Breaking down the clichés: consumerism and income in East and West Germany

February 2010

It is almost 20 years since Germans celebrated the reunification of their country. In these two decades, the intention was for East and West to grow together. As far as consumerism is concerned, at first glance, this aim seems to have succeeded, since consumers meanwhile certainly seem to exhibit similar behavior. However, in terms of income, there remains a disparity, and not only between East and West.

The anniversary of the fall of the Berlin Wall was celebrated for the 20th time in autumn 2009. After a transformation which has no equal in history, monetary, economic and social union followed within the space of a year. Germany would become one, and at least at consumer climate level this union seems to have become a reality one generation after the historic change in East and West Germany. These are the findings of a study carried out by the GfK Association in conjunction with GfK Marktforschung.

Full shelves instead of long queues

The fall of the Wall marked an end to shortages of consumer goods in the East. Formerly empty shelves were filled, and with this consumer sentiment rose. Indeed, in the initial years of the reunified Germany, the improvement in the consumer climate in the East even exceeded that in the West. The upward trend in the indicators for 1998 and 1999 was completely in line with the growing together of East and West, however, before the millennium, the East markedly lost ground to the West. A glance at the job market statistics shows what caused this erosion: in 2000, a good 18% of East Germans eligible for work had no jobs, a sobering statistic after ten years of German reunification. In the West, the figure was not even half this and the number of unemployed had dropped more steeply since the end of the 90s than was the case in the East. However, a subsequent drop in the number of unemployed then allowed the new German states to catch up significantly between 2006 and 2007. Since then, the consumer climate has developed along relatively similar lines, although recently, the trend has been downwards on both sides of the former East/West German border.

But what is the actual consumer expenditure in Germany? The first years after reunification were shaped by the East German need to catch up and this resulted in growth rates in private consumption which at times were considerably higher than in the West. The hefty increase in domestic demand coupled with the introduction of the D-Mark was further encouraged by extensive transfer payments from West to East. However, the promise of the “flourishing landscape” depicted in Helmut Kohl’s vision, started to crumble in 1997. Primarily, growth in private consumption was decidedly poorer in the East than in the West and although 1998 and 1999 proved to be above-average years, from 2000 onwards, development in the new German states was less favorable.

To this day, the differences remain evident. The findings of the latest purchasing power study carried out by GfK Geomarketing for 2010 show that there is still a clear discrepancy between East and West Germany in terms of disposable income. Out of the 25 regional areas with the lowest anticipated purchasing power, all but one are in East Germany. However, the study also reveals that in some regions, the East, with its comparatively lower purchasing power, is catching the West up. Although Mecklenburg-Western Pomerania and Saxony-Anhalt remain at the bottom of the German state league table, in relative terms, purchasing power is growing, and this is equally true in Brandenburg and Thuringia. In some Western regions, the situation is reversed, with the purchasing power index in most West German states on a downward trend, particularly in Bremen and Lower Saxony. However, in the final analysis, at EUR 17,322 per capita, purchasing power in Bremen still remains at higher level in relative terms than in Mecklenburg-Western Pomerania, where it is EUR 15,672 per capita.

Income expectations: Saarland lagging behind Thuringia

With regard to income expectations, the former East/West German border is no longer the only dividing line between rich and poor. Looking at income expectations between 2004 and 2009 shows that right across the nation, Germans have very different financial expectations for the future. The index bandwidth here is in the range of 52 (in Bavaria and the South Eastern region) to 171 (Munich region) and incidentally, it is worth noting that these two regions are directly adjacent. This shows that there are also some massive disparities within individual German states.

The outlook for rising income have been anything other than good in recent years in southeast Bavaria, in Saarland and in the western areas of the Rhineland Palatinate. The index stands at below 70 out of a possible 100 points, which is more than 30% below the value for Germany overall. The survey subjects in these regions were consequently more pessimistic than the population in the East of Germany, where the index value was in the 70 to 82 point range (southern part of East Germany), and 82 to 94 points (in the northern part of East Germany).

However, notwithstanding all the talk of growing together, it should not be forgotten that still today, people with high expectations of rising income remain harder to find in East Germany. It is consumers in the major conurbations of Munich, Hamburg, Cologne/Dusseldorf and Rhine-Neckar who are most optimistic about the future. Presumably, the availability of qualified and consequently well-paid jobs provides an opportunity for an easier climb up the income ladder. The path to a secure financial future leads to these higher-density population areas, and consequently, in a westerly direction.

Information on this study carried out by the GfK Association and supplementary survey findings can be obtained from Rolf Bürkl, GfK Marktforschung.

Further information on the 2010 purchasing power study: Cornelia Lichtner, GfK Geomarketing.

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