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East Germany Wages and Prices
Wage policy is an important part of East German social
policy. Minimum wages are set by the government and have been
allowed to rise gradually over the years. The minimum was raised
to 400 GDR marks in 1976; about one-seventh of the work force
earned the minimum. The average monthly income of a worker rose
from 558 GDR marks in 1960 to 1,140 GDR marks in 1985. Income
differentials existed, however, depending on the sector of the
economy in which the worker was employed. In the mid- 1980s, the
income of workers in retail trade averaged approximately 26
percent lower than the pay of workers in energy, fuel, and
metals. Differences in income also reflected levels of training,
education, and responsibility; the differences were likely to
remain as long as it was necessary to attract workers into
priority industries. Material incentives, in the form of cash
bonuses and extended holiday time, were used to encourage
increased productivity.
Pricing policies are meant to achieve the same effect as wage
policies. During the 1970s, the government committed itself to
maintaining stable prices on staple goods and providing luxury
items to meet consumer demand. As of the early 1980s, food prices
had remained frozen for more than a decade, and rents were set at
extremely low levels. Since prices have not been allowed to
reflect actual economic conditions (in particular the slowdown in
economic growth), the government has had to subsidize certain
products to keep prices low and stable. In the mid-1980s,
subsidies for food, rent, and commuter fares amounted to onethird of total state expenditures. In 1983 the government spent
over 12 million GDR marks to support food prices. From 1980
through 1983, rent subsidies averaged 8.3 million GDR marks a
year. These subsidies strained the state's budget, which in turn
led to a lower rate of increase. For example, between 1979 and
1980 subsidies for commuter fares rose by 7 percent. By contrast
the rate of increase from 1982 to 1983 was 3.2 percent.
Because of the price-support policies of the government, the
standard of living rose in the early 1980s. Per capita
consumption of meats and meat products and fresh vegetables and
fruits increased while consumption of potatoes and cereals
decreased (see
table 3, Appendix A.) Many luxury goods were made
available to the consumer, and consumers proved to be anxious to
purchase them despite exorbitant costs and lengthy delivery
times. A television set, for example, cost about twice the
monthly income of a worker, yet the percentage of households
owning a television rose from 49 percent in 1965 to 93.4 percent
in 1985. In 1965 only one-quarter of households had refrigerators
and washing machines; by 1985 there were 91.8 washing machines
per 100 households and 99 refrigerators per 100 households. In
1985 a car cost eight or nine times a worker's average monthly
income, and delivery took up to six years. Only 8 percent of
households owned an automobile in 1965, but almost 46 percent of
households had acquired one by 1985.
In comparison with their East European neighbors, East German
workers enjoyed a comfortable standard of living in the mid1980s , although it was not as high as that of West German
workers. The government, however, was expected to have difficulty
maintaining the standard of living. As more goods become
available, consumer demands and expectations are likely to
multiply. Ultimately the economic situation will affect the
pricing and rate of production of consumer goods.
Data as of July 1987
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