Hardly a week goes by without representatives of the political community and the media complaining that Germany is unfair and that the divide between rich and poor is growing.
Many people share this impression: In surveys conducted by the Allensbach Institute for Demoscopy, 57% of German citizens recently expressed the view that the situation in their country is “not fair”, while polls by ARD-Deutschlandtrend and Forsa put this figure at 44% and 40% respectively.
But is there any truth in these opinions? Has Germany abandoned the social market economy model? “The opposite is the case,” says Clemens Fuest, economist and President of the Ifo Institute in Munich. In a recent article in the “Frankfurter Allgemeine Zeitung”, he wrote, “The welfare state contributes significantly to ensuring that income distribution is Germany retains a high level of stability and that, at least in the past ten years, it has changed only slightly.”
Personal sentiment among the vast majority of German citizens is also considerably better than the widespread criticism of inequality would suggest. This is supported by data from the German Socio-Economic Panel, an annual survey carried out among 15,000 households throughout the country: most recently (in 2015), nearly 55% of Germans declared a “high level of satisfaction” with their lives, and 43% a “medium level of satisfaction”.
Take the example of wage development: A clear, tangible increase
This is also due to the very positive development of wages in recent years. Take the German chemical industry for example: In this industry, wages have increased by at least 25% over the past ten years. Today, full-time chemical industry employees’ average annual earnings amount to € 66,000 – that’s almost
24% more than the average received by employees in the manufacturing industry. And, if you deduct price increases, the 550,000 employees of the chemical industry also have considerably more money in their pockets in real terms: 15% more compared with 2007. In this way, they benefit from the success of the industry as a whole.
Generating output before distributing wealth
However, some politicians are fueling the perception that social injustice exists in Germany – despite record levels of employment, a stable economic climate and rising wages. As a consequence of this distorted view, some parties are, for instance, calling for comprehensive amendments to be made to Agenda 2010, Germany’s social reform package. It would however be more pertinent to strengthen the prerequisites of our prosperity, instead of discussing its distribution.
Hardly any country has such a comprehensive social network as Germany. Social spending in Germany is currently higher than ever before. Amounting to € 918 billion in 2016, it has thus increased at a faster rate than economic output for the fifth consecutive year.
“Social justice is not possible without a strong economy”
But only if we generate high output in Germany can we distribute a lot. Politicians must therefore do more to strengthen Germany as a business location, i.e. less regulation, greater flexibility and more room for innovations. Each restriction to operational flexibility through interventions in the labor market and labor laws reduces competitiveness at the expense of employment opportunities in Germany.
If businesses are competitive, they can create jobs and pay decent wages. Competitive pressure in the chemical industry is high; companies have to compete in the global marketplace. That’s why it is wrong to want to roll back Agenda 2010 while it is currently celebrating successes such as record employment. Agenda politics has made Germany stronger and more competitive. We need more of it, not less.