The wage gap is closing particularly in East Germany

The earnings gap between low and high earners is decreasing. The decline is particularly noticeable in eastern Germany. Is that because of the minimum wage?

Payroll

Dhe wage gap in Germany has narrowed slightly. In 2018, for the first time, there was a trend towards equalization of wages between low and high earners, the Statistical Budesamt announced on Monday. Higher earners achieved 3.27 times the gross hourly earnings of low earners, while in 2014 it was 3.48 times.

“The wage gap is closing particularly clearly in East Germany,” it said. Here, higher earners achieved a gross hourly wage that was 2.80 times higher than low earners in 2018. In 2014 it was 3.31 times as much. This trend was significantly weaker in western Germany (3.47 in 2014 and 3.29 in 2018).

The minimum wage rises

An equalization of the earnings gap between East and West Germany can be seen especially among the low-wage earners, who make up the bottom ten percent of the wage scale. One reason for this is probably the nationwide statutory minimum wage introduced on January 1, 2015. In 2018 it was 8.84 euros, currently it is 9.35 euros. In the case of higher earners – the top ten percent of the wage scale – the statisticians did not find any convergence between East and West.

Overall, a good fifth of the jobs in Germany in 2018 were in the low-wage sector. At 29.1 percent, the share in eastern Germany is still significantly higher than in the west (including Berlin) with 20.0 percent. While the share in the east fell by 5.4 points in 2018 compared to 2014, it rose slightly in west Germany by 0.7 percentage points.

The proportion of jobs in the high-wage sector fell slightly in both East and West Germany. Most recently it was in the west of 22.3 percent, almost twice as high as in the east, at 11.2 percent.