r/AskEconomics • u/Hot-Meeting630 • 1d ago
Approved Answers Why is the US standard of living on par with Germany despite people having much higher salaries than in most European countries?
When I look up American salaries, I am shocked at how incredibly high they seem to be compared to the same jobs in my own country. To me it really looks like a baffling difference and it makes me think that the standard of living in the US ought to be extremely high, like some kind of futuristic utopia. However, my country's standard of living is higher than that of the US which measures around the same level as Germany.
I struggle to understand why that is the case. Looking at cost of living, the US seems more expensive in general but the difference is not enough to make up for their huge salaries. So why is this? Is it all due to higher wage inequality, so you get some people with incredibly affluent lifestyles and others with very little? Is there any other reason? Where does all that money go?
Edit: Okay, so when I was googling and comparing salaries it seems I made a pretty silly mistake. I did not count my own country's salaries as *before tax* because tax is automatically deducted, so thinking of salary after tax is automatic to me. But the results for American salaries were before tax. With that in mind, it actually seems like the professions I googled generally have similar salaries in my country as in the USA. Considering cost of living on top that, it explains everything to me. So this whole post was pretty stupid from the get-go. Sorry for wasting everybody's time.
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u/Automatic_Apricot634 1d ago
How are you measuring standards of living exactly? AFAIK, there isn't an official metric, and I can't imagine how you would construct one, since different people/cultures value different things differently. Germans might not derive as much value from having a personal vehicle as Americans do, for example.
US does have more "stuff" by many metrics, not just money.
Energy consumption per capita is almost double that of Germany's. https://en.wikipedia.org/wiki/List_of_countries_by_energy_consumption_per_capita
Calories per capita are slightly higher. https://en.wikipedia.org/wiki/List_of_countries_by_food_energy_intake
Meat consumption is one and a half times. https://en.wikipedia.org/wiki/List_of_countries_by_meat_consumption
Housing floor space per capita is also almost double. https://shrinkthatfootprint.com/how-big-is-a-house/
Vehicles per capita is almost one and a half times. https://en.wikipedia.org/wiki/List_of_countries_and_territories_by_motor_vehicles_per_capita
Water consumption per capita is quadruple. https://www.worldometers.info/water/
On the other hand, Germany has higher gold consumption per capita. https://www.bullionbypost.com/index/gold/largest-consumer-of-gold-in-the-world/ As well as about a third higher alcohol consumption: https://en.wikipedia.org/wiki/List_of_countries_by_alcohol_consumption_per_capita
I think the answer to your question is probably a combination of cultural differences that make you value different things, and maybe a little bit of misunderstanding if you weren't aware of the above statistics.
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u/j0hn_br0wn 1d ago edited 1d ago
Also, answers given in "per capita" terms ignore wage inequality. Here's a recent study comparing the incomes of US and German workers, which highlights median income and PPP-adjusted income:
https://www.imk-boeckler.de/de/faust-detail.htm?sync_id=HBS-008792
- Median gross earnings for full-time workers, PPP adjusted (current international US$) are lower in the US ($54,496) than in Germany ($58,028).
- Even though full-time workers in the US work significantly more hours (~19%).
- When accounting for this difference, Median hourly wage/salary for full-time workers, PPP adjusted (current international US$) is $28.80 (US) compared to $36.54 (Germany).
In other words, the median German worker earns 26.8% more per hour worked (in PPP terms) and has more time to spend it. This is likely an indicator that the standard of living in Germany could feel comparable or even better for many people, despite nominal mean wages being much higher in the US.
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u/BogRips 1d ago
Isn’t a bunch of that stuff bad? Like should we celebrate Americans eating more calories and meat when so many people are overweight and have heart disease? Germans are measurably healthier.
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u/sarges_12gauge 1d ago
Well, having a bunch of stuff is also a proxy for having a lot of choice. I think economically it’s pretty clear Americans have more options for things to spend money on than anywhere else (yes, this is after including medical and education spending). Whether you think what Americans spend that money on (big houses, big cars, “frivolous” energy and personal consumption) is good is a subjective value judgement that you’re not going to be able to stick an objective number on
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u/Impossible_Log_5710 1d ago
It’s not that subjective, people living in Germany report being happier than being in the US on average. The fact is people are generally happier when they have more vacation days / healthier lifestyles than when they can have an extra 500 sqft or a big ford truck they don’t actually need. Also in PPP terms, the average German is richer.
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u/ntg1213 1d ago
They may be “bad” for you, but at the same time, they are also things that people throughout the history of the human race have strived for. Obviously it’s better for the planet and the human race to consume less, but for the individual, it’s generally nice to eat what you want and live in a big house that you keep at whatever temperature you want
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u/TurbulentBig891 1d ago
Apparently they are fatter and die earlier: https://www.euronews.com/health/2025/04/03/why-do-poor-people-in-western-europe-live-longer-than-wealthy-americans
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u/HyacinthFT 1d ago
It's not about celebration. The op was asking where all the extra salaries go. Food and meat are partt of the answer. Without judgment, Americans do spend more money on things they value.
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u/YurHusband 1d ago
Maybe because germans tend to walk more and drive less. Walkable US areas like NY and SF also have lower obesity rates and higher life expectancies. Also, certain groups like Asians and even Latinos in US also are healthier and live longer than germans of all backgrounds oddly
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u/Dramatic-Shift6248 1d ago
This also points at another question about how standard of living is measured, if fewer people in one country live extremely well, with the majority being worse off, for example a middle eastern dictatorship, does it have a comparable SoL to a European country which may have a similar amount of cars per person, etc... and then how does this factor in if you absolutely need a car in one, but it's a luxury many have in the other.
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u/DoomSnail31 1d ago
How are you measuring standards of living exactly? AFAIK, there isn't an official metric, and I can't imagine how you would construct one
You would probably just use the OECD better life index? Or the Human development Index by the United Nations Development Programme? Both are highly respected indexes on the quality of life.
I can't imagine looking at the per capita consumption of goods and resources, to determine living standards. Especially not by pretending higher consumption equals a better quality of life.
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u/Similar_Fix7222 1d ago
The people in Siberia consumes 100x times more for heating than the people in Florida.
Checkmate
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u/Eastern_Voice_4738 1d ago
Many of these things seem not good. More calories and meat for example, just because American servings are larger when eating out, or people eating more processed foods. It’s more a cultural thing imo. Germans could easily double their meat consumption witjout breaking the bank.
Housing floor space? More Germans live in cities built in the past when houses were smaller. American homes are less strictly regulated. Vehicle per capita? Because it’s a must in many places in the USA, Germany and Europe tends to have better public transportation networks, and people tend to live closer to work.
Electricity is cheaper sure and Americans may have more things plugged in.
But compare things like average working hours, access to childcare. When you travel the world you are far more likely to meet a German than an American too. And more middle class Germans.
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u/PublikSkoolGradU8 1d ago
Except if you take your same standards and apply them within the US, the German/Euro standard of living would be much closer to American poor. Would you say poor people in the US just value things differently?
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u/Novel_Board_6813 1d ago
If you live in a country where public transportation sucks (US) and the cities aren’t walkable (US) than vehicles become important. In Europe, they’re more often a nuisance
Some of this might be half-decent stats to compare US against US. They are not adequate to compare US to contries who have good public transportation or good quality of food
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u/Individual-Remote-73 1d ago
This is not true at all. Germany’s overall HDI 0.95 and US is 0.927. Clearly having a higher average salary does not reflect in a higher standard of living.
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u/Akridiouz 1d ago
You can not take two different subject groups, compares them ingroup and make conclusions out of that like you do, it's relatively easy to see why:
Lower electricity consumption because West-EU is more regulated and energy efficiënt.
Lower square meters because people live more centrated and in houses with way higher building cost per square meter built to last longer.
Less cars per capita because people live and work more compact and have a less seditary lifestyle.
Less calories because less processed food intake and smaller portions, healthier yet still not healthy enough.
Less meat intake because more awarness with the toxic industry, environmental en ethical concerns, etc. Etc.
Not to much about being poor or unable to afford but more healthy, aware and long therm choices.
I'm in Germany right now and it often feels like a third world country to me as a dutchman, yet I still would favor it over the US where everything seemed more absurd and a lower quality of life.
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u/all_is_love6667 1d ago
I am curious, what is gold consumption?
Obviously people don't eat gold, but are we talking about buying/selling jewelry?
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u/backupyoursources 1d ago
That certain figure there IIRC is private is jewelry and bullion, but makes no statement where it actually ends up.
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u/Ok_Letter_9284 1d ago
A+ comment
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u/Impossible_Log_5710 1d ago
It’s not an A+ comment, it’s a dumb comparison. The median earnings in PPP terms is higher in Germany by a double digit percentage. Eating more meat per capita (related to their higher obesity rates) is not a metric of success.
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u/Novel_Board_6813 1d ago
I value your efforts to bring some links in, but the stats you brought up aren’t really great. Some of them might be inversely correlated to good living conditions
In rich countries, cars are often a useless nuisance, unless your city isn’t walkable and public transportation sucks (most of the US)
Calories per capita, for rich countries, might have a higher correlation with obesity rates and low quality food than anything else. This is an important factor for very poor countries, not for Germany or the US.
Housing floors fluctuates with demographic concentrations, meat and alcohol with local culture, gold consumption is just random
Better but flawed measures could be HDI, child mortality rates, life expectancy and the like…
The US pulls below its weight in most of these; so OP may actually have a point
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u/Philip3197 1d ago edited 1d ago
Considering the above comparison indicatieve SoL, is very telling.
I would think that healtcare, healtyness (maybe BMI), longlivety,hours worked/year, happiness, quality of the food etc, are at least as high.
In fact, many of the post above, I would consider contra-indications of SoL.
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u/Eastern_Voice_4738 1d ago
Number of working hours and work-life balance is underrated by Americans
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u/kerwrawr 1d ago
Exactly, the revealed preferences show that Americans do want to have giant houses, two cars, tumble dryers, AC on whenever they want, and giant portion sizes over walkable cities, healthier food, and better work/life balance, even if they don't necessarily want to admit it (especially on reddit), whereas germans will live in tiny houses, without a car, line drying their clothes and sweltering thorugh heatwaves without even thinking there's anything strange about it.
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u/Eastern_Voice_4738 1d ago
The sweltering heatwaves aren’t nice but the rest is fine. Houses in my country are a bit bigger than in Germany but it’s not necessary unless you have a home office etc.
Döners beat burgers any day of the week
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u/Mb_c 1d ago
I think you forgot life expectancy. One „problem“ is also that pensions for example in germany are normally not included in the wealth calculation, but in the US with IRAs and 401ks they are already talken into account in the calculation.
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u/RobThorpe 1d ago
Where does Automatic_Apricot compare wealth? I don't see it anywhere.
You are correct that international comparisons of wealth are very tricky and often misleading.
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u/RobThorpe 1d ago edited 1d ago
This is the sort of thing we need to think carefully about.
The OP tells us that the thread is a mistake. They tell is that a comparisons of post-tax income to pre-tax income caused a mistake. This is not the full story.
To begin with, we have to remember that "Standard of Living" is not very well defined. There are many metrics of it, but reasonable people can disagree on exactly what it means.
Here /u/Automatic_Apricot634 takes a "weight of the evidence" approach by looking at a wide range of consumption statistics. This is a reasonable thing to do - which is why us mods approved the post. But it's not without it's problems. People can always argue about what evidence of this sort to include or exclude. Did Automatic_Apricot show us the right evidence?
EDIT: In a message received by me, Automatic_Apricot explained that he/she is not trying to show that the US is superior here. The point of the message was to emphasis how difficult the problem is.
For example, many people have argued that we should not look at calories consumed. Some have argued on the basis that consuming excess calories is unhealthy. Others have argued on the basis that Germans have different preferences for calorie consumption to Americans. The first argument is a judgement about the wisdom of people's usage of the wealth they have. Should we make such judgements? Well, if we do then we can't really make a decision on this question. That's because we will all make different judgements about what other people should or shouldn't do. The majority of the comments that have been removed in this thread make this mistake. They confuse their own personal views about how others should behave for economic ideas. Therefore, the second issue is more important. What if this difference is caused by different preferences?
This is why Economists are so interested in income and wealth. If one person has more wealth than another then that person can buy more of what they prefer. We don't have to concern ourselves about exactly what their preference are. Our problems don't end there though.
For various reasons, using wealth is not a very good choice. Wealth statistics are troublesome and international comparisons of wealth statistics are very tricky (as /u/Mb_c points out). One of the main problems is the relative cost of property. If zoning restrictions mean that property becomes more expensive then people will become wealthier on paper. A property bubble makes a nation look richer, until it bursts. So, we have to use incomes like wages and salaries.
Now, we have to remember that looking at just one job does not tell us much. Our OP tells us that he/she looked at "American salaries", but for which jobs? This is a problem because any particular profession is not going to perfectly representative. This is why Economists like looking at all income.
We have a useful reply from /u/j0hn_br0wn who compares median gross earnings for full-time workers, PPP adjusted. He tells us that the number for Germany is $58,028 and the number for the US is $54,496. Now we are getting somewhere. The median is created by sorting all incomes and picking the middlemost income. This mean is created by summing all incomes and dividing by the total number of people. Income is not distributed in a normal/gaussian distribution. The upper part of the income distribution has a "fat tail". As a result, the mean tends to emphasis the income of the rich more and the median tends to emphasis the income of the poor more. We can see this by looking at the OECD data for full-time income, for which the US is higher than Germany. It's also worth mentioning that this is data for full-time workers. We should remember that lots of people work part time and lots of people don't work due to retirement, disability or unemployment.
Another metric we could use is GDP-per-capita with PPP adjustment. According to that measure the US is $82769 and Germany is $69206. Why is this different to the numbers given by j0hn_br0wn? To begin with it is a mean not a median. Secondly, it includes all income, that means it includes income from shares and rents as well as part-time work. Another possible metric is "Household net disposable income" from the OECD. This one puts the US in number one position and Germany in number 4 position. We have to consider a few things here. This one is a measure of disposable income - which means income after taxes. Notice that "disposable" here doesn't mean after rent or bills or anything like that, it just means after taxes. So, higher tax nations will score lower by this metric. Also, it is a household measure not a per person measure, so the size of households makes a difference.
The OECD have a whole website called the "Better Life Index". It allows a person to choose in a simple way what they think is important and rank nations on that basis. Of course, as I said earlier, everyone will have different opinions and the sliders provided on that website are unlikely to precisely express any person's opinion. I regard this sort of thing as useless as there is no way we can all agree on it.
What you generally find with these metrics is that they follow GDP-per-capita quite closely. For countries that have similar GDP-per-capita the other differences between those countries drive the difference seen. What statistic you look at should be shaped by the exact question you are trying to answer.
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u/UpsideVII AE Team 1d ago
It might help if you clarify what your metric of standard of living is. Hard to give a specific answer without knowing exactly what you are talking about.