Since 2007, wages in eastern Germany have risen by approximately 79 percent, compared to 61 percent in western Germany This demonstrates a clear trend of stronger wage growth in the east over the long term Available household incomes have also converged considerably While eastern Germany’s income level per capita stood at around 60 percent of western levels in the early 1990s, it has now reached nearly 90 percent
Steffen Müller, a labor market researcher at the IWH, explained that a slight slowdown in the pace of income convergence over the last three years is due to a short-term effect related to the COVID-19 pandemic During the pandemic, disposable incomes fell temporarily in the west while continuing to rise in the east The subsequent recovery in the west has mathematically shifted this difference, but the underlying trend remains one of continuing catch-up growth for the east, compared to pre-pandemic years
The remaining income disparities, according to the IWH, are primarily attributable to the comparatively lower average productivity of eastern German companies and the existing wealth advantage held by western German households The IWH notes that this productivity gap is also closing and does not reflect a lack of performance from eastern German employees Rather, there are a greater number of headquarters for large corporations in western Germany, allowing for significantly higher investment in research and development
“The fact that the income gap is smaller than the wage gap also demonstrates the equalizing effect of the social welfare system, which has significantly contributed to convergence” stated IWH economist Müller He concludes definitively that “the gap between east and west is not widening – in fact, it has significantly narrowed The long-term trend clearly points towards further convergence, even if short-term fluctuations may suggest otherwise”
