I read somewhere that the German billionaire class controls 1T dollars. Why do people earn only 5k after tax ? There seem to be very little opportunities for investment in stock market. Real estate prices too seem insane.
https://news.ycombinator.com/item?id=20647651
Add to that all time lows (zero and below) for German bond yields which has bleak consequences for long time savers (future pensioners). Germany is a nation of savers.
Swiss 10y bonds are at -1%.
We are living in interesting times.
Because Germany is a high-tax-country. People also generally don't have a lot of private pension funds, that's tied up in a publicly organized system that's based on income, and "shared" between employer and employee (that is, the employer will pay half of it directly, which generally means that your pay is lower by that much). You get pension claims instead of building personal wealth.
While there's still a lot of personal wealth to be inherited over the next decades, families appear to have more difficulties building wealth. It's why, whenever somebody says "Germany is a rich country", my instinct is to ask them "what is this Germany you speak of", because there are large differences when you look at the average/median citizen, a very well-off knowledge worker or rich person, or a person living at/below the poverty line.
It's not clear what your point of reference is. If you're wondering why it's much lower than in the US (where the 90-percentile household is probably around 170k USD pre-tax or 9k-10k post-tax), there are many many factors that contribute to the difference. The most important ones (unordered) are IMO:
- USD is probably overvalued by 15%-20% [1]. In the past 10 years, the EUR/USD rate fluctuated between 1.05 and 1.55, currently it's 1.12. It's unlikely that the relative living standards between the US and Germany fluctuated as much as 50% in this period, so a lot of the nominal incomes differences are not real.
- Americans work 30% more hours than Germans [2]
These two factors can explain most of the pre-tax income differences.
The net difference is a bit higher still, due to higher taxes/mandatory payments. I don't have references at hand, but at the €100k level, take-home pay is around 60%-62% of gross, while for an American at $112k it's closer to 70% (federal, state and payroll). No comment about justness, proper accounting for transfers, subsidies, other taxes, mandatory insurances, etc. This is a huge sprawling debate topic, but it's indisputable that disposable income at the same gross is higher in the US than in Europe. IMO, the first 2 factors accounting for differences in gross incomes are more important anyway.
A fairly mainstream economic theory is that the higher European (marginal) taxes are actually a major cause of the lower working hours (and hence lower personal income) [3]. The highest marginal rates actually don't differ that much (typically around 50% in Europe, 45% federal+state in the US), but in Europe the higher rates typically kick in at much lower levels: US marginal rate at $100k is probably around 30%, whereas in many European countries it's already in the 40%+ bracket.
[1] https://www.bloomberg.com/news/articles/2019-06-11/trump-has... [2] https://en.wikipedia.org/wiki/List_of_average_annual_labor_h... [3] https://www.wsj.com/articles/SB109830788286551061
You answered the question yourself no ?
As a side note, the 5k are not actually "purchasing power" or really-really "after tax" as it is usually intended in the US, in the EU there is VAT:
https://en.wikipedia.org/wiki/Value-added_tax
https://en.wikipedia.org/wiki/European_Union_value_added_tax
which is similar to the "sales tax" in the US but that is usually much higher.
In Germany (Mehrwertsteuer) it is (relativaly) low at 19% standard.
Do German states have income taxes?