A recent study points to a substantial pay gap between rich and poor countries in the European Union. However a closer look shows that the gap is narrower than it appears.

5 April 2006

AMSTERDAM — German and Dutch workers earn six times more per hour than equivalent workers in Slovakia, a study published this week revealed.

According to the Federation of European Employers (FedEE) Pay in Europe 2006 report, a substantial pay gap still exists between rich and poor countries in the European Union.

Workers in Denmark earn the most followed by Norway. Switzerland, Liechtenstein, Luxembourg, Germany, Guernsey (Channel Islands), Isle of Man, The Netherlands and Finland.
 
Albania, Ukraine, Bulgaria, Belarus and Moldova rest at the bottom of the league.
 
However, as Secretary-General of the Federation of European Employers, Robin Chater, points out, although there are large differences in the gross pay received by workers across Europe, the picture changes dramatically once tax, social security, holiday bonus supplements and differences in spending power are taken into account.
 
"These factors all tend to narrow the gap between countries," he said.
 
For example, Chater explains, "Although median gross hourly earnings in Spain are only 30 percent of that in Denmark, the real net spending power experienced by the typical Spanish worker is actually 70 percent of that enjoyed by an equivalent Danish worker."
 
Chater continues, "After having looked at the changes of the relative difference of all the other countries in relation to Denmark, we find that all countries improve position in relation to Denmark except Iceland, because the cost of living in Iceland is 22 percent higher than even in Denmark."
 
The employees who turn out to be the best off are those in Luxembourg.
 
At the end of the day, the living standards across Europe aren't as different as they might first appear.
 
Also contributing to the narrowing of the pay gap across Europe is the statutory 13th and 14th month payment in some countries.
 
"Governments allow employers to pay very different salaries to employees," says Chater, "But through tax systems - they even it out."
 
There is also a continuous catching up process due to differences in wage inflation in countries such Germany, the Netherlands, Slovakia and the Czech Republic, says Chater.  Plus, "employers in higher-paying countries tend to pay lower annual wage increases, therefore there is a secondary equalising process taking place," he says.
 
This is the seventh annual pay table produced by FedEE, which uses an expert system into which data is fed from a number of sources based on standard job classifications.
 
Chater says that the pay table was started to help large companies when setting up factories and offices in another European country for the first time.

[Copyright Expatica 2006]