PAY IN EUROPE  2006 - THE GAP IN EUROPEAN PAY

FedEE's (Federation of European Employers) seventh annual Pay in Europe 2006 report reveals a yawning pay gap between rich and poor countries in the European Union, with German and Dutch workers earning six times more per hour than equivalent workers in Slovakia.

In terms of real spending power, however, a different picture emerges when holiday bonus payments are added to basic pay, and earnings are adjusted for tax differences and relative purchasing power. In the table below it can be seen that the pay gap between countries narrows substantially once these additional factors are taken into account. Luxembourg also becomes top of the pay league for real net spending power.

Median hourly pay in the private sector for selected European countries: February 2006

Ranking by gross hourly pay Country Gross hourly pay (percentage) * Real net spending power (percentage) ** Ranking by real net spending power
1 Denmark 100 100  2
2 Norway 78 91  5
3 Switzerland 76 98 3  
4 Luxembourg 67 106  1
5 Germany 63 83  6
6 Netherlands 58 92  4
7 Finland 53 68 14
8 Ireland 53 77 8  
9 Sweden 52 71 11
10 Iceland 50 51 17
11 Belgium 49 66 15
12 United Kingdom 48 77 9
13 France 47 69 13    
14 Italy 44 79 7
15 Austria 43 72 10
16 Spain 30 70 12
17 Greece 28 60 16
18 Portugal 18 46 18   
19 Poland 13 32 21
20 Hungary 12 29 19
21 Turkey 10 23 22
22 Slovak Republic 10 29 20
© Copyright: FedEE Services Ltd 2006 All world rights reserved
Source: FedEE Pay in Europe 2006 report

* Figures expressed as a percentage of gross hourly pay in Denmark (Denmark = 100)

** Pay inclusive of 13th/14th week payments and holiday pay enhancements, net of tax and social security and corrected for differences in spending power between countries. Figures expressed as a percentage of real net spending power in Denmark (Denmark = 100).

FedEE review of minimum wage rates

In Europe, statutory minimum wage rates range from just 23 euros a month in the Russian Federation to 1,503 euros a month in Luxembourg. In all but a handful of countries, these rates provide a standard of living that is close to, or even below, subsistence levels. Austria, Denmark, Finland, Germany, Italy and Sweden do not operate statutory minimum rates, but nevertheless have binding sectoral collective agreements that jointly cover a high proportion of the working population.

The International Labour Organisation establishes minimum rates for seafarers. This is currently set at $500 US per month.

Monthly gross statutory minimum wage rates
Full-time adult employees, aged 23+ (*)

 
Country local currency euros Date effective**
Belgium   1,234.21 01.06.2005
Bulgaria 160 leva 81.80 01.01.2006
Croatia 2080 kunas 282.23 01.01.2005
Cyprus‡ 362 Cyprus pounds 631.44 01.04.2005
Czech Republic 7,660 koruny 263.93 01.01.2006
Estonia 3,000 kroons 191.73 01.01.2006
France   1,217.88†† 01.07.2005
Greece†   658.00*** 04.04.2006
Hungary 62,500 forints 247.26 01.01.2006
Ireland   1,326.00 01.05.2005
Isle of Man
910 IOM pounds
1,314.94 01.10.2005
Jersey (Channel islands)
908.27 Jersey pounds
1,312.08 01.04.2006
Latvia 90 lats 128.06 01.01.2006
Lithuania 550 litai 159.29 01.07.2005
Luxembourg   1,503.42# 01.10.2005
Malta 250.81 lira 584.19 01.01.2006
Moldova 440 lei 28.98 01.02.2004
Netherlands   1,272.60 01.01.2006
Poland 899 zlotys 233.01 01.01.2006
Portugal†   385.90 01.01.2006
Romania 338.00 new lei 97.07 01.01.2006
Russian Federation 800 rubles 23.48 01.09.2005
Serbia 7,973.33 new dinars 91.24 03.02.2006
Slovakia 6,900 koruny 182.14 01.10.2005
Slovenia 122,600 tolars 511.87 01.08.2005
Spain†   540.90 01.01.2006
Turkey 530.73 new lira 332.26 01.01.2006
Ukraine 332 hryvnias 55.58 01.09.2005
United Kingdom 875.33 pounds sterling 1,272.28 01.10.2005

NOTES:
* Where official rates are expressed by the hour or week, they have been converted to monthly rates on the basis of a 40-hour week and 52-week year. Minimum wage figures are gross (pre-tax) rates and exclude any 13th or 14th month payments that may be due under national legislation, collective agreements, custom or practice.
** Minimum wage levels last updated.
*** Unmarried white collar workers only
# Unskilled workers only
† The terms of this wage order entitle a worker to 13 or 14 monthly payments per year.
†† France: based on statutory 35-hour week
‡ Starting salary in non-unionised sectors (increases after six months' service). Rates apply only in six occupations.

Competitive wage costs
Employers in western Europe looking to save on wage costs are increasingly relocating operations to eastern Europe, Asia and South America.

In Western Europe itself,l states. The countries with the highest gross pay levels are Denmark, Norway, Switzerland, Liechtenstein, Luxembourg and Germany. At the bottom of the western European pay league are Spain, Greece, Malta and Portugal. In fact, Portugal's median weekly earnings are just 28% of those in Germany.

Pay in the EU's eastern European member states* is generally much lower than in western Europe, with the highest rates being approximately one-third of those paid in Germany. Social security charges are generally higher than in western Europe, but corporate taxation is usually low enough to offset such costs.

Median gross weekly private sector earnings: eastern Europe *
(February 2006)

Country Weekly pay in euros † Index: Germany = 100 
Bulgaria 37 5
Croatia 182 25
Czech Republic 145 20
Estonia 104 14
Hungary 135 19
Latvia 68 9
Lithuania 89 12
Poland 147 20
Romania 66 9
Slovakia 113 16
Slovenia 247 34
Source: FedEE, Pay in Europe 2006 **

Pay levels in many of the EU's global competitor countries are much lower than even in Bulgaria, Latvia and Romania. Both India and China are rapidly growing production and IT service centres, whilst Russia is attracting considerable inward investment because it combines a huge internal market for goods and services with very low wage costs. Even though pay levels are low in Spain and Portugal compared with the rest of western Europe, many companies in both countries are taking advantage of linguistic and cultural ties with South America to outsource production and call centre operations. However, not all emerging economies have retained their cost advantage with the EU - as can be seen from the median weekly rates in South Korea.

Median gross weekly private sector earnings: alternative production centres
(February 2006)

Country Weekly pay in euros † Index: Germany = 100
India (directly employed regular workers) 22 3
China (urban workers) 34 5
Russian Federation 56 8
Brazil (Rio de Janeiro) 85 12
South Korea 475 66
Source: National statistical offices and economic agencies

Notes:

† Pre-tax pay expressed in euros, based on a five-day week of 40 hours. All figures rounded to nearest euro.

* Eastern Europe has been taken to include eight of the states that joined the European Union on May 1st 2004 plus the EU accession states, Romania and Bulgaria, and the EU candidate country, Croatia.

** Pay in Europe is published annually and contains benchmark pay tables with hourly rates for 32 standard job positions in 48 European countries and territories. .

Federation of European Employers

 

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