Description and meaning of the component

The income distribution is important as a weighting factor (the only one in the NWI) for private consumption expenditure, i.e. component 2. This is based on the welfare-theoretical assumption, that an additional amount of income, for example 100 €, means a much higher additional welfare for a low-income household than a similar addition to a high-income household.

A low Gini-Index represents a more equal distribution - a higher value a more unequal distribution. Usually changes towards a more equal distribution are regarded as positive. This is not only because of general sentiments of justice. There is a lot of evidence that lower income inequalities improve social cohesion and the ability of societies to overcome economic crisis. Therefore, the Gini-Index is a indicator of the realization of a social market economy.


Description of Indicator trends

Many studies in social sciences show that a modest inequality in income distribution generally has positive effects on society as a whole. For the development in Germany the following evaluation can be made: The Income Inequality as measured by the normalized Gini-Index remained relatively constant between 1991 -2000. The inequality level was lowest in 1991, when the Index value was 96,5 . After 2000 the inequality was considerably rising up to its maximum of 113,2 in 2005.

This deterioration was caused by stagnation of real wages and simultaneously rising incomes for the upper classes, additionally gaining income from capital assets.

The fall in the normalized Gini-Index between 2005 to 2008 to a value of 111,6 can one the hand be traced back to the financial- and economic crisis, that at least in the short-run also hit higher (capital-) incomes. Furthermore the unemployment statistics showed a significant decline of people unemployed, which has positive effects on the society’s income distribution. After that period, the normalized Gini-Index is rising again to the value of 114,2 in the year 2013; in 2014, it is a little lower (114,0). During the last decade, it is on a comparably high level.

Not yet considered here is the role of wealth-inequality.