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How your wages in Germany could depend heavily on where you live

The amount you can earn in a job could depend heavily on whether you live in eastern or western Germany, a new study has shown. But geography is not the only factor.

A woman holds bills and coins in her hand.
A woman holds bills and coins in her hand. Photo: picture alliance/dpa | Daniel Karmann

Although it’s more than 30 years since Germany was divided in two, the former East-West border is still visible in many economic statistics. 

A newly published study by the Hans Böckler Foundation’s Institute of Economic and Social Research (WSI), shows that, on average, 18.7 percent of all full-time employees across the whole of Germany are low-income earners. 

But in the five former East German states of Brandenburg, Mecklenburg-Western Pomerania, Thuringia, Saxony-Anhalt and Saxony this average is at 29 percent. 

Low-income earners are defined in the study as full-time employees who have to make ends meet with a gross pay of less than €2,284 per month. This is the value at which the Federal Employment Agency currently sets the nationwide upper limit of the lower pay range and is less than two-thirds of the average monthly gross pay of full-time employees (subject to social insurance contributions) in Germany.

Full-time workers in eastern Germany are the lowest paid

The study, which is based on pay data from the German Federal Employment Agency for 2020, shows that there are major differences by region and a stark contrast between incomes in eastern and western Germany.  

While 6.4 and 8.3 percent of full-time employees in western cities such as Wolfsburg and Erlangen, respectively, worked in the lower pay range in 2020, eastern cities such as Görlitz and in the Saale-Orla district reached figures of more than 40 percent. The highest rate was in the Erzgebirgskreis in Saxony, where 43.2 percent of full-time workers earned a low wage.

READ ALSO: How big is the divide between eastern and western German states?

According to the WSI’s findings, rates of more than 30 percent continue to be relatively common in eastern Germany, especially in rural districts. By contrast, in the western states, even predominantly rural regions remain below this mark, albeit only relatively close behind in some districts of Schleswig-Holstein and Rhineland-Palatinate. In general, full-time work in the lower pay range is more widespread in rural regions, where there are mainly small businesses and little industry.

But the WSI’s study isn’t the only indication of lower earnings in eastern Germany. 

A study by career platform Stepstone from 2021 also showed that the states with the highest average incomes in Germany are all in the west, while the states with the lowest average incomes are all in eastern Germany. 

A response by the federal government to a question from the Left Party in the Bundestag from March 2021, also showed that wages in eastern Germany still lag far behind incomes in the west in some sectors. The biggest difference was in the manufacture of clothing, where, in 2019, full-time employees in the western states earned 73 percent more than in the east. 

The reply also revealed a large gap in earnings in the manufacture of cars, engines, bodywork, trailers and car parts. In this sector, the gross income was 45.1 percent more in the West.

Other factors influencing low pay

It isn’t just living in eastern Germany that will affect your wages. The report by the WSI also shows that factors such as gender, industry sector and qualification level also have a significant influence on income levels. 

Nationwide, 25.4 percent of women have to get by with a low monthly income despite full-time work, while the same is true for only 15.4 percent of men. 

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Full-time workers under the age of 25 earned a low salary in 39 percent of cases, while 40.8 percent of those without vocational qualifications were also poorly paid. 

According to the study, 17.8 percent of people with vocational qualifications were among the low-paid compared with just 4.9 percent of people with university degrees.

READ ALSO: Wages, rent and pensions: What will the new German government mean for your wallet?

Low pay despite working full-time was particularly pronounced in the hospitality industry (68.9 percent), temporary employment (67.9 percent) and agriculture and forestry (52.7 percent). An above-average number of people also earned less than two-thirds of the average gross salary in the arts and entertainment and private household sectors (33.2 percent), logistics (28.3 percent) and retail (24.9 percent).

Is it all bad news?

The WSI’s report does also indicate that some progress has been made.  In 2011, 21.1 percent of all full-time employees were still low-wage earners and this figure fell to 18.7 percent by 2020. “In recent years, we have succeeded in pushing back the lower pay range,” said Helge Emmler, one of the authors of the study, describing the trend. This is particularly true in eastern Germany, he said.

In order to further push back the lower pay range, the increase of the minimum wage to 12 euros per hour is “certainly a step in the right direction,” Emmler explained. In addition, however, stronger collective bargaining coverage is also necessary. In eastern Germany in particular, this is still much weaker than in the west.

READ ALSO: EXPLAINED: How the minimum wage will increase in Germany in 2022

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WORKING IN GERMANY

Germany’s biggest trade union seeks 7 percent pay rise

Germany's biggest trade union, IG Metall, said Monday it would push for a seven-percent pay rise for millions of workers in the key electrical and metalworking sectors, despite falling inflation and a sluggish economy.

Germany's biggest trade union seeks 7 percent pay rise

The recommendation by the union’s leadership, which will now be discussed by regional branches, comes ahead of new wage talks starting in September.

“Employees need significantly higher wages to combat persistent price pressures,” the union said in a statement.

Wage demands by IG Metall — which negotiates for some 3.9 million workers in sectors ranging from auto to electrical and mechanical engineering — are closely watched in Europe’s top economy as they often set the tone for negotiations in other industries.

IG Metall’s executive board said it was advising members to seek a seven-percent pay increase over a 12-month period, as well as higher compensation for apprenticeships.

IG Metall chairwoman Christiane Benner said the demands were “reasonable” in these “turbulent times”.

But the head of the Gesamtmetall employers’ federation, Stefan Wolf, urged the union to be “more realistic”.

“The metal and electrical industry is still in recession. But these ideas sound as if we are in an economic boom,” Wolf said in a statement, warning that the focus should be on strengthening Germany’s competitiveness.

In the last wage rounds in 2022, IG Metall clinched an 8.5-percent pay hike over two years to help members cope with soaring inflation after Russia’s war in Ukraine and pandemic-related supply chain issues pushed up consumer prices.

German inflation has eased significantly since then, but at 2.4 percent in May it remained above the European Central Bank’s two-percent target.

The German economy meanwhile shrank slightly in 2023 and the government expects only modest growth of 0.3 percent this year.

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