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.

riffmongous

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?

Geuze

AMKC wrote: »

Geuze wrote: »

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

Where is here? America?

Here is RoI.

Average earnings of FT workers, including overtime and irregular earnings are 46k approx.

AMKC

Geuze wrote: »

Here is RoI.

Average earnings of FT workers, including overtime and irregular earnings are 46k approx.

Suppose it depend's on your job but the average self employed person does not earn anything like that and neither do their employees. Maybe politicians, IT workers, Nurses, Teachers, Gards and Doctors do but not most privately employed people not by a long shot.

SteelyDanJalapeno

AMKC wrote: »

Suppose it depend's on your job but the average self employed person does not earn anything like that and neither do their employees. Maybe politicians, IT workers, Nurses, Teachers, Gards and Doctors do but not most privately employed people not by a long shot.

IT sector, 47k avg sounds about right

Geuze

AMKC wrote: »

Geuze wrote: »

Here is RoI.

Average earnings of FT workers, including overtime and irregular earnings are 46k approx.

Suppose it depend's on your job but the average self employed person does not earn anything like that and neither do their employees. Maybe politicians, IT workers, Nurses, Teachers, Gards and Doctors do but not most privately employed people not by a long shot.

Please note that I am reporting official CSO data.

Look it up yourself.

Average earnings across all FT workers is 46k approx.

Geuze

https://www.cso.ie/en/releasesandpublications/er/elca/earningsandlabourcostsannualdata2017/

Here is the 2017 data.

Geuze

The 46,402 average earnings covers employees, not self employed people.

It is for FT workers, not all workers.

It includes overtime and irregular earnings.

Charles Babbage

The parts of the USA where high salaries are paid, California, New York etc are quite expensive to live in. Other parts are certainly cheaper but have fewer highly paid jobs. The weather is perhaps better in California, not so much in Chicago.

Qrt

Berserker wrote: »

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

To be fair, SUSI’s threshold isn’t the highest and some students do struggle an awful lot, especially since we have very few loan systems. Add the skyrocketing accommodation costs into the mix and it’s still fairly expensive.

I mean, we’re far far FAR from the worst, but it’s not exactly ideal.

Fourier

ThomasFlynn wrote: »

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.

Read the source you quoted, half of middle class Americans. America has a smaller middle class than EU nations:
https://www.businessinsider.com/american-middle-class-smaller-wealthier-than-european-2017-7?r=US&IR=T

Basically if you get to be middle class in America you'll be richer, but you're less likely to be middle class.

Also you are way more likely to be poor and if you're poor in America you are much more likely to be in a literal poverty situation unable to pay for basic medical needs and adequate nutrition.

suicide_circus

i would agree that there is a large amount of cultural snobbery directed at the US

Manic Moran

There is a rather sizable difference in the various benefits available to typical workers in the US, depending very much on what you do. I'm fairly much in the middle bracket.

My wife and I both have 401ks. It's a "put a portion of your tax-exempt salary into a savings fund" thing. All three of my jobs have provided it, and all have provided matching, which means that if you put a percentage in, the company will match it on a ratio basis. So if I put 5% of my pre-tax money into the 401k, the company pays in an extra 3%. So this is, in effect, a 3% annual bonus which doesn't get reported or taxed. I just can't touch it until I retire, so I'm only personally saving half my income from that source. The exact match figures vary by company. If your employer doesn't do a 401k, there are IRA options instead.

In addition, I can expect a pension from my government job. I expect quite a reasonable retirement. I know a good number of people who have worked for the government for 20 years, and then used the pension (at age 38) as an investment fund while they work a regular salary in the private workforce.

Vacation time tends to be on a very sharp scale. The first year, indeed, vacation is limited, but tends to accrue with seniority. After two or three years, the figures get quite reasonable. I personally get some 6-7 weeks off, including the ten government holidays, I'd need to do the maths. My paid paternity leave was 6 weeks for each kid (one from the government, the second I was working private sector).

Healthcare is expensive without insurance, no two ways about it, but my insurance, through my employer always, has been quite reasonable. The expensive bit is my wife, there is a significant increase in price for a dependent who can work but doesn't. When she worked, her own insurance outlay was barely 10% of what I'm paying now. That said, it's also not too ridiculous a drain. We pay $15 to see a doctor, I don't think it was more than $2000 in the hospital for the emergency C-section. Not enough to put me in the poorhouse.

When I emigrated, it was for higher pay and cheaper cost of living. I found it. As it happened, I also found better weather and some damned good scenery, but that was a by-the-way.

FernandoTorres

All of the figures are converted to $US using exchange rates, so they're of limited use. For example if the FX rate of $US appreciated by 10% against the $AUD over 12 months then it'd look like the median wage of Australia had fallen by 10%, when in reality nothing has changed. All of these comparisons are of limited use when not tied back to the cost of living.

MightyMunster

Working with a few American multinationals at the engineering and automation Graduates hired in USA are starting on 60k USD plus, same jobs here starting on around 30-35Euro. Was surprised at how much they're getting in the US.

I wonder does the lower proportion of 3rd level qualified candidates drive up the wages

Noo

One of the highest infant mortality rates in the western world linked to lack of maternity leave....yeah, no thanks.

_Brian

OP your taking a typically American view of things.

Lots of cash = a great place to live.

I’ve not lived there but worked month at a time and it’s a terrible place. It’s a completely consumerism shallow society and between healthcare and food costs it takes a strong wage to survive.

There is also a huge disparity in wages, much more than here with second jobs being common to make ends meet, its common to see husband and wife holding down two full time jobs plus one or even two additional roles to supplement incomes. I saw great commentary recently that the reason unemployment was so low is because so many people have two and even three jobs to survive.

It’s a third world country dressed up as a developed nation. After a few stints there I turned down a number of assignments as I hated the place so much. While there are a few places like Grand Canyon, Yellowstone id love to visit I find the country so awful I don’t think I ever will.

MightyMunster

A note on cost of living over there is property tax appears to be much higher,one of my colleagues pays $10,000 a year in NJ for example!

Seems a much poorer country compared to here as you drive around. I was in Pennsylvania and a detached house could be bought in a town for $30,000, loads of derelict houses and businesses etc...
Also have never seen highways in as bad a condition in the Western world, massive potholes everywhere, huge gaps between lanes in the road surface

M.T. Cranium

I am not surprised to read these numbers living in Canada. But the differential between the U.S. and Canada is almost negated by our lower health care costs per worker. Otherwise it's a fairly similar situation with most families needing to have both adults and any live-at-home adult children working to make mortgage or rent payments in cities.

If you look at wikipedia articles on towns and cities (and counties) in the U.S. you can easily see that average incomes are about half the national average in smaller towns where housing costs are probably a lot lower, and I know this is true in Canada, so to some extent the standard of living if you are employed is fairly even across the board from higher income to lower income states or provinces, towns etc. The difference may be more in terms of unemployment rates and the numbers of two-income families (in smaller towns it is more common to find a working and non-working couple, and nowadays that is not as often predictable as to gender).

I visit Utah a lot, and have read the stats so I know that there, the two larger urban areas (Salt Lake City to Ogden, and St George) have higher than these median wages and a lot of high tech or service industry jobs, while smaller towns in Utah will usually have median incomes closer to 35k USD. Most of the employment there would be in stores, restaurants and small businesses, or the government (land management and parks, jobs that probably pay a bit higher). And the stats seem to indicate that most households are one-full-time and perhaps one part-time income. That's probably all they need to stay afloat -- house prices and rents in urban areas in North America are anywhere from 3 to 10 times what they are in smaller towns (for comparable housing although the higher end in big cities is probably not represented in the markets of smaller towns at all).

As to the comments about state of the roads, this tends to be more of a problem in the northeast U.S. due to the harsh winter climate and constant freeze-thaw cycles at start and end of winters putting a lot of stress on what is also older infrastructure. Roads "out west" are generally better and if you visit Nevada, Utah or nearby states you'll find that you can drive at 70 mph quite comfortably on even the most basic secondary highways in the grid, and 80 on the interstates unless you're in mountain pass sort of driving situations. You do find a lot of tire debris on interstate highways as big trucks regularly blow tires (they likely don't notice until their next stop as they have so many wheels). That debris usually ends up on the shoulder of the highway but you can find big chunks of rubber in your driving lane on occasion. I also had to avoid the partial remains of a deer killed on the interstate in Idaho on a recent trip. At night that could cause a fatal crash. But in a big, wide open country with a lot of wildlife, these things will happen. There are programs to build more wildlife fences and controlled crossings (overpasses or tunnels) for wildlife. We have these in place on some freeways in B.C. which probably saves lives in both the human and animal populations.

As to the consumerism question, that is a cultural divide question. Some of us who live here are very aware of it and try to reduce it as much as possible. I've visited the UK often enough to have some idea of where the consumerism index rests in the two different societies and would say there's an overlap of two bell curves rather than a total distinction. As our population originated mostly from Europe (and more recently Asia and Latin America) we just have the faults that they had, magnified by exposure to the vastness of resources here. It has to be understood that culturally, we are only three generations removed from the rape and pillage of the land that probably took place in Europe over a longer period of time seven or eight centuries ago. And when you get into frontier areas it is not even that removed. The old ethos was to cut down all the trees and clear all the land. With 20-20 hindsight we would no doubt approach it differently now, but all those forests that you see driving across North America are the second growth after the original forests were totally removed from the landscape (except maybe in a few remote areas).

Wanderer78

_Brian wrote:

It’s a third world country dressed up as a developed nation. After a few stints there I turned down a number of assignments as I hated the place so much. While there are a few places like Grand Canyon, Yellowstone id love to visit I find the country so awful I don’t think I ever will.

Ah shur, they're making it great again, won't be long now

Mad_maxx

Eurozone economy is a basket case for the majority of countries, Spain, France and especially Italy, were wealthier pre 2008

M.T. Cranium

The income question actually ties in to parts of the political question in the U.S. -- for decades, the Republican Party had been more or less supporting the more liberal Democrats on the open border issue not out of compassion but because it provided a steady stream of cheap labour for their voter base, small business. It is quite common to find that the employees of restaurants, motels and casinos in the west in particular are Hispanic and you get the idea that they may not always be "above board" employees (little clues like envelopes left in rooms asking for tips for cleaning staff to boost their wages). Trump represents a faction of the party that for various reasons wants to end the flow of cheap illegal immigrant labour across the border but that faction is not always opposed to large scale immigration, they just want it to be above board. Then farm workers and service workers will no doubt be earning more and costs will go up (reducing the earning power of those extra dollars in wages).

In U.S. political circles, you will often read references to the "Uniparty" which is an expression of frustration with this policy of looking the other way on illegal immigration. There is also the derogatory term "RINO" which means Republican in name only, for supporters of amnesty or continued unchecked illegal immigration and resultant cheap labour. But two different theories then evolved about what would be better. One is amnesty and allowing these low paid workers, obviously needed to make the economy work, above board (and no doubt higher paid with better benefits). The other theory is Trump's idea of blocking the border and stopping the flow. Support for the two ideas seems about equal, almost nobody would stand up in a public political forum and say they were status quo supporters but the public perception is that in reality, the business-dominated Congress is just going through the motions and secretly is status quo and will remain that way until replaced.