When SPIEGEL has German citizens asked about the most urgent problems in economic and social policy in its economic monitor, one topic is regularly at the top: the unequal distribution of wealth. Even the mega-crisis of the past few months has not changed that.
And this perception seems entirely appropriate. Because the corona crisis is likely to increase this social inequality again. It hits people more often and harder who previously had to cope with low incomes – and tends to spare high earners. At least this is the conclusion of the Economic and Social Science Institute (WSI) of the union-related Hans Böckler Foundation in its current distribution report. The crisis thus seems to end the phase of the past boom years, during which income inequality did not decrease, but at least stopped growing.
This finding may be obvious – after all, the corona-related restrictions have hit and still hit businesses with low incomes: restaurants, hotels, shops, theaters, cinemas, nail salons. However, it has so far been difficult to definitively prove it, because the current data from the detailed and extensive income surveys are always only available after a delay of several years.
The WSI researchers therefore used their own comprehensive survey: the employment survey. Up to 7700 people were surveyed online in two waves at the beginning of April and the end of June, 6300 took part in both surveys. Above all, it reflects the effect of the spring shutdown. However, since the new – and possible future – measures largely affect the same industries and people, the structure of the effects is unlikely to change in the further course of the crisis.
Accordingly, of all households – families or singles – have to accept income losses that usually have little money anyway: Every second household with an income of less than 900 euros per month was affected – but only around one in four with an income of more than 4500 euros .
In addition, poorer households often lost a significantly higher proportion of their income than richer ones. This is made clear by the following graphic, which shows the relative size of the losses for the various income levels – however, the WSI researchers only evaluated households that had lost income at all and in which more than one person lived.
According to the WSI data, 60 percent of the poorest affected families suffered losses of more than a quarter of their normal income, while only 28 percent of the richest families had losses of this magnitude. Almost every tenth household with pre-crisis income below EUR 900 even stated that they had lost all of their income. This could show the massive reduction in mini-jobs – 837,000 of them were lost between March and June alone.
According to the study, small self-employed people and freelancers were hit particularly hard, with more than half of them losing their income. (In this article you will find detailed data from the WSI and other institutes on the solo self-employed and other groups of people who are particularly hard hit.) The most common cause of reduced income, however, was short-time working, which saw around six million employees in April and May. It also affects low-wage earners more often than high-wage workers:
For another study, which SPIEGEL has already received, two of the three authors of the distribution report, WSI Director Bettina Kohlrausch and Andreas Hövermann, sociologist at the Hans Böckler Foundation, examined which factors favored or mitigated a loss of income. In order to be able to quantify the effect of a single factor, they calculated additional factors. The graphic shows how belonging to a certain group increases or decreases the probability of a loss of income – it is often the weak anyway: precarious workers, low-wage earners, people with a migration background.
The corona crisis could at least temporarily break a trend that has been gaining strength in recent years of the job boom – the participation primarily of the middle, but also the lower economic classes in the increased income. The WSI report also shows this development. However, the latest data from the Socio-Economic Panel (SOEP) only provide information up to 2017.
Only the poorest tenth had lower real incomes in 2017 than in 2010. In this group, the income for most people is likely to consist almost entirely of the state basic security – which indicates that the annual increases are insufficient to at least ensure the already low standard of living of the recipients keep constant.
However, in the second poorest tenth, most households are likely to earn their living predominantly from gainful employment. Their incomes were only three percent higher in real terms than in 2010 (i.e. after factoring out inflation) – but have increased very significantly since the introduction of the minimum wage in 2015, even more than in all other groups. The incomes of the middle class (more precisely: the ten percent exactly below the median income) rose by an average of eight percent in real terms between 2010 and 2017 – and thus just as much as the income of the top tenth.