Inequality of Earnings in Germany Generally Accepted but Low Incomes Considered Unfair

Abstract

Earnings differences are a recurring topic of public discussion in Germany. Data from the long-term Socio-Economic Panel (SOEP) study as well as a separate survey of German employees (LINOS) show that earnings inequalities are generally perceived as fair while a substantial share of the respondents find the current earnings distribution in Germany unfair. This applies above all to the middle and lower end of the earnings distribution, where respondents perceive there to be particularly severe underpayment. More rarely do respondents find that employees earning high salaries are unfairly overpaid. Perceived unfairness in the upper strata of the earnings distribution is associated with a reduction in effort at the workplace while perceived unfairness in the lower end of the earnings distribution is accompanied by a lack of participation in the democratic process.