Many salary is not enough to live on due to high inflation

According to their own statements, almost a third of the employees in Germany are reaching their financial limits because of the significantly higher prices. In a Yougov survey, 21 percent of a good 1,000 employees answered that their salary was “rather not” enough to pay for ongoing living expenses. 8.5 percent said the money was “not enough at all”. The survey was commissioned by Postbank, which belongs to the Deutsche Bank Group.

In particular, respondents with a monthly net household income of less than 2,500 euros can hardly make ends meet: 43 percent in this group stated that they could not pay their current living expenses with their current salary.

The high inflation in Germany that has been going on for months is a burden for consumers. It saps their purchasing power, people can afford less for one euro. In April, inflation in Germany slowed for the second month in a row, but at 7.2 percent the inflation rate was still comparatively high. Consumers had to pay 17.2 percent more for food in April than a year earlier. Energy prices rose by 6.8 percent over the year. The federal government strives to make natural gas, electricity and district heating more affordable through the price brakes that apply retroactively to January 1st.

With a series of interest rate hikes since July 2022, the European Central Bank (ECB) to curb high inflation. Higher interest rates make loans more expensive. This can slow down demand and counteract high inflation rates. In the medium term, the ECB is aiming for price stability in the euro area with an inflation rate of two percent.

“But inflation is not just an economic problem, it’s also a social problem. Those with the lowest incomes are hit the hardest by rising prices,” said Ulrich Stephan, Deutsche Bank’s chief investment strategist for private and corporate customers. “In this respect, it can also make sense to raise wages, especially for these groups. However, care must be taken to ensure that aggregate demand is not further fueled by higher wages.”

After all, every second respondent (53.6 percent) expects a salary increase in the next twelve months – most of them on the basis of a collective bargaining agreement or thanks to successful individual salary negotiations. According to the data, in the group of those whose current salary is not enough to cover the cost of living, a good four out of ten respondents (43.6 percent) have the prospect of increasing salaries.

By no means all employees receive the tax-free inflation compensation bonus: almost half (48.8 percent) stated that they did not expect their employer to pay them. Almost a quarter (24.5 percent) have already received such a bonus, and 18.7 percent expect it to come. The state gives employers the opportunity to pay up to 3,000 euros per employee tax- and duty-free as an inflation compensation premium by the end of 2024.

(dpa)