How Underpaid German Workers Helped Cause Europe’s Debt Crisis - NYTimes.com

How Underpaid German Workers Helped Cause Europe’s Debt Crisis - NYTimes.com

To understand a crucial reason for the European financial crisis that nearly caused a global financial collapse and threatened to undo a six-decade push toward a united Europe, you could look at a bunch of charts of bond markets and current account deficits and fiscal imbalances.

Or, you could take a look at new data compiled by LIS, a group that maintains the Luxembourg Income Study Database, that shows how income is distributed in countries around the world. It offers a surprising insight about why Europe came to the financial brink.

In most advanced economies, the middle class made significant advances in earning power over the last few decades, even if the rich have done quite a lot better. But one major country stands out as the exception, with middle-income workers seeing no meaningful increase since the 1990s.

It is Germany, the largest economy in Europe. And the numbers are remarkable. From 2000 to 2010, after-tax income for people in the middle of the income distribution in Germany increased 1.4 percent. Not per year. Total.

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