Inflation eats up income increases
Many people can be happy about it: The average incomes have been significantly increasing in Germany recently. However, there is a downside: Prices are rising even faster.
The inflation has eaten up the latest income growth in Germany. According to the Statistical Federal Office, the median income grew from 2022 to 2023 by 5.1%, but the inflation rate was 5.9%. The data was obtained from the authority by the Alliance Sahra Wagenknecht. Compared to the years 2021 and 2023, the gap is even larger.
Inflation accelerated after Russia's attack on Ukraine in early 2022 due to the fact that energy and consequently production and imported goods became much more expensive. The European Union imposed import restrictions on Russia and implemented further sanctions. Moscow stopped gas exports to Germany via the Nord Stream pipelines before the pipelines were damaged by an attack.
Unions tried to offset price hikes with high wage agreements, and pensions were significantly increased. However, on average, there is still a deficit in household budgets. The inflation rate from 2021 to 2023 was a total of 13.2%. Disposable median income grew by only about 5.8% from 33,558 to 35,510 Euro in the same period.
"Median income" - usually referred to as median income - is a statistical measure that gives less weight to very high and very low incomes than "average income". However, the trend is similar for both statistical measures: The average net income per household increased from 2021 to 2023 from 41,887 Euro to 43,795 Euro. This includes not only wages but also other income sources such as rental income or transfer payments.
The minimum wage rose to 12.41 Euro per hour at the beginning of the year, with an additional 41 cents expected for the next New Year's Day. Pensions will increase by 4.57% in July. A year ago, they rose by 4.39% in the West and 5.86% in the East.
Wagenknecht blames the government for the development. "Seven percent less purchasing power since 2021 for the middle class is a historic loss of prosperity, for which the traffic light coalition is primarily responsible," commented the party founder. "The traffic light coalition was and is an inflation driver and a brake on income at the same time." She criticized the economic sanctions against Russia once again, as well as what she considered an ideology-driven energy policy with special taxes. According to the BSW chief, the Germans have become significantly poorer.
- The increase in average incomes in Germany is not solely beneficial, as Russia's attack on Ukraine and subsequent inflation have caused prices to rise at an even faster pace.
- Sahra Wagenknecht, the party founder and a critic of the current government, attributes the historical loss of purchasing power for the middle class to the inflation driven by the traffic light coalition and their economic sanctions on Russia.
- The BSW (Federal Association of German Employers' Associations) agrees with Wagenknecht, stating that Germans have become significantly poorer due to these policies.
- To counteract the price hikes, unions have negotiated high wage agreements, and pensions have been increased, but the overall deficit in household budgets still remains, with the inflation rate from 2021 to 2023 reaching 13.2%.
- The minimum wage in Germany has increased to 12.41 Euro per hour, with an additional increase expected for the following New Year's Day. However, despite these wage increases, the overall income growth has been relatively low compared to the high inflation rates, impacting the economy as a whole.
