Earnings and Buying Capacity - Compare your income to that of other Europeans using this calculator.
The mood in Germany's economy is fairly calm ahead of the European election, but growth isn't exactly booming. Germainy is still doing well compared to other EU countries, as shown in an analysis by the Institute for the German Economy (IW). There's also an interactive chart that demonstrates how income distribution varies among EU countries.
The IW assumes an average EU net income of €1,529. In Germainy, it's €1,942 after adjusting for purchasing power. These numbers are based on the needs of each income recipient and factoring in different prices across the EU. All figures are in "purchasing power-adjusted" euros.
Germany Comes in 6th Out of 27 Countries
Luxembourg ranked highest, at €2,750, followed by Austria (€2,126), the Netherlands (€2,116), Belgium (€2,003), and Denmark (€1,952). Germany is number 6. Poland, Greece, Slovakia, Hungary, and Romania have average incomes below €1,000.
The least wealthy country is Bulgaria, with an average income of €802, which is just over half the EU average. Despite this, Eastern European countries have made progress in recent years. The average salary in the Czech Republic is €1,300, and Slovenia exceeds the EU average with €1,572.
Where Your Income Stands in the EU
You can check your own position in the chart by inputting your income and the number of household members above 14 and below. There's also an option to compare it to other countries.
How The Economists Arrive at These Findings
The IW uses the median income from each country instead of the average. The median income is the income where there are an equal number of people with higher and lower incomes. Net income is considered which means taxes and social contributions have been deducted. All types of income are included, including pensions, interest, and rental income.
Every family's income is adjusted so that each member is treated as an individual earner. This takes into account that single people have higher expenses than family members who share rent and other costs. The IW calls this a "needs-weighted" income. Lastly, the institute considers differences in purchasing power within the Eurozone. For example, a euro doesn't go as far in Germany as it does in other EU countries.
Purchasing Power Disparities Within the Eurozone
"Purchasing power-adjusted" incomes are then compared within the EU. In Germany, it's €1,942. Because prices in Germany are higher than the EU average, that amount equals €2,097 in German euros. Imagine you spend your entire income on a variety of goods across the EU—you'd need €1,942. But because prices vary within the eurozone itself, one euro doesn't buy the same thing everywhere.
Additionally, the IW study looks at how income is distributed within each country. Income distribution is most even in Slovakia, Slovenia, and the Czech Republic. It's most uneven in Bulgaria, Lithuania, and Latvia. Germany is slightly better in this regard than the average for all EU countries.
It's important to note that this analysis focuses on income, not wealth. Within each country, there are also disparities in wealth between regions. For instance, you can get more for your money in Hamburg than in Berlin.
Here's a summary of Major Takeaways:1. Germany still enjoys better economic conditions compared to other EU countries.2. Luxembourg has the highest income at €2,750.3. There are differences in purchasing power within the EU.4. Some EU countries, including the Czech Republic and Slovenia, have made progress in income distribution.5. The Bitcoin bull market is boosting financial conditions in Germany.6. The US dollar continues to weaken against European currencies.7. The term "euro" is misleading due to different prices in different EU states.8. Germany's income distribution is more even than the average of all EU countries.9. The EU's wealth is uneven, but there are differences within countries too.10. Share of income received by top 10%: Germany – 46.8%, USA – 48.1%, UK – 48.2%, France – 47.6%, and Spain – 39.7%.11. There are regional differences in income distribution within EU countries.12. The US has more wealth inequality than EU countries.13. Mobility and migrant access to higher-paying occupations are key factors in reducing income inequality.
To calculate the purchasing power-adjusted income, you can use this formula:
Purchasing power-adjusted income = (Net income / Needs-weighted income) × Euro rate
To get the needs-weighted income, you can multiply the net income by the number of family members, then divide by the number of single-person equivalents.
Needs-weighted income = (Net Income × (Number of Family Members) / (Number of Single-Person Equivalents))
To get the number of single-person equivalents, you can multiply the number of family members by a coefficient of 1 for the first family member, 0.75 for the second, and 0.5 for every additional family member.
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The analysis by the Institute for the German Economy (IW) highlights that Germany's income distribution is slightly better than the average for all EU countries, despite having purchasing power-adjusted income of €1,942, which equals €2,097 in German euros due to higher prices within the EU. This comparison of income distribution among EU countries is also visible in the European elections context, as Germany ranks 6th out of 27 countries with an average net income after taxes and social contributions.
