Which Countries in Europe Offer the Best Standard of Living?

April 27, 2016

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Where in Europe can you earn the highest wages and in which countries does your money stretch the furthest? Average wages vary considerably from one European country to another but when it comes to compensation, a larger paycheck isn’t always better. What matters is the ability to afford useful things that enrich our lives. Glassdoor Economic Research presents an analysis of how wages differ across Europe and identifies countries in which the cost of living is the most (and the least) favourable. The analysis covers 18 countries and tracks how these European markets compare to the United States, which is used as a benchmark.

The report, titled Which Countries in Europe Offer The Best Standard of Living?, and conducted in cooperation with Llewellyn Consulting, finds that when ranked in order, the countries offering the highest standard of living are Switzerland, Denmark and Germany.

Key findings:

  • Nominal wages are on average highest in Switzerland, at €72,000; Norway €61,000; and Denmark €56,000. They are lowest in Estonia at €13,000; Portugal €15,500; and Greece €18,500. Nominal average wages in the country with the highest wages (Switzerland) are thus over five times those with the lowest (Estonia).
  • Comparisons of nominal wages do not, however, take into account what those incomes can buy. One way of addressing this is to adjust the income data by a so-called “Purchasing Power Parity” (PPP) factor, which takes into account differences in relative prices between countries to show how much money is needed to buy the same amount of goods and services in each country. Comparing wages on a PPP basis narrows the gap somewhat. Average wages on a PPP basis are highest in Switzerland, Ireland, and Norway at around €42,000. That’s roughly double the lowest PPP wages of €20,000 or less in Estonia, Portugal, and Greece. Workers in Switzerland earn about twice as much in real terms, on average, as those in Estonia.
  • A different way of comparing countries is to look at differences in price levels among their largest cities. This shows how much money is needed to buy a standard basket of goods and services — including rent — throughout Europe, with New York City used as a benchmark. On this basis, Geneva and Zurich are more expensive than New York City. These two cities, along with London, are the three most expensive cities in Europe. All of Europe’s other cities are cheaper than New York City, with some cities (notably Tartu, Porto, Thessaloniki, Tallinn, Athens, and Lisbon) markedly so.
  • Taking not only income and cost of living into account, but also the effects of differences in taxation (income tax and Value Added Tax), it is possible to derive an indication of after-tax, local purchasing-power-based, “standard of living.” On this basis, the highest overall standard of living is found in the cities of Switzerland, Denmark, and Germany. Although the cost of living can be relatively high in these countries, so are average wages and purchasing power. Estonia, Greece, and Portugal, by contrast, offer the lowest overall standard of living: although the cost of living is relatively low in these countries, average wages and purchasing power are amongst the lowest in the region.