Merz: The Distribution of Income of Self-employed, Entrepreneurs and Professions
The Distribution of Income of Self-employed,
Entrepreneurs and Professions
as Revealed from Micro Income Tax Statistics in Germany
Joachim Merz
1 Introduction
One of the emerging actual trends within the labour market is the sharp increase in work
described as ‘self-employment’. From a long lasting trend - in Germany from the 50s
on - with a declining amount even of the absolute number of the self-employed this
trend has changed in Germany from the early 90s on.
Together with the accompanied structural shift within the labour force the public and
the economic and social policy interest increasingly are visualizing and discussing the
situation and importance of the self-employed, and as a prominent part of it, the
situation of the professions (free-lancer, liberal professions, ‘Freie Berufe’). Multi-
faceted reasons for this and keywords like industrial restructuring with new labour
market flexibility, outsourcing, new government promoted ‘culture of enterprise’, the
‘new self-employed’, escaping from unemployment into (marginal) forms of self-
employment, ‘quasi self-employment’ (Scheinselbstandigkeit) with legal and social
protection aspects etc. might illustrate the complexity.
In a sharp contrast to the growing and actual public interest and discussion the
(scientific) knowledge about the situation of the self-employed is still at its infancy; and
this holds not only for Germany1. The situation is crucial in particular, if the income
situation and distribution is regarded. One of the rare income distribution analyses of
the self-employed and professions are the studies by Merz and Kirsten (1995, 1996)
which, although based on the 1% German Microcensus, still had to deal with grouped
data of specific evaluations of the Microcensus. Another study on the topic ‘who pays
the taxes’ (Merz, Quiel and Venkatarama 1998) analyzes the income distribution of the
self-employed and professions on the basis of grouped public and published income tax
data of 1989 for Germany before the re-unification.
Our study will contribute to this topic diminishing to a certain extent the knowledge gap
of the income situation and distribution of the self-employed and professions. New is
the actual possibility to use for the first time a sound microdatabase to analyze the self-
employed in particular: a 100.000 microdata sample of the population wide German
Income Tax Statistic. New is the comparison between income from dependent and self-
employed work with emphasis on the entrepreneurs and professions, and new is the
1 With regard to research on professions in particular two German institutes are focussing their research in this ares:
Forschungsinstitut Freie Berufe (FFB) of the University of Lüneburg (FFB 1999, our institute), and Deutsches
Institut für Freie Berufe (IFB) at the University of Erlangen-Nürnberg.