German Complaints: Justified or Not?

Spending money is no longer fun. In the supermarket, the butter now often costs three euros, the ice cream parlor wants to have at least four euros for two balls, and the kebab is no longer below seven euros. Inflation was fully struck. “It has become expensive. Nobody can afford that anymore,” it is now being sued everywhere. And will probably be scolded again in the next few days when the new number of inflation comes for June.

But a precise analysis shows that that’s not true. The prices have actually increased significantly since 2021. But we can afford that – again, you have to say.

The inflation rates have been falling for some time, but that does not mean that something is getting cheaper now. No, the prices just rise a little slower. The pain started in the spring of 2021, the price increases left the years of comfort zone of one to two percent a year. That was the result of delivery difficulties in Corona pandemic and basic effects: In 2021, the crisis-related VAT cut, and the energy prices recovered from the low stands in 2020. With improved economy after pandemic, the general prices also rose.

In the spring of 2022, the outbreak of the Ukraine secretary of gas, oil and electricity dramatically and thus all other products that need energy. In October and November 2022, the inflation rate reached its high with 8.8 percent. People demanded a compensation through strong wage increases, which subsequently made goods production and services more expensive. The prices have increased by almost 20 percent over the entire period since 2021.

Many people have the feeling that this number is still understood the true extent. In surveys, they regularly rate inflation much higher than it is. In a survey by the German Economy Institute (IW), the respondents suspected inflation in 2024 at 15.3 percent and 14.4 percent for 2023. In fact, it was 2.2 and 5.9 percent. Inflation particularly overestimated people with low incomes and supporters of parties on the political edges such as AfD, BSW and the left. The often more confident Greens voters, on the other hand, overestimated inflation. However, there are hardly any city-country differences.

The IW suspects that when it comes to their assessment, people have a significant increase in the long -term price level. And the prices that you often encounter in everyday life, especially in the supermarket. “The very high price increases for individual consumer goods such as olive oil, sugar or flour may characterize the price perception above average, since they often end up in the shopping cart in many,” says the IW. Experts speak of the perceived inflation. This coincides with a result of the survey that two thirds of the respondents in 2024 kept the food prices for a lot, but only a quarter of the gasoline prices – although they actually added significantly more. Food and restaurant visits have also increased by more than 30 percent since 2021, but energy has risen by 45 percent.

The complaint of people about the high prices is therefore quite justified, even if they overestimate and ignore the extent that, for example, clothing became hardly more expensive and technical devices even cheaper. However, complaints are not justified that no one can afford the high prices. “People embezzle that wages and salaries have also risen sharply since 2021,” emphasizes Dominik Groll, labor market expert of the Institute of World Economy (IFW). “Since the first quarter of 2021, net hour of wages have grown by 24 percent and thus more than inflation. So people have compensated for the losses by the high price increases.” In 2021 and 2022, the employees still suffered real losses, and since then it has been going up. “The wages have now even reached the pre-Corona level in 2019, taking inflation into account.” Spectacular tariff degrees with increases of ten percent contributed to this.

There are big differences between income and professional groups in wage development. Figures from the Federal Statistical Office, which, however, only begin in 2022, show the highest growth in full-time before part-time staff. The lowest wage groups, the least the middle class and average the high earners, increased the strongest. “This is due to tariff financial statements that provide minimum increases for lower wage groups, so that the percentage increases there are higher,” explains labor market expert Dominik Groll.

Anyone who worked on the minimum wage benefited from the unscheduled increase in 2022 from 9.82 to 12 euros – an election gift from the SPD. The minimum wage is now 30 percent higher than 2021 and thus increased even more than the general wages. For 2026 and 2027, further significantly increases are planned to 13.90 and 14.60 euros. The minimum wage commission has just recommended this. Pensioners, on the other hand, always only benefit from rising wages. For this reason, the increases in the legal pension have not completely compensated for inflation since 2021, but will do this with the increase in July 1st.

For a fair consideration, whether you can afford today’s prices, you should also include the development of other sources of income. Anyone who put on the DAX shares has been able to achieve almost 50 percent price gains since the spring of 2021. Some of them were partly due to inflation, from which companies and their shareholders benefit from higher sales with their products and therefore often larger profits. In contrast, investors could not compensate for inflation with interest systems. Real estate owners even suffered slight losses. They should perceive inflation more serious because their assets are not up to. After all, since half of the citizens are house or apartment owners, this affects more people than the happy but less numerous stock owners.

The general inflation rate is too imprecise for an even more precise picture of those who have more compensated for inflation since 2021 and whoever could compensate it less well. Because people spend their money on different things depending on income. The price increases in the individual products will then meet them differently. For example, low earners spend a higher proportion of food and are therefore more affected by the increased food prices. This is shown by an evaluation of the Hans Böckler Foundation for the FAS, which has to endure families with two minor children and low income from 2000 euros to 2600 euros net income per month (base 2018) since March 2021, namely 19.3 percent. The rate drops with higher incomes and without children. The best way to live with a net income of more than 5000 euros was best. Your inflation rate is 17.1 percent.

However, both values are due to wage development. This shows that groups that have been disadvantaged in inflation have now compensated for the loss of purchasing power since 2021. Of course, this is also based on average values. The more individual the evaluation, the sooner groups can be found that have not yet made up for the price increases. This could be, for example, low -earning families with gas heating. Because gas prices have increased by 82 percent since the first quarter of 2021, but heating oil only increased by 42 percent. Or tenants who have just moved in a popular city and may have to endure more than eight percent rent.

The intermediate conclusion remains: The prices have risen sharply, but almost all of them can now afford due to high wage growth. However, a bit of scolding is still allowed. Because it is not satisfactory that the salary increases only compensated for the losses due to the high prices. “The historical normal case is real wage growth, i.e. more money in the pocket despite inflation,” says labor market expert Dominik Groll. So people should actually earn significantly more than in 2019. But they don’t do that, they have just reached the pre -crisis level.

The poor economic constitution of Germany is reflected here. Five years without real increases have not existed since the turn of the millennium. At that time there was mass unemployment, and the Hartz reforms had not yet been decided. So now the turn is done. But the prospects are not optimistic. Also this year the wage increases will be above inflation. The prices are likely to grow around two percent and wages significantly more, the management consultancy Kienbaum expects, for example, an increase of 3.8 percent. However, only gross. Due to the strong increase in social security contributions, especially the health insurance contributions, the net wages in 2025 could already drop again.