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Rising Star
That plus taxes are lower in the US too compared to Europe! So we get paid more, have a lower cost of living, and pay less in taxes.
US is a great place to be a white collar worker versus the rest of the developed world. Not so much for blue collar workers.
Does Europe have government funded retirement? We get like $1000/month in US from social security…provided it isn’t bankrupt by the time we retire…so 30% of my paycheck goes toward retirement savings
Chief
The root cause of the general phenomenon (not this specific instance, but the trend) that American salaries are higher:
Philosophical and political motivations behind societies and views on capitalism / the market. European countries tend to be focused on benefiting the worst performers / the least wealthy. They tend to prioritize policies and tax systems that benefit “the little guy”— such as making it difficult to fire employees, high taxes and withholdings (on the employer and employee side), and generally focusing on the lowest levels and labor rights / benefits. This has goods and bads.
In America, we tend to focus policies on increasing the top line, with the view that it benefits everyone, and incentivizes entrepreneurship and “moving up the ladder.” Companies are much more free in America to do what they believe is best for their company— firing an underperforming worker, for example. Taxes and withholdings are lower, with the goal of incentivizing growth.
There is a general attitude of “watering all the plants, and especially the ones that are growing best” versus “watering the underperforming plants” and neglecting to nurture the tallest.
The effect is that there’s almost a forced middle class in places like germany, with taxes so high that there’s no real incentive to increases salary beyond a certain level. Why strive for 200k salary vs 100k, if the take home only goes up by 40k? The trade off is that they have more people in this middle class.
Not passing judgement on either. The result is that it’s better to be a top performer in the US, better to be a lower performer in Europe. I personally like the US system, as I studied hard, got into a target undergrad, and have been doing great financially.
The whole veil of ignorance exercise is useful.
Jesus … since when redistribution of wealth is benefiting worst performers? So your only measure of performance is capital ?
Since the 2008 crisis we have seen in Europe a large movement towards liberalizing the labor market, and yet in general salaries have remained flat. Germany is one of the most protected labor markets in Europe (together with France) and yet have the highest salaries (comparable to the US in some cases). How would you explain that?
Your example of people choosing not to make more because they are already at the higher bracket of pay is ridiculous.
Even if some of your assumptions are somewhat valid, there’s so much more that goes into play.
I would assume it’s because outside options in US pay more than outside options in UK or Canada. (Compensation in Tech in the US is crazy y’all)
Exiting to L5/L6 in US is similar to our principal pay
Although salaries at level in US are higher compared to EU
Chief
1. Education costs in the US are magnitudes higher
2. Medical care costs much more in the US
3. Transportation/lifestyle in the US is much more expensive - outside of NYC SF and downtown Chicago you need a car to get anywhere in America (quite the opposite in European cities)
EU residents get so much more from their governments though (I know I’m generalizing here…). Medical, education, social benefits. We in the US pay for much of those expenses out of pocket.
In the US medical is not covered by the company, you have to pay a big chunk of it.
Price you pay for not getting shot
Market is already mentioned above.
More generally, taxes also push European salaries down quite a bit. Not just income tax but all other mandatory contribution, both on your side and the firm. If you calculate the overall cost per consultant, the difference is much much less.
Curious as to whether generally higher corporate taxes play a role…
Rising Star
Canadian with the same question
Rising Star
But the answer is market size and willingness of clients to pay a higher rate / fee.
Chief
Please ask Boris
Bc the US > UK
Pro
I’m not an apple fanboy so I’m not going to do any research, but is it a like-for-like comparison? UK prices include exorbitant VAT while you need to add sales tax in the UK.
Salaries are definitely out of wack though.
And some states you don’t even have to pay sales tax 😂
In the Netherlands. I have been wondering about this for a long time. Everyone here makes 100k+and complains when I can only dream about making 100k here.
Rising Star
Yes I’ve had the same thought.. we also pay more taxes. Some of the benefits in most of EU are we don’t have student loans and have a lot more holidays. But.. not to justify such a large gap :(
Yes! Like I remember hearing about FB new grads getting 6 figure signing bonuses in CA, where here you’re lucky to hit 5
Not everyone makes more. I for one only make $170k base with 8 YOE it's pretty terrible. I can't imagine salaries in the UK are less than that.
Have you always been at EY? Also after converting, yes I’m fairly sure there are roles that would be about the same especially given tax hikes above £100k
Pro
Supply demand. Europeans & Canadians don’t get paid that much in general.
Also why do you think the price of Mac is a good indicator? Many strong consulting markets in the US (e.g., NYC, SF, Chicago) aren’t cheap. Where you are, likely you don’t need to pay very much (if at all) for childcare, healthcare, etc. etc.
Also childcare is incredibly expensive in the uk pre-schooling age, it’s a massive problem for families that need to work full time given a lack of support elsewhere
50% smarter
We won the war.
We also took your favorite song and made a better one about a better country.
The answer is Brexit
Chief
Wasn’t Brexit supposed to fix everything and turn the UK into mini-USA? Or maybe mini-Texas?
We don’t have universal health care 🥲
Truthfully it’s overrated, German system is way better
US is way richer per capita than most European counties except Switzerland and few others.