Recently Friedrich Merz, one of the three candidates bidding to replace Angela Merkel as the head of Germany’s most popular political party, sparked a rowdy debate in the local press and on TV chat shows. The question they were discussing: Who is rich in Germany? And there is a reason why this question is so controversial. Although many others nations see Germany as a wealthy country, the Germans themselves don’t like to categorize themselves that way.
It all started when Merz took part in a round of reader questions for a popular daily newspaper, Bild. Asked about his wealth, Merz – who spent years accumulating lucrative directorships, and who is seen as the party’s pro-business candidate – rather tortuously acknowledged that he earned around €1 million ($1.13 million) annually. But, he insisted, this didn’t make him rich; he was “upper middle class.” That’s despite the fact he owns his own plane.
How to be upper class
Cue talk-show mockery and endless social media memes. Just one example, that a car rental company posted on social media above a picture of Merz: “For €1,000,000 you can be middle class. But for just €99 a day, you can be upper class,” they wrote, referring to the rental price for their luxury vehicles.
But Merz is typical enough in one regard. Regardless of property or earning power, a majority of Germans describe themselves as middle class. Even the rich don’t like to call themselves rich. “In Germany, the population has a large affinity to the middle class,” says Markus Grabka, an economist with the German Institute for Economic Research.
So what is rich in Germany? Since the country has no wealth tax, estimates of Germans’ wealth – rather than their income – is mostly educated guesswork. Surveys show that most Germans tend to think of people richer than they are as “rich.” This means that, like Merz, they never think of themselves as wealthy.
The federal government suggests “three times the median income” is rich, as a rule of thumb. That would give a figure of around €9,500 a month after tax.
And Grabka suggests that the upper middle class earns around €5,700 per month after tax. That amount puts this group into the top 20 percent of German households.
But income is not necessarily the best indicator of wealth, researchers say. It makes a big difference which assets are included in wealth statistics. If, for example, properties that the owner does not live in but owns freehold are also counted, then anyone with over a million dollars’ worth of property is a “high net worth individual,” according to consultants Cap Gemini. Anyone worth over €30 million belongs to the “ultra-high net worth individuals,” with your average millionaires somewhere in the middle. Cap Gemini figures there are 1.36 million millionaires in Germany, a country with a population of 82 million.
Old money rules
However, German millionaires are not quite like those elsewhere. For one thing, most have inherited their money, with only 8 percent working their way to wealth. There are far fewer self-made millionaires than in the US. Sociologist Wolfgang Lauterbach says: “All in all, the German upper classes are characterized by relatively old money.”
Although Germany’s rich usually inherit their money, they tend to favor social influence over self-indulgence. A typical model is the famous Mittelstand: family-owned businesses with strong local ties, determined to pass on prosperity to the next generation.
And they tend to lead to a more typical “millionaire next door” who lives just like you do, but also happens to have inherited a couple of rental properties. Merz himself is actually an unusual figure, much more socially mobile than most. The son of a district judge and grandson of a mayor, he first appeared to be following in his family’s footsteps, into politics. It was only later, as a corporate lawyer and board member, that he moved up to a wealthier class, whether he cares to admit it or not.
In recent years, questions of wealth and poverty have crept back onto the political agenda. The center-left Social Democrats, keen to distinguish themselves from their coalition partner, the Christian Democratic Union to which Merz belongs, are pushing to raise pensions and the minimum wage, with funding from increased taxes on top earners. The Greens, now the principal opposition party on the left, are toying with the idea of a guaranteed basic income.
Less unequal after benefits
Further left, Sahra Wagenknecht, the more radical co-leader of the Left Party, has carved out a prominent media profile decrying inequality. “Together, the richest 1,000 Germans own more than €1 trillion, more than ever before,” she says.
Wagenknecht is right about one thing: Germany does have unequal wealth distribution, with a Gini coefficient – a gauge of economic inequality – of 0.49 in 2014. That's higher than in the US, which scored 0.47. (The closer a Gini coefficient is to one, the higher the inequality, with zero indicating absolute equality.) But Germany's figure comes before redistribution through tax and welfare contributions. If this is taken into account, inequality between Germany’s rich and poor falls to 0.29, around the same level as in Scandinavia, which is generally seen as a European benchmark.
And it is also true that Germany’s wealthy pay a fair bit of tax: The upper 10 percent of the country's taxpayers contribute about 50 percent of income tax. Add another 10 percent of high-income earners, and the upper 20 percent of Germany’s wealthy account for two-thirds of all income tax.
Christian Rickens is a Handelsblatt editor at the Düsseldorf headquarters. Brían Hanrahan adapted this article into English for Handelsblatt Today. To contact the author: email@example.com