Luxembourgh Times

Luxembourg's high salaries offset by living costs

Although the country boasts the highest average annual salary in Europe, spending power is reduced when the cost of living is factored in

What is left at the end of the month depends not only on salaries, but also on living costs

What is left at the end of the month depends not only on salaries, but also on living costs © Photo credit: Marc Wilwert

Julie Éddé

Nowhere else in Europe can workers earn more than in the Grand Duchy - but that appeal is lessened once salaries are compared to the cost of living, Luxembourg's national statistics agency Statec said on Wednesday.

The average gross annual salary in the Grand Duchy is €64,932, which represents almost double the European average and is eight times the rate of pay in the lowest-ranked country, Bulgaria, according to a report by Statec.

But when taking into consideration the cost of living and purchasing power, the value of the average gross annual salary in France, which is normally 58% of the total in Luxembourg, rises to 67% compared to its smaller neighbour.

In Belgium, the value of salaries increases from 71% of the Luxembourg total to 80% when adjusted for the cost of living across the border, and rises to 84% in Germany, where it is normally 69% when a straight comparison is made with pay packets in the Grand Duchy.

"The Grand Duchy has the highest legal minimum wage in the European Union. However, the differences between countries are reduced considerably if we adjust minimum wages for the purchasing power," the report notes.

When purchasing power is taken into account, the average hourly wage in some European regions is higher than in Luxembourg. Within the EU, for example, Hamburg, Bavaria and Ile-de-France have average hourly wages that are higher than those in Luxembourg. The same goes for Switzerland and London.

The average wage is largely influenced by the sectors that makes up a country's economy, Statec said. In the Grand Duchy, finance and insurance occupy a dominant position, accounting for 13% of employment, while scientific and technical activities represent an additional 9%, meaning those two sectors alone employ more than one in five workers in Luxembourg, compared with just 8% in Belgium, 9% in Germany and 11% in France.

Conversely, other industries play a less significant role in Luxembourg, with retail only accounting for 11 % of employees, compared to 15% in the euro zone. In manufacturing, the gap is even greater: the industry employs only 10% of the workforce in Luxembourg, while it accounts for 22% of employees in the European Union and as much as 24% in Germany.

Statec also points out that the average wages in Luxembourg are significantly higher than in neighbouring countries in certain sectors such as education, public administration, health and social services as well as finance and insurance. At the end of May Statec announced that wages in Luxembourg are expected to rise by 2.5% before the end of this year, in order to keep pace with inflation. Luxembourg’s minimum wage increased by 2.8% at the start of the year, despite strong criticism from business groups. The basic minimum gross monthly salary for unskilled workers currently stands at €2,201.93, rising to €2,642.32 for employees with qualifications.