Germany's Real Earnings Fall By Record 4.1% Due To High Inflation

Real earnings in Germany fell by 4.1 per cent year on year in 2022 due to rising consumer prices. According to preliminary figures published by the Federal Statistical Office, this was the sharpest drop since the time series began in 2008.

According to Destatis, the record 7.9 per cent annual inflation in Europe's largest economy last year more than offset the 3.4 per cent increase in nominal earnings. The Covid-19 pandemic had already reduced real earnings in the previous two years, according to the Xinhua news agency.

As a result, an increasing number of Germans use overdraft services to pay their bills. According to the Federation of German Consumer Organisations (VZBV), one in every seven Germans overdrew money from their bank account between September and December of last year.

“The increased cost of living is a risk of over-indebtedness for consumers,” VZBV Executive Director Ramona Pop warned last week, stressing that overdraft facilities were “far too expensive to make up for financial shortfalls in the medium or long term.”

High inflation has a particularly negative impact on low-income households. According to a recent Macroeconomic Policy Institute study of Germans' spending habits, inflation reached 8.8 per cent last year, just under one percentage point higher than the overall inflation rate (IMK).

In contrast, inflation was only 6.6 per cent for high-income singles. The latest government relief measures had narrowed the “social gap” in the severity of inflationary pressure, but it was “by no means closed,” according to the institute.