How much do we really earn? The Surprising Reality About Wealth!

How much do we really earn? The Surprising Reality About Wealth!

A recent report from the German Institute for Economic Affairs (IW) sheds light on the misperception many people in Germany have about their income compared to others. In addition, growing social inequality is discussed. Economists such as Maximilian Stockhausen and Judith Niehues found that in a 2023 survey, around 54.5 percent of respondents classified themselves as middle class, while only 48 percent actually belonged to this group. This discrepancy raises questions about the perception of wealth and poverty.

The Poverty and Wealth Report shows that people from different social classes often overestimate their own wealth. Marius Busemeyer, an expert on inequality, found a “marked tendency towards the middle” in a 2022 study. This tendency leads poor people to underestimate their relative poverty, while rich people often underestimate their wealth.

Inequality and income stratification

The definition of middle class is often unclear and, according to the IW, is based on a needs-weighted household net income between 80 and 150 percent of the median. For a family with two parents and two children under the age of 14, the middle class has a net income of between 3,880 euros and 7,280 euros. Those who earn less than 2,910 euros a month are among the poorest eight percent of the population. On the other hand, the richest five percent earn more than 12,140 euros per month.

In addition, the Federal Agency for Civic Education sheds light on the change in income stratification and its connection to increasing inequality. Shares of the population in lower income brackets have increased continuously, while shares at the top of the income distribution fell until 2020, but have been rising again since 2021. In 2021, about 16 percent of the population lived in relative income poverty, while this figure fell to 15 percent in 2022.

Perception and reality of poverty

The risk of poverty is often viewed through the concept of relative income. According to current statistics, people below the threshold of 60 percent of median income are at increased risk of poverty. The discussion about poverty in Germany shows that the population can often assess the reality of poverty more accurately than the distribution of wealth. People believe that there is more wealth than there actually is. However, these misperceptions lead to a distorted idea of ​​social justice and inequality.

The IW experts warn that the concept of poverty and the associated indicators can be not only complicated but also misleading. Ultimately, the challenge remains to address these misperceptions and raise awareness of social classes and their economic conditions.

For more information and detailed statistics, visit the reports on Mercury and Federal Agency for Civic Education.