Is Germany a prosperous country?

//Is Germany a prosperous country?

Idea in short

  • Germany is considered a prosperous country. Yet, there is poverty in this country as well.
  • The poverty threshold for single persons was € 942 net per month in 2015.
  • Only with a net wealth of € 500,000 does the federal government consider one wealthy.

Germany is considered a prosperous country. Yet, there is poverty in this country as well. Prosperity and wealth are term that are controversial among experts. Because it’s hard to demarcate when you are rich and poor! Poverty has many faces. There are homeless people on the streets asking for a donation. Or, women and men queuing up for the donation of charitable food. And, parents who apply for a state subsidy for their children’s school trips. But, does that mean, conversely, that those who do not do so are automatically rich?

Absolute and relative poverty

The term poverty is very controversial among experts

says the Cologne poverty researcher Prof. Christoph Butterwegge. A common definition does not exist. Differences are, therefore, between absolute and relative poverty. There is absolute poverty when there is not enough money to meet basic needs, such as buying food and drinks, renting an apartment.

Relative poverty occurs when basic needs can be satisfied, but there is nothing left to participate in society

explains Butterwegge. For example, a visit to the cinema, buying a book or going for a swim are not financially feasible.

How poverty is calculated?

The poverty rate in Germany is 15.7%

says Butterwege. In purely mathematical terms this means: 12.9 million people in this country are poor. The calculation basis for this is the so-called median income. According to a definition by the German Institute for Economic Research (DIW Berlin), the median income is the income at which there are just as many people with higher and lower incomes.

If you were to sort the population by the amount of their income and then form two equally large groups, the person who is right in the middle of this distribution, the median income would relate

says the DIW.

The following rule of thumb applies: If someone has 50% of the median income, he or she is officially poor. Poverty threatens 60% of the population around the median income. According to the Joint Welfare Association, based on 2015, the poverty threshold for single persons was € 942 net per month. Depending on the age of the children, the poverty threshold for a family with two children is between € 1,978 and € 2,355 net per month. In other words, anyone who has more money each month is officially not considered poor.

The struggle of the middle class

Those who earn between 60 and 200% of median income each month belong to the middle income bracket. From the point of view of the Cologne Institute for Economic Research (IW Köln), a lone-living person belonged to the (income) middle class in 2014 if he had a monthly net income of between € 1,410 and 2,640. According to IW Köln, the income limits for a family of four are between 2,950 and 5,540 euros net per month.

But, how realistic are these numbers anyway? Whoever has € 942 a month as a single person has little bottom line. But, even those who bring home more money have to pay more to finance their lives in big cities like Munich, Frankfurt or Hamburg.

At this point, it is clear that poverty starts much earlier

said Butterwegge. Anyone who has problems settling the telephone bill or has to save the money for a new winter coat tends to move towards the poverty line rather than to the middle class.

Who is considered rich?

Those who have more than 200% of the median income are considered wealthy. According to the poverty and wealth report of the federal government, singles with a monthly net of € 3,100, are considered rich. For couples, this figure is at least 4,600 euros. Employees in higher positions or engineers earn higher salaries. But, are they really rich because of that?

The deciding factor is ultimately the existing assets

explains Butterwegge. Only with a net wealth of 500,000 euros, which can consist of real estate, cash and / or valuable art, does the federal government consider one wealthy. For him, wealth exists when the fortune is so great that one can live off the interest.

Incidentally, according to the German government, the sum of all net assets in Germany in 2013 was around 4.9 trillion euros – on average around € 123,000 per household. The share of individuals with individual assets of more than half a million euros is around 2.5% of the population.

Poverty and wealth are vague terms

Nevertheless, the question remains: how realistic are these computational variables?

Not infrequently, those who have a lot of money do not even consider themselves to be wealthy

explains Butterwegge. The rich do not see their wealth; the middle classes are struggling with the cost of living; the poor are considered such only when they have hardly anything left.

This shows that poverty and wealth in this country are inaccurate and vague terms for a phenomenon that is hardly synonymous for the whole of Germany. Ultimately, whether someone is rich or poor depends on their personal feeling. This also depends on their living conditions in the city or country, and their liquidity.

Summary

  • Poverty and wealth are inaccurate and vague terms to describe whether Germany is a prosperous country.
  • The sum of all net assets in Germany in 2013 was € 123,000 per household on average.
  • Some in the middle classes are struggling with the cost of living, especially in large cities.
By |2018-09-23T15:16:52+00:00September 18th, 2018|Assorted|

About the Author:

Mithun Sridharan
I am Mithun Sridharan, Managing Partner & Co-founder of INTRVU, where I run the Career Services track. I'm also responsible for strategy and platforms at INTRVU. An Engineer by education and a Management Consultant by passion, I lead the Digital & Data Practise for Germany, Austria and Switzerland at Sapient Consulting, where advise clients in the Financial Services industry. I hold an MBA from the European School of Management & Technology (ESMT) Berlin and a Master of Science in Digital Communications from Christian Albrechts University of Kiel. I also run Think Insights, a blog on Management Consulting and serve as the Frankfurt Chapter Lead for The Linux Foundation since 2016. I enjoy reading business books & magazines (Economist, Wired, Harvard Business Review, McKinsey Quarterly, BCG Insights, etc.), listening to podcasts (TED Talks, David Ramsey Show, a16z, Tim Ferriss Show, etc.), playing golf and watching history documentaries. I am based in Heidelberg, Germany.
This website uses cookies and third party services. Ok