Saturday, May 7, 2016

How to explain the "shrinking German middle class" fact: blame poor immigrants

Measuring income and wealth is complex within a country and even more complex between countries, and there are all kinds of numbers to quote and interpret. So, the blogster, like pretty much everybody else, relies primarily on the media for news.

Over the years, this reliance has become increasingly tenuous, as it* became much more critical, as source information became available on the web, and as reader comments sections offered more than the expected partisan support.

This week, the blogster found a nice fuzzing report in middle of the road conservative Frankfurter Allgemeine Zeitung (in German only) under the headline "Poor migrants cause middle class contraction".

The article starts out fine: More rich, more poor, fewer in-betweens: since reunification, the percentage of middle class residents has dropped from 60 to 54%. What immigration has to do with it."

The piece is based on a study of Deutsches Institut fuer Wirtschaftsforschung (DIW), which is considered somewhat progressive or centrist, depending on your preconceived world view. The study in question deals with the US and Germany, and the article explains differences and similarities of income and wealth distribution. You can find the English version of the press release with the basics here.

How does the economics expert of Frankfurter Allgemeine come to the conclusion that "demographics and immigration are an important factor in shrinking the middle class"? He claims the "under class of the US grew because of strong immigration from Latin America; blacks continue to be over represented in the under class".

The study says that migration "partly" (page 7 of the study) explains the shrinking proportion of the US middle class.

We could argue forever whether the choice of "important factor" is so starkly different from "partly" that it raises a red flag. What should be undisputed, though, is that "partly" (teilweise) does not convey the same emotional weight as "important" (wichtig).

Remember, this was about the US. What does the newspaper man say about Germany? After all, he should put facts behind the headline.

He says "Immigration was also a factor in Germany" [Our translation of "In Deutschland war die Immigration ebenfalls ein Faktor."]

That's not much.

Next, he quotes the study's statement (p. 7), and generally accepted fact, that immigrants tend to have below average incomes for some time after arrival.

The article then goes to quote an "employer friendly" think tank that points out a period of a lull in the decrease of the German middle class and adds the usual blurb about  how higher qualifications are need in today's economy.
He finishes off by quoting the study regarding an increase in the number of young people (ages 19 to 29) who are loosing out.

You might be forgiven to believe the newspaper's claim that the influx of poor migrants into Germany is an important aspect in the decline of the German middle class.

Unless you look at the study and read what it says about absolute numbers:
1) Since 1991, the US population "grew by about one quarter" (25%), "primarily through immigration". So, in absolute terms, the number of middle class residents increased despite the smaller overall share of the population.
2) Germany's population saw small growth, and the share of immigration was lower than in the US, which means the German middle class not only saw a relative decline but and absolute decline of around 2.5 million adults (study, page 7).

How big was the drop?
6 percentage points between 1991 and 2013 for both countries (US from 56 to 50, Germany from 60 to 54), study page 6.
Which, in absolute terms, means Germany failed compared to the US.

So, the econs of Frankfurter Allgemeine took readers for a ride. And they added a short blurb based on the same misleading slant as an OpEd on Saturday.

Sadly, not one of the commenting readers read the study.

* Yes, we are gender neutral and proud of it.

[Update 5/7/2016]
To help understand why the German decline in absolute numbers is serious, here are the population figures.
Population of Germany in 1991: 80.27 million; in 2014:  81.2 million
US population in 1991: 252.98 million; in 2014: 317.68 million

[Update 5/9/2016]
Some more context for Germany:
According to the Federal Civics Education website, wage increases were canceled out by inflation within the 20 year period 1992 to 2012, with real wages down by 1.6 percent.
Real GDP (indexed to 2010 = 100, exactly as for the foregoing wages overview) went from 81.8 to 103.8 in the period 1992 to 2012. That's a real increase of about 25 percent.

This makes it hard to blame "under qualified" immigrants for the shrinking middle class, or for anything for that matter.

As to education, immigrants during the period were generally not "under qualified" but often had better qualifications than Germans, as this study by Bertelsmann (not known as antagonistic towards companies and entrepreneurs) of 2013 showed. The numbers were actually pretty staggering, with 43% of immigrants having a vocational master craftsmen ("Meister"), specialist technician or college degree versus 26% of natives.

During the first big immigration wave of the 1960s/1970s, "guest workers" were generally less qualified than Germans, but the middle class grew.

The 2015 influx of refugees again has fewer better educated folks, but it happened after the period prior to 2015 which shows the German middle class shrank.

[Update 5/11/2016] Headline style, changed "fix" to "explain"

[Update 5/13/2016] The blogster lucked out because it* didn't quote median income figures because the subject was not absolute numbers so much as proportions. So, an error in their calculation by the folks of DIW doesn't change the overall analysis. The econ editor at Frankfurter Allgemeine, though, had a field day with them, despite the fact that the overall drop in the percentage of middle class residents remained almost the same (from "almost 6%" to "over 5%).
Interestingly, the average (mean) income for individual Germans is given at around 31 600 Euros for 2014, whereas the corrected DIW study pegs the "median income" at 53 500 Euros in 2014. To make sense, this latter figure must be a household median income.
Sadly, the professional economics reporter at Frankfurter Allgemeine took the errors at face value (while the blogster did check the figures for the mean income).

* Sitll gender neutral and proud of it.

[Update 5/27/2016] Sorry, being slightly dyslexic is not always fun, so, fixed two pesky errors ("you" --> "young", "over" --> "overall")

No comments:

Post a Comment