Why is Germany cheap? Die Armut des Exportweltmeisters – Kai Melling 2022


Kai MellingWhy is everything so cheap in Germany?

It is one of the most persistent myths that Germans are rich. Germany is a rich country – alas, with poor inhabitants. Although our economy is the biggest in Europe, the Germans are the poorest people in Western Europe. Even the Irish and the Italians are richer than we are.

We all know that Germany is one of the most attractive countries for immigration. Fewer people know that Germany is also country of emigration.

In 2011, 3,4 million Germans had left the Fatherland to work abroad. In 2017, this number had risen to 4 million. We are European champion in re, émigrés (even before Poland, who is vice champion). Why do they leave? “People want a fair salary, a full time occupation and an unlimited contract, period”, says Lars Fiedler of chamber of trade and industry Saxonia. Those things are hard to find in the Germany of today.

Wages in Germany came under severe pressure due to the labour market reforms by the Schröder administration. Wages in most G20 countries increased 2000 – 2009, but in Germany they plummeted.

Despite the strong economy, the number of impoverished Germans has been steadily increasing. Figures from a European-wide study released in 2012 show one in six people are at risk of poverty.

That is considerably more than in Germany’s neighbouring countries, the Czech Republic and France.

This seems puzzling, considering that in Germany unemployment is at an all time low

But things get clearer once we realize that the job miracle comes at the expense of wages:

The figures from the German Office of National Statistics (Destatis) and Eurostat, showed 16.1 percent of Germans were at risk of falling into relative poverty, compared to 9.6 percent in the Czech Republic, 10.1 percent in the Netherlands and 14.1 percent in France.

It also suggested that relative poverty in Germany has been rising in spite of the robust economy and falling unemployment. Back in 2005, the number of people at risk of poverty was 12.2 percent. That figure had risen to 16.1 percent in 2011.

The study defined people earning less than 60 percent of the median income as at risk of poverty. By that measure a single person earning less than €980 a month and a family with two children on less than €2,058 a month were at risk of poverty in Germany.

Average (blue) and median (red) distribution of wealth per household // quote of houseowners // income per year median and average

Germany has the lowest rate of houseowners in Europe. Let this sink in for a minute.

Considering the wealth per household, the German modell looks even worse than before. Now even the Spaniards overtake us.

And just to be sure, one more time the median distribution of wealth per household:

Quorans complaining that the Germans get things in return, like free health care, defense, infrastructure, school, retirement plans etc miss the point. The French enjoy the same good health as the Germans. They also enjoy the same amount of security and their infrastructure is in much better shape.

The number of German pensioners working “mini-jobs” to supplement their income has risen by 60 percent from 2000 to 2012. The figures prompted warnings of an old-age poverty epidemic.

In 2000, 280,000 pensioners had the €400-a-month jobs, which are exempt from taxes and national insurance contributions. This figure has risen to around 761,000 in 2012.

And of these, 120,000 were 75 and older. A further 154,000 people of pensionable age are working in more lucrative positions – twice as many as since then end of 1999 – and 80,000 of these are working full time.

When it comes to employed over-75s, they are rarely university professors who fancy keeping up their job, rather pensioners who are delivering papers, stacking supermarket shelves and doing other unattractive jobs to subsidise their measly pension.

The average monthly pension payment is dropping. In 2000, an average person who took retirement after paying into the system for 35 years would have been set to receive €1,021 a month. By 2011, this had sunk to €953.

Retirement income is in fact further evidence how Germans get dispossessed by their own government. In this respect, Germany lags not only behind the European Union average, but also behind the OECD average. In fact, with a net replacement rate of 50%, it even lags behind Poland.

Net pension replacement rates:

Pensions – Net pension replacement rates – OECD Data

The net replacement rate is defined as the individual net pension entitlement divided by net pre-retirement earnings, taking into account personal income taxes and social security contributions paid by workers and pensioners. It measures how effectively a pension system provides a retirement income to replace earnings, the main source of income before retirement. This indicator is measured in percentage of pre-retirement earnings and can be used to determine the effectiveness of the pension system.