Or rather why Europe pays so bad.
I wonder whats the reason behind many american companies being able to pay 200-400kusd a year while its hard to get past 100k usd in the richer countries of Europe (Germany, Scandinavia, UK, etc.). A junior in USA gets more than a senior in Europe. And after 10 years the american may get 2-4x the salary of the european counterpart. In contrast life in USA is often even cheaper.
- Are european companies greedy?
- Are european companies less competitive?
- Are the high taxes and equality in Europe pushing companies to not try harder to reward talent while USA rewards the high performers as they can see the benefits it brings?
Social security. Strong protection against lay-offs. University without paying upfront - just because you don’t care for it as someone who didn’t grow up here, doesn’t mean it’s not a benefit for the majority. Healthcare at affordable prices. Public transport.
The thing is, you only see your own benefit. And I feel that’s a very typical way of looking at life in the US. The state is not here to rob you, but to provide you with a structure to live in that you couldn’t have in the same way on your own. Public transport may not be something you need, but what about the elderly? What about the people who can’t drive for whatever reason?
What if you have an accident that renders you unable to work? It doesn’t even need to be your fault. Someone might loose control over their car and you might get hit. People like that need strong social nets, and people who can work finance them. Elderly people need those. They are often sick (high health care costs) and not longer able to drive (public transport) and if their pension is not enough, the social security kicks in and supports them.
You personally may not be profiting from it right now, but there’s a ton of security built into the system for everyone that gets financed by everyone according to their means.
You’re right that healthy, young working adults without children have very little to gain from socialized systems. I’m going to assume that OP, like me, is an early Gen Z who fits this description, and is about to enter the job market or has just entered it. For our generation, this statement
does not check out mathematically. The taxes we pay today don’t get locked away in a box to be spent when we are sick or elderly and need them. They are spent on the sick and elderly we have right now. This means that at the age that we start needing benefits more than we contribute to them, it’s not going to be us, but our children’s and grandchildren’s generation who are footing the bill. But the birth rates across Europe are below replacement level and none of our countries have come up with a system that either raises birth rates above replacement level or successfully introduces foreigners who will be net tax contributors for all their lives. That means that despite paying high taxes and receiving miserable salaries (compared to American salaries) today, we won’t even be able to enjoy benefits from the state in the future because there won’t be enough tax contributors by the time we need these benefits.
It absolutely feels like getting robbed.
I am older than you think but I still need to pay out of pocket for most things and get an insurance for unemployment and invest my pension. At that point even when Im older other than healthcare and kids getting a free education theres not much more Id get out of the welfare. If I get sick its the insursnce that pays for me again. At some point paying 50% taxes and when Im old I basically have no pension feels so wrong. I feel taken advantage of. When Im old if I cant drive id sell the house and move to a smaller apartment in a city like most old people do. Again the country is not giving me anything or helping me its only my investments and decisions that would give me a bright future.
However if I slack off and Im a parasite the welfare will help me no problem. Im not that kind of person but it feels thats what my taxes pay for for the rest of my life.
Oof, it sounds like your country is further along than mine on the “broken down social system” scale. My country is already dealing with reports about retirees who can’t survive off their pension despite working for an average income their entire lives, old people who are not able to find caretakers and people who have to wait in line for an unreasonably long time to get public healthcare and subsidized housing. All while politicians slash budgets and make privatized systems the only way to get timely and high-quality services. I can only see it getting worse from here and it makes no sense to pay so much for something whose quality only gets worse with every passing year.
I think your country is my country. 60% top skat… still no decent public pension. Where the money goes who knows.
I’m not Danish (I’m the resident foreign invader on the instance), but if you are, you should come over to feddit.dk to complain with us. Privatization and the social system destroying itself is a hot topic right now.
I must admit though, the way you described your country made me think you were from Greece or somewhere that is bleeding citizens because its social systems are beyond salvaging at this point. Is the public pension in Denmark really unliveable? I would assume that it’s much worse here in Sweden but old people are generally still able to get by.
I dont remember the exact numbers but it was around 1/5-1/6 of what I make a year now. I mean if you have the house fully paid and dont have any expense other than food maybe its technically possible but its so low you need the private one. And if you rent all your life like some people do then Im not sure what would be your options.
In the danish reddit people also say take an american job in denmark never look back. The best of both worlds american salary with danish welfare and protection laws. I was just trying to understand why its only them that pay well and the rest dont do more than average.
I think it has to do with the higher rate of investor funding in the US that allows companies to spend above their actual assets by a huge margin, because of the significantly lower capital gains taxes there. The risk is much higher that US companies go bankrupt or investors stop funding the company during times of high interest rates (such as now), which is why US tech companies are disproportionately affected by the post-Coronavirus layoffs. Even Reddit itself (according to Spez) has not been profitable through all 18 years of its operation, but someone was clearly pouring money into it to keep it running. European companies on the other hand have a lot more administrative overhead when it comes to loans and investment than US companies, so they can’t use money they don’t have to offer attractive compensation on the level of US companies.
That could explain some but still “old” hardware companies not even software ones can pay well above market here. I would imagine these to be more similar to european stable companies.
I think ultimately the US choses to pay more for certain jobs at the expense of some others getting less. In Norway for example I read somewhere software developers only make 20% more than the average worker. I think that would be unimaginable in the US. Theres simply not the same reward for hard work in Europe as theres in USA and I think its dangerous because it tells people to do the bare minimum and make Europe less competitive. Why study for 5 years and work hard (mentally) all your life when you can just work in a factory or flip burgers etc for next to the same?
Reading some comments I think laws are weaker in the US and companies need to pay more as hiring a worker there is closer to hiring a contractor here in terms on how easy is to fire. But still these companies choose to pay more when they come to Europe to attract talent.
I guess it’s a difference in values, which affects your perspective. You can see it as robbing, or as contributing to society.
I’m trying to word it as neutral as possible, but it’s really hard in the values area. I think both sets of values are valid. I may not agree with yours, but that’s the thing with moral values - if you don’t share the same values, you will never see eye to eye or agree. Hard to be objective in such a situation.
Tl,dr: you value different things, which is not evil or bad, but completely valid. It’s just that I personally with my values don’t agree and see it negatively.
I don’t think that you, me and OP have different values on this issue, actually? We all agree that the state is supposed to provide us with a structure to live in that we couldn’t have on our own, and as payment for this safety net, we contribute taxes. My and OP’s argument is that with the current projection of the economy and population growth, the state cannot provide the current generation of tax payers with the structures and support that we will eventually need, and therefore many of us would rather pay lower taxes and lose the benefits, because we won’t be getting them anyway. We know what’s coming and we don’t want to be the ones “holding the bag” when the system collapses.
I’m trying to explain OP’s point to the Americans in this thread who don’t understand that European social security systems are currently under severe strain and are on the road to collapse, and how OP feels to have to sacrifice so much of his potential income to support a failing system. The 80s stereotypes of reliable, high-quality social security no longer hold true in Europe in 2023.
I think its hard for some americans to understand that welfare in Europe is not an utopia. I personally believe the estate needs to provide help and support to citizens including healthcare and basic education at a minimum. Ideally some basic help for people that are unable to work and whatever is needed for people to not be on the street.
My biggest issue is as it is right now I can see how much money I have been putting over the years and how much extra money I still need to put on top privately to have a quality of life for things such as pension, salary insurance, etc. So while almost half my salary goes out as taxes I still need to contribute on my own to private companies. On top of that I can see people that can take advantage of the system and between the high taxes and all the help you can get (house help, unemployment, lids, etc.) theres people not working that get almost as much as an engineer working full time. I think something is off.
But this has nothing to do with the post of why american companies choose to pay more than european ones.
I brought up the social system because you can see that everyone in this thread arguing against you is saying that your “excellent welfare system” is the reason why your income is lower than the corresponding American programmer’s. The massive taxation is obviously a big factor to your reduced income, but let’s look away from that for a bit and just focus on the American companies.
American companies in America pay more because the costs of doing business in America are much lower and there is a greater availability of loans and funding.
American companies in Europe pay more because they have the advantages listed above that local European companies don’t have and they have the resources to invest in a global expansion.
That’s it. That’s the answer.
I’m not American, but I born and bred in the EU. Please don’t assume wildly :)
I still view it as a value issue: you are looking out for your own good above contributing to society. If everyone does that, it will be utterly impossible for society to actually give back, because you’re depriving society of the taxes it needs to move.
I’d rather contribute to society and the social security net we have. Any society will have people who are unable to work due to disability or sickness, and to me taking care of your weak links is a mark of civilization. We don’t have to leave disabled or injured members of society in the dust to die. We have the means to take care of them, and that’s what taxes are for.
But we kind of lost track of the original question, why the wages are lower in the EU than in the US. In my opinion it’s because with all the social security and insurance it is not necessary and the environment - the society - is providing part of what you get in monetary form in the US.