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Germany records largest drop in real wages in over a decade

Germany records largest drop in real wages in over a decade

Germany records largest drop in real wages in over a decade

The coronavirus crisis had a serious impact on employee salaries in 2020, with real wages falling by 1 percent for the average worker in Germany. This corresponds to the biggest drop in real wages since records began in 2007.

Real wages plummet in Germany

Recent data from the Federal Statistical Office (Destatis) has revealed that coronavirus in Germany caused pre-tax wages to drop by 0,6 percent in 2020, largely as a result of the lockdowns and people being put on short-time work. Destatis also recorded an increase in prices over 2020, by an average of 0,5 percent. The statisticians thus concluded that real wages in Germany had fallen by 1 percent in 2020.

One of the main reasons for the reduction in wages was the number of people being put on the government’s Kurzarbeit (short-time work) scheme during the early stages of the pandemic. By April, around 6 million people were signed up for the scheme, which means they were either put on reduced working hours or not working at all. Kurzarbeit recipients normally receive about 60 percent of their wages (67 percent for parents), but if certain conditions are met they can potentially receive up to 80 percent of their lost wages.

Despite having a significant effect on German household finances, money received through the Kurzarbeit scheme was not included in Destatis’ calculations.

An end to years of growth

The drop in real wages puts an end to six consecutive years of growth. While the German economy was booming, wages increased by over 1 percent every year between 2014 and 2019.

Prior to that, real wages have only fallen twice since 2007; in 2009 they decreased by 0,1 percent following the financial crisis and in 2013 they also fell by 0,1 percent against the backdrop of the Greek debt crisis.

William Nehra

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William Nehra

William studied a masters in Classics at the University of Amsterdam. He is a big fan of Ancient History and football, particularly his beloved Watford FC.

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