not attract any particular growth, and areas that are considered less glamorous achieve a notable increase in revenue. The bottom line is that the regions are getting closer rather than moving apart.

“You keep hearing that the rich are getting richer, the poor are getting poorer, but a look at the data reveals that this is not true in reality,” says Klaus-Heiner Röhl, an expert on structural change and competition at the Institute of German Economics (IW) in Cologne. If the rich really got richer and the poor got poorer, the booming regions would have to differentiate themselves more and more from the supposedly lagging regions in terms of income and capital income.

However, this is demonstrably not the case. That does not mean there are no differences: for a large economy like the German one, a certain range of income and cost of living is not unusual, but it does not come more and more. As another observation proves.

In 1997, residents of the highest-income district of Starnberg were able to post 3.1 times per capita what residents of the poorest area had at that time, that is, Kyffhäuserkreis in the 1990s. More recently, the range between the number one (still Starnberg) and number 401 (now Görlitz) was still below 3.1.

Therefore, there is no spread or separation of the regions in the last two decades. If income in wealthy areas of the country had risen as much or even more in percentage terms, the gap would actually have widened due to the base effect (3% of € 30,000 is more than 3% of € 10,000 in absolute terms ), which is not so.

That does not mean that there are no relegated people, only that they cannot be placed in an east-west scheme. The district with the weakest income development is in the west: St. Wendel in Saarland only achieved a per capita increase of three percent in ten years. In no other place in the Federal Republic has development been so weak.

The mere consideration of gross amounts obscures the vision of a very important fact: in Germany there is a massive redistribution through taxes and social contributions. This leveling effect is so strong that the range of disposable income is only 2.4 after redistribution.

It is also striking that the municipality, whose inhabitants are mathematically the least likely to survive, is now in the west: in Gelsenkirchen, disposable income is only 16,300 euros, while people living in the pretty district of Starnberg have a average of 39,000 euros after taxes and contributions. to have. By comparing the five strongest and weakest areas, here the range is 2.6, the pattern is confirmed: alignment, no decoupling.

“Disposable income in eastern Germany is already partly as high as in some western countries. Brandenburg and Saxony have an average of 20,475 and 20,335 euros per year, more than Saarlanders and only slightly less than Lower Saxony ”, calculates Röhl.

This can also be explained by the fact that in the period since reunification, the East has clearly recovered productivity: 15 years ago it had already reached 80 percent of the value of West Germany. However, there are also some inhibiting factors: “In much of the new federal states, very little is invested in machines and systems and very little money is invested in research and development.

This is due to the fact that there are relatively few large companies there and the industrial landscape is weak. Demographics are also a problem; On average the population between the Baltic Sea and the Ore Mountains is significantly higher than, for example, in Baden-Württemberg or Bavaria. “Although the migratory balance between East and West is now balanced, the number of people employed is decreasing. The cohorts that are having children now are weak, ”explains Röhl.

Furthermore, immigration from abroad is less than in the west. “Demographic development is the Achilles heel of East Germany,” says the economist. In general, the region needs to become more attractive to skilled migrants.

The extent to which aging has progressed can also be seen in the fact that in no less than 35 cities and districts in Germany the disposable income is above the so-called primary income. Simply put, primary income means: money earned through labor or capital assets.

In contrast, transfer payments such as social assistance, child benefits, or pensions are also incorporated into disposable income. If the disposable income in an area is higher than the market income, this is almost always due to the fact that a particularly large number of retirees live there who are no longer in gainful employment and who make their living mainly from pensions.

This is most pronounced in Görlitz in Saxony and in Oberspreewald-Lausitz in Brandenburg. Number three is Altenburger Land in Thuringia. In these territorial units, people particularly benefit from social security funds and the redistribution of the welfare state.

In cheap metropolises like Frankfurt am Main, Munich, Stuttgart or Hamburg, but also in car locations like Ingolstadt, people pay particularly high amounts through taxes and contributions. Yes, Germany is a colorful country, also in terms of financiers and beneficiaries of the welfare state.