How do average salaries compare across Europe? Euronews Business takes a closer look at the countries that reward employees the most.
EU employee regulations are generally quite strong with an emphasis on individual working conditions and labour rights, including the right to information, anti-discriminatory laws and job security.
However, when it comes to salaries and wages across EU member states, there are still significant variations, depending on a number of factors, such as laws, demand, inflation and more.
How countries across Europe compare on pay
According to Statista, in 2022, the average annual wages ranged from €73,642 in Iceland, down to €24,067 in Greece.
The highest paying countries in 2022 were Iceland (€73,642), Luxembourg (€72,529), Switzerland (€67,605), Belgium (€63,758) and Denmark (€59,405), whereas the lowest payers were Greece (€24,067), Slovakia (€24,337), Hungary (€26,376), Portugal (€29,540) and Czech Republic (€30,967).
According to Eurostat, the average hourly labour cost in the EU was €30.5. Average annual salaries for single employees without children were €26,136. Working couples with two children clocked in an average of €55,573 yearly.
The unadjusted gender pay gap was 12.7% in 2021, with the largest gap being seen in Estonia, at 20.5% and the smallest gap being in Luxembourg at -0.2%. However, according to the European Commission, the pay gap increased 13% in 2023.
What is the EU doing to bridge the pay gap?
Back in 2020, the European Commission announced a strategy to attempt to bridge this gap by 2025. This was followed by the commission launching the Pay Transparency Directive in June 2023, with a €6.1 million fund to help implement the same. This made it easier for employees to recognise pay discrimination. It also functioned as a guideline for employers.
Typically the highest paying sectors in Europe are finance, insurance, electricity, mining, information technology, retail and education. On the other end of the spectrum, the lowest paying sectors tend to be administrative support, hospitality and construction.
What’s driving high wages in Iceland and Luxembourg?
Iceland’s high salaries are driven by a large proportion of the country’s private sector banking on collective agreements. Some increases have also been due to the addition of Covid-19 benefits, as well as hourly salaries bouncing back following weakness during the pandemic.
Iceland is also one of the most expensive countries in the world, with persistently high inflation, which also contributes to workers demanding higher salaries. Since March 2019, 326 Icelandic labour agreements have been signed, with over 90% of the workforce being part of a labour union.
The financial and banking sectors form the main weight behind Luxembourg’s attractive salaries, with most banks employing highly educated, experienced and in demand workers. A number of these are also expats.
Luxembourg also reviews its minimum social wage, in comparison with average wages and price movements every two years, thus keeping wage standards very updated. However, salaries depend largely upon sectors, divisions of banks, seniority, age, as well education and experience.
This can cause significant disparities, even within the same sector, depending on an employee’s particular role and job title. As such, average salaries have been more or less flat in Luxembourg since 2015, as productivity wanes.
Lower taxes and the booming banking and finance sector
Switzerland’s labour market also shares much of the same offerings as Luxembourg, due to both countries being bolstered primarily by the banking and financial services sector. However, Switzerland also has much lower taxes compared to the rest of Europe, averaging around 20% to 35% for the 150,000 to 250,000 Swiss Francs bracket.
Belgium also banks heavily on wage indexation for both private sector white collar and blue collar employees. The country saw the highest indexation in 50 years in 2022, as soaring inflation and out of control energy prices took their toll on employee purchasing powers.
Denmark, meanwhile, has a somewhat unique labour market model, which hinges on a balance between flexibility and security. This allows the country to not have a set minimum wage, instead letting employees and employers come to their own salary agreements.
At the same time, there are also less laws regarding dismissals, with litigations challenging these also being quite low. However, employees are not left out in the cold. They have unemployment insurance funds, to which they can contribute while they are employed, on a subscription basis. This provides them with unemployment benefits of up to two years, in case they lose their jobs later on.
Why are salaries so low in Greece compared to others?
Greece’s overall economy and labour market is still struggling to recover from the sovereign debt crisis, leading to average salaries and minimum wages being far lower than the rest of Europe. A number of more stringent labour market measures have also been implemented recently, such as drives to hire younger, fresh graduate trainees, who can be paid less.
Similarly, Slovakia also struggles with low labour productivity and the aftermath of a collapsed Soviet regimen, keeping salaries suppressed.
Portugal also faced low productivity, as well as an increasing tendency to hire short-term seasonal workers, to bolster the country’s tourism sector. Lower salaries have also gone a long way in pricing a number of people out of the burgeoning real estate sector.
A technical recession in Hungary may have contributed to lower wages recently, as fewer companies were able to afford labour costs. However, historically, Hungary’s low cost of living may have been a key factor in weak upside salary movements, although this may be slowly changing now that the country faces higher inflation.
On the other hand, Czech Republic faced a more cultural problem with the majority of employees being hesitant to negotiate for higher salaries. As a result, even trade and labour unions are weaker than they should be and are unable to do much to further employee agendas.
