Real Income Rose Significantly between 1991 and 2014 on Average – First Indication of Return to Increased Income Inequality

DIW Weekly Report 5 / 2017, S. 47-57

Markus M. Grabka, Jan Goebel

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The real disposable income of private households in Germany, accounting for inflation, rose by 12 percent between 1991 and 2014. This is what the present study based on data from the Socio-Economic Panel (SOEP) has shown. However, the trends varied greatly depending on income group. While the middle income segment rose by more than eight percent, the highest income segment increased by up to 26 percent. The lower income segment, on the contrary, declined in real terms. Consequently, income inequality has increased overall, especially in the first half of the 1990s, in the period from 1999 to 2005, and after 2009. It stagnated or even decreased in the interim periods. The proportion of people at risk of poverty has recently become greater again. Gainful employment still provides the most effective protection against income poverty, but more and more employed persons are at risk of becoming poor. Containment of the low wage sector, by revoking the privileged status of mini-jobs, for example, could counteract this effect. And single parents should no longer be fiscally disadvantaged in comparison to childless coupled households – this could also reduce the number of children at risk of poverty.

Markus M. Grabka

Direktorium SOEP und kommissarische Bereichsleitung Wissenstransfer in the German Socio-Economic Panel study Department

JEL-Classification: D31;I31;I32
Keywords: Income inequality, poverty, SOEP
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