Self-employment as a motor for advancement: Germany is socially more permeable than expected

Dhe economic rise in Germany has many faces. One of them is that of Nabil Essadik. Essadik has a black beard, a bald head – and a company. Since 2008 he has been running the mobile phone repair shop iPhoneStudio in the Bockenheim district of Frankfurt.

“After school, I did an apprenticeship as a clerk in a clothing store,” he says. A degree was out of the question for him: “I wanted to start quickly and earn money directly.” His father had also trained as a car mechanic. His grandfather came from Morocco as a guest worker.

Essadik worked at Zara but didn’t stay there long. “I noticed what a large turnover they make and how little the employees get from it.” So he founded his mobile phone shop at the age of 23. “Back then there were hardly any iPhones, most cell phones were really old things,” he says and laughs. He acquired the necessary knowledge himself: “I started by repairing the cell phones of the neighborhood children and kept going.” He now has three employees.

The 37-year-old Essadik describes himself as a social climber. And he says that his independence is the reason for this rise. He is one example among many of how children from working-class families can be better off financially than their parents. Independence is particularly important for this, as new research shows.

Is Germany really that impermeable?

When it comes to income mobility in Germany, the story of a country that has lagged behind in international comparison and offers its working-class children hardly any opportunities has persisted for a long time. In 2018, an often-cited study by the Organization for Economic Co-operation and Development (OECD) appeared to show just that.

According to the scientists at the time, it took an average of six generations for people from low-income families in this country to catch up with the middle class. Income mobility is at the level of Chile and Hungary, well below the OECD average and even further below the top performers Denmark, Norway, Finland and Sweden.

The result surprised many economists, as it was much more pessimistic than previous studies. Shortly thereafter, the Munich Ifo Institute calculated that it was a statistical outlier. Nevertheless, the story got stuck in the public discourse.

Independence as the key

A still unpublished study by the employer-related Institute of German Economy (IW) in Cologne, which is available to the FAS, raises even more doubts about the OECD results. Because, argues IW researcher Maximilian Stockhausen: The data on the basis of which Germany looks so bad has a blind spot. The OECD only considered dependent employees.

People who become self-employed, like Nabil Essadik, were not included in the study. The self-employed have a much higher “income dynamic,” writes Stockhausen. That means: Income goes up much faster – and sometimes also down.