Feargus O'Sullivan is a contributing writer to CityLab, covering Europe. His writing focuses on housing, gentrification and social change, infrastructure, urban policy, and national cultures. He has previously contributed to The Guardian, The Times, The Financial Times, and Next City, among other publications.
A striking visualization shows how much buying power average Europeans really have after tax.
Which European nation’s citizens are the most prosperous? Finding an answer to that question isn’t as easy as it sounds.
The E.U. and Europe’s individual nation states do publish regularly updated figures on average incomes. According to the latest available numbers, the continent’s highest net salaries can be found (in order from high to low) in Switzerland, Luxembourg, Norway, Denmark, and Iceland. But such figures still don’t tell the whole story, because they don’t take into account regional price differences. The equivalent of a Euro buys a whole lot less in Switzerland than it does in Romania.
A new map published this month by the cartographer Jakub Marian gives a far more balanced impression. It does so by presenting figures using an artificial currency unit called the Purchasing Power Standard, created by the E.U. purely for statistical purposes. This measure adjusts for price differences, so that one theoretical unit of PPS can purchase the same amount of goods or services across the continent. The results below show that artificial currency converted back into Euros, in order to create a significantly different picture that is adjusted to show purchasing power parity (PPP) across Europe.
The adjusted picture shows that once tax is deducted, residents in central and southern Germany actually have the most consistently high disposable income from region to region. They’re closely followed by North Germans and Austrians, with East Germans notably lagging behind. Nordic countries, by contrast, have lower disposable incomes, especially in Denmark. France, Sweden, and the U.K. all show sharp regional divides, with clear islands of high disposable income around Paris, Stockholm, and the London region. It’s Italy, however, that shows the starkest divides. From northern Lombardy to Sicily and Calabria, average disposable income drops by more than €8,000.
Passionate believers in the high-tax and (apparently) high-wage governance systems of Europe’s Nordic countries might be a little discouraged by the results. With the exception of Norway, with its vast oil-financed sovereign wealth fund and small population, disposable incomes across the region tend to be noticeably lower than in most of Germany. Average disposable income around Paris is apparently far greater than around Copenhagen or Helsinki, while outside the major cities, average disposable incomes after tax are broadly comparable to those in Eastern Germany, a region struggling with high unemployment.
This apparent surprise may in fact show the limitations of using just one measure. By using the Purchasing Power Standard, the statistics may adjust for national price differences, but what they don’t do is take into account what citizens get in return for their tax money. In Denmark and Sweden, for example, taxes pay overwhelmingly for the health service, whose funding is topped up by only modest fees paid by the user. Germans, by contrast, pay for health care with insurance policies usually contributed to by both employers and employees, though these deductions do not count as taxes.
Likewise, citizens living in London’s wealthy hinterland who wanted a higher education would have needed to pay £6,000 ($7,800) a year in 2013-14, when the statistics reflected in the map above were collected. In Europe’s Nordic countries, higher education is free beyond some almost symbolic top-up fees (around $60 per year in Norway, for example), while many college students are also eligible for maintenance grants to cover some living costs while they study. Nordic citizens may have smaller disposable incomes than other regions when tax is deducted from their wages, but the subsequent expenses they are expected to budget for are often notably smaller.