Executive summary

Abstract

The German middle class – proxied in this review as people living in households with incomes between 75 and 200% of the median – is significantly smaller than it was in the mid‑1990s. Between 1995 and 2018, the German middle‑income group shrank by 6 percentage points, from 70 to 64% of the total population (OECD average of 62%). Among the 26 OECD countries with available data, only Sweden, Finland, and Luxembourg experienced a faster decline. Most of the decline occurred in the early 2000s, when income disparities in Germany widened, and it largely reflects a shrinking of the lower middle‑income group (incomes between 75 and 100% of the median). In spite of strong employment growth after 2005, the German middle‑income group did not recover its size as real disposable incomes for middle‑income households stagnated. In more recent years up to the COVID‑19 crisis, income trends have been more positive, and households across the income distribution experienced a healthy rise in disposable incomes. The available evidence on income developments during the pandemic suggests that up to January 2021 disposable incomes slightly grew on average for workers in low- and middle‑income households, thanks to the comprehensive government support.