> Also, please, bear in mind that you cannot directly compare US and EU salaries. Your 80k€ gross in e.g. France should be the equivalent of $150k for a US worker; if you account for the same level of medical care and retirement savings. Not much of a difference after you realise this.
What makes you think that? As to retirement savings, American retirement payments replace 70% of working income on average, versus 60% in France: https://www.etk.fi/wp-content/uploads/PaG2017EN.jpg. The US retirement system is one of the better ones in the OECD. Like the U.K., Germany, Netherlands, and Sweden, the U.S. has a two-pillar system, with a public pillar and a defined contribution (i.e. 401k) pillar. The public system alone pays out about as much in absolute terms as in France. (60% of French pre-retirement income ~= 40% of US per-retirement income.) Adding in the tax-advantaged defined-contribution component (but excluding other private investment income) makes the total income replacement one of the highest in the OECD.
Of course, at the end of the day, a programmer is going to be a “net contributor” to the retirement system in both countries. The French person will pay (percentage wise) much higher social insurance tax to get a bigger (percentage wise) public pension check, while the American person will make a 401k contribution plus a lower social insurance tax. At the end of the day, that doesn’t have any effect on the comparison of 80k euros being less than $150k, because retirement savings will come out of both numbers.
As to healthcare, programmers are going to be among the 65% of American workers who get healthcare through their employer. That means that, on top of their salary, they get additional compensation in the form of employer-paid healthcare premiums. Meanwhile, the French person will pay for healthcare in the form of higher taxes out of that 80k euros. Although Americans spend twice as much on healthcare as French, that isn’t relevant to this comparison, because for the American the additional part is paid by the employer on top of the $150k. It’s not something you subtract out. (Put differently, the 80k euros versus 150k comparison understates the difference, because the American salary includes $10-15k in additional health benefits.)
Finally, cost of living is about the same in France as in the US.
You are completely missing the point here. Not only are you trying to argue against things that I did not say, but you are also comparing things that cannot.
What Europeans call "gross" salary is NOT what Americans call "gross" salary. And you are mixing them together, which is exactly what my comment was trying to prevent.
> the comparison of 80k euros being less than $150k, because retirement savings will come out of both numbers.
No, the 80k remuneration is AFTER half the retirement contribution.
> the French person will pay for healthcare in the form of higher taxes out of that 80k euros
No, most of the healthcare is actually in the employer part, which is already removed from these 80k.
In Europe, what people call "gross" is the employee part of the income. This part already had the employer part removed, which contains a part of medical care and retirement.
In US, especially with 401k, the employer part is pretty much non existent until the employee triggers a contribution.
What it means is that on the 80k that a European will call his "gross" salary, he will in fact have been paid around 140k, with 60k going to his mandatory retirement/medical care for the employer contribution. The taxes left on the 80k are only the employee part.
People in Europe usually don't add up the employer contribution part into account in what they call their "gross" salary because it's a mandatory part and often not displayed on the payslips.
This is not how it works in the US. The $150k that employees refer to as their "gross" income did not had the employer contribution deducted yet.
I am not _at all_ trying to compare the retirement system of US versus EU, or saying that one is better or not or whatever. All I'm saying is EU gross is not comparable to US gross, as these numbers do NOT contain the same deductions.
In your post, you are _consistently_ mixing the two gross numbers together, which is very wrong.
In both countries, there is an employer contribution and an employee contribution. In both countries, “gross” income excludes the employer contribution. In the US, it also excludes employer-paid health insurance premiums. In France, it excludes the employer-paid health insurance tax.
As to the precise mix, I don’t think it’s accurate to say that more will be paid by the employer in Europe. In both countries, medical is paid mostly by the employer, and deducted before the $150k/80k euro number. Both countries have a similar employee-paid social security rate (6-7%). As explained above, the base Social Security payment will return as much in absolute terms as the French retirement system. Any 401k you contribute to will return a lot more in retirement than what you would receive in France.
You are mistaken, because you do not take into account the whole contributions that are deducted between gross and super-gross. Medical care is just one of them and it adds up to WAY more than 8%.
Here is a break down of what that would look like for a French employee:
(1) Starting with a super gross of 130k EUR / year ($145k):
- Deduct retirement contribution
- Deduct health care contribution
- Deduct family contribution
- Deduct public housing contribution
- Deduct unemployment contribution
- Deduct professional disease contribution
- Deduct employee formation contribution
- Deduct elderly contribution
- Some other contributions
(2) You end up with a gross salary of ~80k EUR / year ($90k):
- Deduct employee contribution to all the above
(3) You end up with a net salary of ~50k / year ($55k).
You can do the computation yourself from the calculator on the french government website:
At the $150k salary level, the following will also be provided as benefits before the $150k:
4) Short and long term disability insurance
5) Family leave
A gross salary of $150k is going to be more like $175k including those taxes and costs.
In California, on a salary of $150k, the net paycheck will be like $90-95k, or $80-85k if you max out your 401k contribution. (If you do that, your retirement benefits will be much more than you would receive in France.)
> A gross salary of $150k is going to be more like $175k including those taxes and costs.
So, I checked and indeed there is a small fraction of gross/super-gross difference in US salaries. But that should just be 6% total medical/medicare. Far from the 45% you often find in Europe.
> if you max out your 401k contribution
I don't think accounting for employee/employer triggered retirement contributions should enter the comparison here... Because it exists in pretty much every country, and it depends on what the employee wants to spend.
> If you do that, your retirement benefits will be much more than you would receive in France.
France has exactly the same as US 401k, since 1970, it's called a PEE. It's tax free and company contribution can go up to 3:1, it's limited to 25% of your total income though. There's also the more recent PERCO which is pretty much the same thing but can be cumulated, so you can go over 25% if you want.
> A gross salary of $150k is going to be more like $175k including those taxes and costs.
So, I checked and indeed there is a small fraction of gross/super-gross difference in US salaries. But that should just be 6% total medical/medicare. Far from the 45% you often find in Europe.
It’s 7.65% social security + Medicare, plus health insurance, plus parental leave. On average, employers contribute $14,000 for health insurance for a family: https://www.kff.org/health-costs/press-release/benchmark-emp.... For someone making $150k thats 9.3%. For the average worker with employer provided health insurance, that might be close to 20%.
> I don't think accounting for employee/employer triggered retirement contributions should enter the comparison here... Because it exists in pretty much every country, and it depends on what the employee wants to spend.
Defined contribution accounts are one of the pillars of the UN model for pensions. Many European countries (U.K., Germany, Sweden, Netherlands, Norway) rely on them as an essential part of the overall retirement system. (Basically, they impose a lower retirement insurance tax and let you invest the money yourself.) So it should definitely be included.
> France has exactly the same as US 401k, since 1970, it's called a PEE. It's tax free and company contribution can go up to 3:1, it's limited to 25% of your total income though. There's also the more recent PERCO which is pretty much the same thing but can be cumulated, so you can go over 25% if you want.
My point is that the base Social Security payment, which is mandatory, will already provide you the same pension as you would receive in France. So you don’t have to decrease the 150k for 401k contributions to make the comparison even. But if you do account for 401k contributions, you’re going to get more retirement money than in France.
I'd like to point out that employer side taxes (all the things between "gross" and "super-gross" in your terminology) are very bad whether they are happening in France, the US or anywhere else.
The only purpose of levying them that way instead of as traditional taxes on the employee is to deceive employees as to their true effective tax rates. To the extent that these taxes are higher in France than they are in the US, it's only a demonstration that France's tax system is being more deceptive.
About France's tax system being deceptive, I would highlight that France makes it even more deceptive by having different regimes for different categories:
for instance, nurses or lawyers in France feel that the state levies from them a disproportionate amount of the super-gross (about 70%), and that these categories
(I took 2, but in fact this is true for all "independents" in France) pay more than
the rest of the population... which is not true, it is simply that the fraction of income that is levied as taxes is more obvious to those categories.
A regular employee does not even see most of these levies on their pay stub (it's called the "charges patronales", i.e. employers' contribution, but it really is a portion of wages that is socialized: this is money that belongs to the employee as wages, it's not something that belongs to the employer that pays it for the privilege of employing a person), and in reality what nurses/lawyers/independent perceive as outrageous taxation is just them paying "self-employment" taxes (as it's called in the US).
These taxes are there for good reason, but they are indeed masked from mere mortals.
It would do a world of good for these things to appear (by law) on pay slips, for it would make people realize that the many public services that seem to be free are in fact very much not free at all. Indeed these public services (which are pretty good in France, IMHO) cost an arm and a leg, yet the system is rigged to make them appear free. If that's not deception, I don't know what is :)
I admit I did the computation 80kE ~= $150k from the top of my head, it’s not super accurate and will depend on countries and the status of the employee (different status imply different employer deductions).
In France for instance, people will insist on having the “cadre” status, which require more employer contribution and also has implications on how their liabilities toward the company are judged. This should raise the bar to $150k.
Edit:
I did the computation for France and end up with 130k EUR super gross for a 80k EUR gross.
So that would be an equivalent of $145k. Not far from my guess.
Let me try to reformulate OP's comment. In many European countries, there are three deduction levels: (1) the net salary, after all taxes and health and social care deductions, (2) the gross salary, after all mandatory employer contributions to the health and social care systems (3) the total cost of an employee to the employer (the English equivalent of the term used in Czechia would be "super-gross" salary). OP's point was that first, in the EU, there is often a big difference between (2) and (3), whereas they are very close or equal in the US, and second, gross salary usually refers to (2) in the EU and to (3) in the US.
That said, I don't think that the difference between (2) and (3) is as big as suggested by the OP even in the EU, at least in the countries that I'm familiar with.
Gross salary usually refers to #2 in the US, to, and, contrary to the upthread suggestion, just as in Europe, there is an “employer portion” (which in the US includes some of retirement and retirement healthcare, but not current healthcare—that is, specifically, federally half of the tax for Social Security and Medicare,—plus, a portion of the cost of federal and state unemployment insurance) which is not included in gross salary because it is paid out of employer taxes rather than employee taxes. There are also sometimes employer-provided benefits that while part of total compensation are not part of gross salary , and may or may not be part of taxable income; some portion of employer-provided healthcare cost is frequently part of this, and, though this is almost entirely a public-sector concern now, some portion of employer pension costs also frequently would be part of this, where a pension exists at all (adding these employer taxes and benefits to gross salary isn't the total cost to the employer of the employee either, as there is overhead and other employer costs for employment that that still excludes.)
It is true that the spread between #2 and #3 (when limited only to the required taxes and any benefits not part of salary, which seems to be the intention) is typically greater in Europe than the US, as the supported social services are greater.
> I don't know anyone who calls take-home (net) pay gross salary in Europe. I have lived and worked in multiple countries.
That is not what I am saying...
There are basically 3 stages of income in Europe: employer gross -> employee gross -> employee net.
Most Europeans refer to employee gross as simply “gross”. There are still the employee contribution part to be deducted before the net, but the whole employer contribution has completely been removed already.
Payslips as well as employment contracts usually display the employee gross. That is why the real total compensation including the employer contribution is rarely displayed anywhere in Europe and people forget about it, thus creating the incompréhension of this whole comment thread, where people compare incomparable incomes.
I totally agree. Having lived through both systems and countries with similar salaries than the one you mention. France is a scam. Europe is a scam. Companie are not entitled to anything they make you either enter some traditional companies with very little benefits (definitly no 401k, discounted movie tickets at best) or they make you enter startup world giving you shitting fictional "stocks" that definitely won't make you a millionaire even if the company hits a multi-billion dollar valuation. You know what else? people managing, doing PM, all the soft skills jobs are better paid in france than dev jobs and better viewed overall. unlike in USA where people pay for the technical skills, engineers compensations in europe are low. somehow we still an old country dominated by old money and the rule that only the elites can get chunks of the companies even tho they are not the one slaving. There are a few exceptions to this but those companies moved their HQ and their core in USA to get away from all this BS. such as Datadog or even Docker. oh and regarding price of accomodation paris is much more expensive than NYC. new york not being only manhattan and brooklyn for people who like to compare even modern apartments in LIC sell for half of what a 200year old apartment would sell in paris.
It's curious that you say that, I searched for comparisons between New York and Paris[0],[1] and NY comes on top. Are this inaccurate? I'm genuinely curious
What makes you think that? As to retirement savings, American retirement payments replace 70% of working income on average, versus 60% in France: https://www.etk.fi/wp-content/uploads/PaG2017EN.jpg. The US retirement system is one of the better ones in the OECD. Like the U.K., Germany, Netherlands, and Sweden, the U.S. has a two-pillar system, with a public pillar and a defined contribution (i.e. 401k) pillar. The public system alone pays out about as much in absolute terms as in France. (60% of French pre-retirement income ~= 40% of US per-retirement income.) Adding in the tax-advantaged defined-contribution component (but excluding other private investment income) makes the total income replacement one of the highest in the OECD.
Of course, at the end of the day, a programmer is going to be a “net contributor” to the retirement system in both countries. The French person will pay (percentage wise) much higher social insurance tax to get a bigger (percentage wise) public pension check, while the American person will make a 401k contribution plus a lower social insurance tax. At the end of the day, that doesn’t have any effect on the comparison of 80k euros being less than $150k, because retirement savings will come out of both numbers.
As to healthcare, programmers are going to be among the 65% of American workers who get healthcare through their employer. That means that, on top of their salary, they get additional compensation in the form of employer-paid healthcare premiums. Meanwhile, the French person will pay for healthcare in the form of higher taxes out of that 80k euros. Although Americans spend twice as much on healthcare as French, that isn’t relevant to this comparison, because for the American the additional part is paid by the employer on top of the $150k. It’s not something you subtract out. (Put differently, the 80k euros versus 150k comparison understates the difference, because the American salary includes $10-15k in additional health benefits.)
Finally, cost of living is about the same in France as in the US.