Germany Causes of Inequality and Poverty

Inequality and poverty are factors that countries all over the world are attempting to tackle. Before one can address these issues it is important to understand them. A country like Germany has seen is share of Inequality and poverty on the sharp rise since the 1990s which can be observed in Figure 1 below.

The reasoning behind this increase in inequality is hard to directly pinpoint but some main factors that have contributed are household demographics and employment outcomes. According to the Federal Statistical Office found 15.9% of Germany's population is at risk of falling below the poverty in 2020. Starting from birth, factors like being born into a single-parent household, being a part of an ethnic minority, your parent’s job status, and your family's historical wealth position are all factors that contribute and influence a person’s future income position. Looking at the 90s throught the mid 2000s we can begin to better understand this inequality.

Figure 3 above shows how the unemployment rate rose after the 2000s period in similar enlightenment with the figures of development of income inequality in Figure 2. With the increase in unemployment it is reasonable to expect a increase in income inequality. Just looking at different depencescies on income at various income levels you you can understand this to be true. For example a job loss in a low income household may effect the allocated necessity income. Others in high income groups may have more savings or disposable income to cover necessities.

SOURCES:

Biewen Martin, Understanding Rising Income Inequality in Germany, July 2010 (Link)

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Aggregate Demand

Balance of Trade Consumer Spending Government Spending Business Confidence You can tell a lot about Germany's economy from the following graphs. For instance, looking at Government Spending and Business Confidence first you can see that Germany's government has stepped in with spending when in periods of lows. Taking these graphs to represent Germany's economy you could say that Germanys economy has been a bit shaky and in the big picture having very slow growth. In relation to Aggregate Demand, I also see strong similarities to Real GDP as seen in my last post. Given that the following information comprises aggregate demand and similarly GDP, I think it is understandable to see similarities between the two.

WTO

Germany has been a WTO member since January 1st, 1995. It has also formally been a member of GATT since October 1st, 1951. Germany’s membership is under the European Union. WTO has allowed Germany free trade with other countries on a fair, predictable, and evenly negotiated level. The EU has been a big component in pushing for trade from small developing countries and countries outside the organization. Germany ranked number 3 in exports according to The Atlas of Economic Complexity, It is understandable that Germany would want all the benefits of free trade. In 2017, 46.5 percent of German merchandise exports and 51.6 percent of imported goods were intermediate products according to the World Trade Organisation (WTO). Attached to this is trade among similar products which gives German consumers the benefit of a variety (BDI). Germany a large exporter of motor vehicles could trade motor vehicles with the US and vice versa leaving Germans with options between us and German Motor Ve...

Brooks’s Germany Blog

Note: in USD Germany has the strongest economy in Europe and based on the following data I believe that Germany is just now coming off its peak and is likely going to head into a recession. This is seen with the climbing inflation rate combined with the decreasing account balance. Keeping in mind the recent events of the corona virus that has hurt many economies I wouldn't be surprised to see Germany enter a recession.

Economics

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