The current crises are eating away at people’s money. The war in Ukraine is causing energy prices to rise, inflation is making everyday life expensive. Anyone with wealth is well positioned in such times. However, 40 percent of Germans have next to nothing – and that plunges them into dependence and bondage.

Wealth means security. Thoughts of old-age provision then do not cause any worries, the future of the children is secured, emergency situations do not hit you so hard. A luxury that many Germans don’t have. Because in Germany there is one of the greatest inequalities in private wealth among the industrialized countries.

Marcel Fratzscher explains why on Twitter. For the professor of macroeconomics at Humboldt University and President of the German Institute for Economic Research (DIW) in Berlin, the core problem in Germany is that almost 40 percent have almost no assets. That is unusually much. This takes revenge, especially in times of crisis. And that makes those 40 percent “heavily dependent on the welfare state and limits their own autonomy and freedom”.

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A look at the private pension gap in selected OECD countries also makes it clear that Germany has one of the largest pension gaps for old age, “because many people (can) build up too few of their own savings/assets during their working life,” says Fratzscher. This gap is least pronounced in countries such as Estonia, Slovenia or Luxembourg. The largest pension gaps can be found in Italy and France, for example, with Germany leading the way.

The status quo also means that the average household in Germany has significantly fewer assets than is the case in other countries. That does not mean that there is less private wealth in Germany. Rather, that it is distributed more unequally in this country, explains the economist.

And Fratzscher adds: “The inequality of private wealth is significantly higher than the official statistics show, since the wealthy are usually not recorded.” With the help of data from the Socio-Economic Panel (SOEP) of the DIW, one of the largest and longest running multidisciplinary panel studies worldwide, Fratzscher and colleagues have attempted to correct this data gap.

How our irrational relationship to money divides society – Marcel Fratzscher

The work of the DIW shows that the concentration of wealth in the area of ​​high wealth is greater than previously assumed. The analysis shows:

The wealthy have an average net worth of almost EUR 300,000 and the approximately one million millionaires in Germany have assets of EUR 3 million on average. An average adult in the bottom 50 percent of the wealth distribution, on the other hand, only has a net wealth of 3682 euros.

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The DIW analysis also breaks down how the assets are held by the respective groups. Fratzscher summarizes: “The wealthy hold 40 percent of their wealth through business assets and 40 percent through real estate. The bottom 50 percent keep almost all of their savings in the form of investments and…cars.”

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The study also reveals who is among the wealthiest in Germany. They are characterized by six characteristics:

“Three of these characteristics are compatible with the performance principle, three are not,” writes Fratzscher, emphasizing the regionally very unequal distribution of wealth. This is particularly evident when looking at the shareholdings of the wealthy in companies. In short: the proportion of top shareholders in the adult population is higher in western Germany than in the east of the country.

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The graphic from the study illustrates the imbalance and shows where people with high stakes in companies live:

Fratzscher also notes that the share of national income for the poorer half has almost halved – from 33 percent in the 1960s to 17 percent today. “This is an important reason for the increase in wealth inequality,” said the DIW President.

He recommends seven things to include in the wealth discourse in Germany: