Senior poverty and the gender pay gap in Germany—what’s the connection?

Poverty in old age is a lot more common than you might think. In Germany, senior poverty affects 22.4% of people over 80. And even more shocking, the majority of them—by a full 9%—are women. Not only are more women experiencing senior poverty, their average monthly pension is also €300 less than it is for men. But why? Well, there are lots of reasons for old-age poverty in Germany. In this article, you’ll find out what senior poverty actually is and what role the gender pay gap plays. Plus, we’ve put together a recommended reading list to help you build your financial literacy and safeguard your own future.  

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More than a fifth of people over 80 have €1,167 or less to live on each month. That’s according to a study funded by the Federal Ministry for Family Affairs, Senior Citizens, Women, and Youth. This amount has to cover rent or property taxes, utilities, food, medication, care, and much more. Especially in light of the current inflation, many seniors simply don’t have enough money to meet their basic needs. Instead of being able to enjoy their old age, they’re spending their retirement years living below the federal poverty line.

But why is €1,167 considered the poverty line in Germany? Well, it’s partly determined by the median income, which is the midpoint of the national income range. In other words, 50% of Germans have a net income below this amount, and the other 50% are above it. When your income dips too far below the median income, you’re considered at risk for experiencing poverty. Currently, the poverty line in Germany is set at 60% less than the median income, which works out to around €1,167 per month.

Of course, poverty is a real, complex experience and not just a statistical calculation. That’s why it’s important to draw a distinction between absolute and relative poverty. When we discuss poverty in Germany, we’re generally talking about relative poverty, which looks statistically across the wider population. Absolute poverty, on the other hand, is determined by individual circumstances. It takes other factors into account, like assets and possessions, and indicates whether people can afford food and other daily necessities or not. 

As we mentioned, women make up the majority of people in Germany who experience poverty in old age. So, why does poverty affect women more than men in old age? One reason is the traditional division of roles within families. When women stay home and handle childcare and domestic labor, their care work goes unpaid, despite the fact they’re making an important contribution to society. And, without earning money of their own, women are also less likely pay into their pensions. For today’s seniors, this family model was the norm when they were in their prime earning years, meaning many women never held a job. Instead, they spent their time looking after their home and family—and they’re now the most heavily affected by old-age poverty.

These days, many more women are part of the workforce. The traditional family model is being redesigned: many couples share childcare responsibilities, and others decide not to have children. For some heterosexual couples, it’s the male partner that stays at home. And yet, the working women of today are still more likely to be hit by senior poverty later on, with one big reason: the gender pay gap in Germany.

The term “gender pay gap” describes the salary differences between men and women. It’s also sometimes known as the “salary gap.” The gender pay gap in Germany has dropped to 18%, down from 22%, in 2000. That said, women’s average gross income has remained below men’s at a fairly constant level. On average, women earn €4.08 less per hour than men do—which adds up quickly when you think about how many hours are worked in a year. Those 4+ euros each hour translate to thousands of euros lost by women in their annual salary compared to men. The adjusted gender pay gap isn’t quite as high: in 2019, women in Germany earned “only” 6% less than men by this metric. Let’s take a closer look at what this means.

Just like relative and absolute poverty, there are different ways to calculate pay discrepancies. The unadjusted gender pay gap simply describes the gap between the average gross hourly salaries of all working men and women. The adjusted gender pay gap includes other factors, like education, scope of work, professional experience, and position.

For example, more men than women hold leadership roles in companies. And, if you’re a manager, you receive a higher salary. Women are also more likely to work part-time, which in turn reduces their income. The adjusted pay gap takes these structural factors into account. By highlighting other things that can increase the pay gap, it shows that gender inequality in the workplace is about more than just your hourly wage. It’s also about established structures that prevent women from earning more. Let’s take a closer look at two of them.

Women often choose careers like care work, social work, or childcare. Although these professions are crucial to our society, they aren’t paid as generously as other jobs. Of course, many women work in IT, consulting, or law—and there are men who become social workers, too. But overall, women still make up the majority of workers in lower-income professions, which is one major reason for the salary differences between men and women.

As we’ve discussed, women are less likely to hold managerial roles. The Berlin-based German Institute for Economic Research has developed an indicator for this, known as the gender leadership gap (GLG). The trend is clear: from board members of major DAX companies to top-tier politicians or managers at mid-sized firms, the overall proportion of women in leadership positions remains low. The average GLG was 17% from 2001 to 2014. This number reflects the difference between the proportion of women overall (51%) and the proportion of women in managerial roles (34%) in the companies studied.

The data for 2022 isn’t available yet, but there’s no sign that the proportion of women managers has leveled out. Over the last few years, though, a lot of work has been done to find solutions to senior poverty and improve women’s finances overall. 

Gender inequality is increasingly a topic of global conversation. We’re slowly seeing changes closer to home, too—like International Women’s Day being made an official public holiday in Berlin. Besides the international discussion, there’s a growing number of articles and even podcasts exploring senior poverty and the gender pay gap from a German perspective. For the German speakers out there, here are a few that we recommend:

• Why do women typically earn less than men? Henrike von Platen explains in episode #061 of the “herMoney Podcast.” 
• In the “Female Finance Podcast,” Janin Ullmann talks to Ann-Katrin Schmitz about the gender pay gap, pensions, and how much money you need to be happy.
• Read more about the gender leadership gap—and how we can bridge it—in finance, baby! magazine.
• What does poverty in Germany actually look like? The TV film “Auf der Straße” (On the Street) follows a woman, played by Christiane Hörbiger, as she slips into old-age poverty.  
• Which countries offer the best opportunities for women? Find out in our broad-spectrum study on equal opportunities for women around the world (also available in English).

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Even though traditional gender roles are becoming a thing of the past, the gender pay gap continues to affect women and put them at risk of poverty in old age. But don’t get disheartened: you can change your financial future—starting today! These eight fascinating finance experts, like Madame Moneypenny’s Natascha Wegelin, are a brilliant source of inspiration and information. And with N26 as your mobile bank, you’ll get innovative tools to easily manage and save your money.

N26 Spaces lets you create up to 10 sub-accounts—and set money aside every month for your pension or investments. Handy features like Round-Ups and the N26 Income Sorter help you set aside money automatically. Just turn on the features and watch your savings grow. Our blog also has helpful info, like how much to save for retirement or tips for salary negotiations. We know that financial literacy is an obstacle for many women, so we’ll be adding more resources to help you build your knowledge and confidence. Let’s make the world a bit fairer—stay tuned!