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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

EXPLAINED: The German industries ‘most affected’ by skilled worker shortage

Germany's shortage of skilled workers has reached a new high with almost half of firms struggling with staff shortages, according to a survey.

EXPLAINED: The German industries 'most affected' by skilled worker shortage

In July, 49.7 percent of companies surveyed by the Munich-based Ifo Institute said they were affected by the lack of skilled workers. 

This is the highest figure since researchers launched their quarterly survey in 2009. The previous record was 43.6 percent in April.

“More and more companies are having to cut back on business because they simply can’t find enough staff,” said Stefan Sauer, a labour market expert at the ifo Institute.

“In the medium and long term, this problem is likely to become more severe.”

READ ALSO:

Since the survey started, the problem has increased significantly. At the beginning, around 10 percent of businesses reported being affected by worker shortages. But by 2019 this had climbed into the range of around 30 percent. 

The Covid crisis caused a temporary slump, but since the beginning of 2021, numbers have been rising significantly.

Service providers most affected

The service sector is the most affected with 54.2 percent of companies saying they are struggling to fill vacancies, up from 47.7 percent in April. Within this group, accommodation and event industries came in above this sector average at around 64 percent. In warehousing and storage, 62.4 percent of firms were affected. 

The service sector is followed by manufacturing, with 44.5 percent of companies saying they can’t find staff. Within that group, 58.1 percent of food manufacturers said they faced problems caused by staff shortages. Around 57 percent of manufacturers of data processing equipment and of metal products are also having difficulty finding qualified staff.

In the retail sector, 41.9 percent of companies say they have problems with a lack of staff. In construction that figure is 39.3 percent and in wholesale, it’s 36.3 percent.

The pharmaceutical and chemical industries report the lowest shortage of skilled workers, with 17.2 and 24.1 percent of companies respectively reporting that they are affected by staff shortages.

The automotive industry is also below average with 30.5 percent of firms reporting issues with staffing, as is mechanical engineering, with 43 percent.

Germany’s labour shortage is causing major concerns. A report by the IAB Institute for Employment Research from earlier this year found 1.74 million vacant positions across the country. 

The president of the German Confederation of Skilled Crafts and Small Businesses, Hans Peter Wollseifer, recently spoke out about the issues. According to Wollseifer, the skilled crafts sector in Germany alone lacks at least a quarter of a million qualified employees.

Meanwhile, between 15,000 and 20,000 apprenticeship places remain unfilled every year, signalling problems for the future. 

As The Local has been reporting, the government is pushing ahead with plans to reform immigration law in a bid to attract talent from abroad to fill jobs.

“We want to make it easier and faster for foreign skilled workers to find their way to Germany,” said Interior Minister Nancy Faeser and Labour Minister Hubertus Heil (both SPD) recently.

The plans for a reform of immigration law could be presented as early as autumn.

READ ALSO: 

Vocabulary

Skilled workers – (die) Fachkräfte

Labour market – (der) Arbeitsmarkt

High/peak – (der) Höchststand

Service providers – (die) Dienstleister

Temporary employment – (die) Zeitarbeit 

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

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