Why are salaries in Europe so much lower than in the US?

SharpshooterTom

So I was looking at the median household income's by country (approx figures), and surprised to see how much higher than median wage is in the US, compared to not just Europe, but other western countries like Canada and Australia.

USA - $60,558
Australia - $49,126
Ireland - $47,653
Canada - $47,622
Germany - $47,585
France - £43,755
UK - $43,732

https://www.pewresearch.org/fact-tank/2017/06/05/through-an-american-lens-western-europes-middle-classes-appear-smaller/ (the figures from this article are from 2010, my figures are the more updated ones from 2016/2017)

People will point out the fact that American's have to pay for Health Insurance (on average $6000 annually), but they also have lower taxes compared to most other countries to offset this. They also have bigger houses on average for their money, obviously better weather. The US has become a bit of a laughing stock for electing Trump, seeing mass shootings every other week, people mocking it as a "third world country". Their healthcare is actually one of the best in the world, its just a moral question of accessibility and who gets it.

But why are the wages so much better over there compared to here? Scandinavia are the closest to the US ($55,000) but even they pay very high taxes. Canada is also a lot lower too, similar to the UK/Ireland. When it comes to salaries and disposable income the US is still streets ahead of everyone else, but why exactly?

ToddyDoody

In parts of Eastern Europe it usen't be uncommon to get paid with building materials.

danger mouse

Europeans only work 10 months a year, Americans are lucky to get 10 days leave.

wingnut

Yeah the median is higher but is income inequality so it doesn't give you the full picture. You make it sound awesome but for me it's a nice place to visit but I certainly wouldn't want to raise my kids there.

SharpshooterTom

wingnut wrote: »

Yeah the median is higher but is income inequality so it doesn't give you the full picture. You make it sound awesome but for me it's a nice place to visit but I certainly wouldn't want to raise my kids there.

I'm not, but a lot of people do look down on the US, particularly for those who live outside it seeing mass shootings, healthcare debacle, Trump, the Republican party etc. And they are very valid criticisms, but there are clearly some measures its still the best (or near the best) in the world at.

Money doesn't guarantee you happiness obviously, but I was surprised to see how much it led the way on average incomes still.

ytpe2r5bxkn0c1

Like so many statistics, it depends on how it's all correlated and which 'average' is used.


Another report shows:

Switzerland 80,560 $
Norway 75,998
Iceland 60,830 $
United States 58,270 $
Ireland 55,290 $
Denmark 55,220 $
Singapore 54,530 $
Sweden 52,590 $
Australia51,360 $
United Kingdom 40,530 $

Sabrebo

I'd say probably because they're more productive throughout the year. Waiting for someone to prove me wrong with stats now.

For the past two decades productivity growth has been anaemic so not surprised to see the UK so low.

Unpaid leave might be part of it alright, longer hours.. I recently met an old colleague who moved over there a few years ago and it was a bit shocking to hear about the working conditions compared to Europe

Franz Von Peppercorn

Sabrebo wrote: »

I'd say probably because they're more productive throughout the year. Waiting for someone to prove me wrong with stats now.

For the past two decades productivity growth has been anaemic so not surprised to see the UK so low.

Productivity hasn’t much to do with wages, unless workers are well organised enough.

SharpshooterTom

Samson Tasty Dingo wrote: »

Like so many statistics, it depends on how it's all correlated and which 'average' is used.

Another report shows:

Switzerland 80,560 $
Norway 75,998
Iceland 60,830 $
United States 58,270 $
Ireland 55,290 $
Denmark 55,220 $
Singapore 54,530 $
Sweden 52,590 $
Australia51,360 $
United Kingdom 40,530 $

Yeah I'm kind of a novice to some of these figures, that's why I'm asking to see if there are people on here who know better and tell me if they're misleading.

I knew mean incomes would be wrong because the US has a ridiculous number of millionaires and billionaires, so searched for median income, which it still leads the way.

Sabrebo

Franz Von Peppercorn wrote: »

Productivity hasn’t much to do with wages, unless workers are well organised enough.

The more productive workers are the more employers can pay them. Productivity is also a function of the amount of capital within an economy. Developed countries generally have higher levels of investment making employees more productive.

ytpe2r5bxkn0c1

ThomasFlynn wrote: »

Money doesn't guarantee you happiness obviously, but I was surprised to see how much it led the way on average incomes still.

It doesn't lead the way. You're quoting the median figure and ignoring an absolutely massive wage gap inequality in the US.


Turn the statistics on their head and look at % of people living on less than $5.50 per day.


Ireland 1%
Australia 0.7%
Germany 0.4%
France 0.7%
Sweden 1%
USA 2.1%

Wibbs

Sabrebo wrote: »

I'd say probably because they're more productive throughout the year. Waiting for someone to prove me wrong with stats now.

The last time I looked US workers were around fifth most productive in the West, the other four worked shorter working weeks and had far more holidays and ancillary benefits, both as employees and citizens. They were also "happier" according to such indexes. The US actually scores even lower on that metric.

ytpe2r5bxkn0c1

Sabrebo wrote: »

I'd say probably because they're more productive throughout the year. Waiting for someone to prove me wrong with stats now.

For the past two decades productivity growth has been anaemic so not surprised to see the UK so low.

A piece here on productivity by country.

Interesting findings.

http://time.com/4621185/worker-productivity-countries/

Amirani

It's a market economy, much more so than in Europe. Everything is commodified and has a cost. Corporations as a whole are a much bigger part of society and they earn far more than their European equivalents. These factors feed down into how much employees (particularly good ones) get paid.

As mentioned above, workers tend to work longer hours - this needs to be compensated. It's also quite a competitive labour market, particular in the upper quartiles - this leads to people being paid more. And the market effects of certain workers being paid more, does tend to lead to other workers providing ancillary services being paid more. That said, it can also be a driver of inequality.

Franz Von Peppercorn

Sabrebo wrote: »

The more productive workers are the more employers can pay them. Productivity is also a function of the amount of capital within an economy. Developed countries generally have higher levels of investment making employees more productive.

Again it depends on how organised labour is. Productivity can increase without wages increases. Instead profit increases.

SharpshooterTom

Samson Tasty Dingo wrote: »

It doesn't lead the way. You're quoting the median figure and ignoring an absolutely massive wage gap inequality in the US.


Turn the statistics on their head and look at % of people living on less than $5.50 per day.


Ireland 1%
Australia 0.7%
Germany 0.4%
France 0.7%
Sweden 1%
USA 2.1%

I'm aware of its huge amounts of poverty, but if the $60k figure is correct, that means 50% of Americans are earning at least that.

You get some smug (but possibly correct) articles like this:

https://www.forbes.com/sites/timworstall/2014/08/25/britain-is-poorer-than-any-us-state-yes-even-mississippi/

I personally can't believe the UK is poorer than Mississippi even after accordance with power purchasing parity, but apparently it is.

Wonder what it will be like after a no deal brexit, probably fall behind Puerto Rico.

MJohnston

USA:
29th in the world on the Healthcare Access and Quality index (behind most of Western Europe)
40th in the world in educational performance (below the International Average)
Highest health care spend per capita (by quite a distance too) in the world
One of the lowest levels of foreign aid per-capita among wealthy countries
Awful income inequality much worse than most of the EU (especially if you take the UK out of that equation).
Higher murder rate than all of the EU except Ukraine
No right to paid MATERNITY leave, let alone paternity leave
A base entitlement of ZERO days of any kind of paid time off (yes, that includes Public holidays too) (oh and there are no guaranteed paid sick days either)
Expensive primary and secondary education costs
Massively expensive university costs

Frank O. Pinion

Everything is so much cheaper in America, too. You can get 10 chicken nuggets at Burger King for $1. 10 chicken nuggets for $1.

10 F*CKING NUGGETS FOR €0.89!

Beasty

In the US you have to fund your own healthcare and pensions

Anteayer

Huge overheads in the US that are probably largely employer's PRSI type charges in Europe.

Healthcare, pension and third level education is very much more expensive.

Sabrebo

Samson Tasty Dingo wrote: »

A piece here on productivity by country.

Interesting findings.

http://time.com/4621185/worker-productivity-countries/

The first thing that comes to mind when I see Ireland and luxembourg at the top is AIFMs and UCITs investment vehicles. Ireland and luxembourg are the two prominent nations to have enacted and taken adavabtage of these as well as generally being fund admin hubs for funds globally. That draws in huge flows of wealth.

AMKC

Ireland - $47,653 Your doing ok if your are lucky enough to be earning that kind of money a year whether it is in Euro,s or dollars.

Anteayer

Frank O. Pinion wrote: »

Everything is so much cheaper in America, too. You can get 10 chicken nuggets at Burger King for $1. 10 chicken nuggets for $1.

10 F*CKING NUGGETS FOR €0.89!

You don't want to ask where the beef and chicken came from tho .... Best not to.

Geuze

Beasty wrote: »

In the US you have to fund your own healthcare and pensions

This is true for health insurance, yes, unless provided by employer.

But there is a federal social insurance pension, known as Social Security.

Americans pay FICA, equivalent to PRSI.

Berserker

Beasty wrote: »

In the US you have to fund your own healthcare and pensions

Your employer will cover healthcare, if you have a decent profession, in my experience. Healthcare is atrociously expense over there. Never needed to use mine, thankfully but I was very happy that they covered that. Salaries are higher because you work longer hours and you have bugger all leave. Employees have to pay off loans for third level study also; six figure loans.

Geuze

AMKC wrote: »

Ireland - $47,653 Your doing ok if your are lucky enough to be earning that kind of money a year whether it is in Euro,s or dollars.

Average earnings here for FT workers are 46-47k, so over 50k USD.

BBFAN

Berserker wrote: »

Your employer will cover healthcare, if you have a decent profession, in my experience. Healthcare is atrociously expense over there. Never needed to use mine, thankfully but I was very happy that they covered that. Salaries are higher because you work longer hours and you have bugger all leave. Employees have to pay off loans for third level study also; six figure loans.

You'd need to be earning ten times what you can in Ireland to repay a six figure sum, there's where your difference is coming from.

The average student in Ireland leaves college with no debt. Huge huge benefit.

Berserker

BBFAN wrote: »

The average student in Ireland leaves college with no debt. Huge huge benefit.

I know. I laugh our loud when I hear students here complaining about college fees.

Atoms for Peace

At least the weather here rarely kills anybody.

AMKC

Geuze wrote: »

Average earnings here for FT workers are 46-47k, so over 50k USD.

Where is here? America?