You guys are doing it again -- idealizing the other side of the fence as if everything was all rainbows and unicorns in Europe.
In Germany and many European countries, you pay for healthcare and it costs a lot -- you simply don't have the option of not having healthcare and the cost is proportional to your income rather than your health condition. Also note that the employee caries the full cost of health insurance as opposed to the employer usually covering it in skilled professions in the US.
The social security model is also somewhat similar: you pay (high) social security taxes and get money back based your contributions.
Unemployment, also like in the US, is pretty sane if you're a full-time employee and are fired. You don't get it for several months if you quit on your own and if you haven't payed unemployment taxes, you get put on unemployment that's just at the edge of livable (housing costs + about $500/month).
And note, those taxes come after the lower salary. A pretty common take-home salary for a European software developer would be $3000-4000/month.
And really, how many 20-somethings that complain about the cost of living are doing it because they're stashing away too much in their retirement fund?
Public transit is a valid one, but then, the two highest paid areas for software developers in the US, New York and San Francisco, also have quite good public transit. (Not to mention that a one-month pass costs $100-200/month depending on the area.)
The truth is that I've heard people say that while they eat out every day, have a new car every couple years, live in swanky places and spend money on a constant stream of new gadgets. Americans also have a weird fetish that you don't find other places about buying homes in their 20s. While there are some valid reasons that make the total cost of living in Europe comparatively lower, I'm really not convinced that's the core of the difference. It's just that people quickly grow into their incomes and start seeing things as essential that aren't.
We're not idealizing: European take home less pay and pay more in taxes -- but get huge social benefits. If you're honestly trying to argue an equivalence in US and Europe in terms of such benefits, you're crazy. Europe is a big word as each country varies. That said...
In Germany and many European countries, you pay for healthcare and it costs a lot
But, from the studies I've seen, Europeans on average spend about half in terms of healthcare.
New York and San Francisco, also have quite good public transit
No, they simply have public transit -- it's not great by any means. You often have to supplement with taxi in both places. (The rates are high there because costs of living are very high in both places.)
Unemployment compensation in most European countries is vastly better. Free university systems? That's nice. My point is that we know it's not all rainbows and unicorns in Europe but you can't argue that you don't get a whole lot for those taxes.
"No, they simply have public transit -- it's not great by any means. You often have to supplement with taxi in both places."
Citation needed. 99.9% of the time I was lived in NY, I used public transit instead of taxis. London and France? Underground stops running close to one and so anytime I tried staying out late I needed to walk, take a night bus, or hail a cab (which is near impossible on a Friday night).
I think you should more carefully choose your battles: It's really no contest.
Bart closes at midnight and has four stops in the heart of SF. NY has an OK metro but if you want to go cross-town, better just walk. I've spent time in NYC and lived in SF, Zurich, Berlin, Prague and London. Europe destroys on this topic. A huge percentage of people in Europe, like myself, don't own cars simply because we don't have to.
Saying it's no contest is a huge exaggeration. I won't argue that BART/MUNI is better than other transit systems, but I still get around without a car.
That said, the fact that transit closes in London and Paris while New York doesn't is a major advantage. It's actually precisely the reason why I have been able to not take a taxi or have to walk home in the early morning. And in NYC, a lot of people don't own cars because they don't have to either.
BART and Muni beat most other transit systems in the US, but pale in comparison even to London, let alone Berlin or Frankfurt. If you're heading anywhere west of downtown SF, expect long waits for connecting buses...which often simply fail to appear, NextBus's predictions notwithstanding. As an earlier commenter mentioned, it's not uncommon for SF commuters to finish the last leg of their commute with a cab.
And a lot of people in NYC don't have cars simply because they can't afford to park them, not because available mass transit makes them unnecessary.
Can confirm that for Prague. I'm using bike mostly, sometimes combinded with metro, but whenever I fallback to public transport I feel grateful for how well it works. It's easy to get anywhere at any time, even at night. Last week it took me 40 mins at 4am to get from my home near the centre to the airport outside of city using bus lines that cross the city in 30mins intervals and meet together at hub stations.
On contrary, the bus lines in country were privatized and many useful (but probably not so profitable) lines were cut, and while it got better balanced in time, it's still suboptimal on many places/times and is a living example of where free market actually diverges from being a good public service.
I love BART, but it's a fairly unreliable system with very few stops in San Francisco. MUNI is actually several connected systems, but the majority of them are unreliable, expensive, and not implemented well.
I would not say the Bay Area has great public transit. It just has some public transit, which is more than you can say for a lot of California.
I lived in NYC and SF. Public Transit is far from ideal. When's the last caltrain on sunday? 8pm?? In NYC, I live in midtown east and take a lot of cabs .. mainly for cross town events. Yes .. I tried the bus but I realized my dignity was worth more than 10 bucks.
In London, the night bus route I tend to use (to Walthamstow from central London) runs at a slightly lower frequency overnight - just once every ten minutes. It's about as fast as the tube because of the more limited traffic.
And you use the same old Oyster card as during the day. I assume it's just as cheap - 80p or a pound per ride? Cheap enough that I don't even keep track.
I agree with the GP - the overnight services outside of limited routes in NYC aren't flash, and most of the rest of the US metro areas are appalling.
I really appreciate your reply and the global perspective!
That said, I'm not sure about Germany being approximately as rough as the U.S..
* Retirement - Our benefit is well under half of yours. The _minimum_ German pension, the floor, after reform will be 67 percent of national average wage (cites below). In the U.S., the average social security benefit is $1,153, annualized to $13,863 or about 34 percent of the average national income of $40,711.
So our _average_ govt. retirement benefit (34%) is about half of your _minimum_ retirement benefit (67%). In fact, the maximum U.S. benefit of $2,346 is just 69 percent of national income, i.e. the current German minimum (!) (it will go down to 67 percent under the current reform).
If you are right about "housings costs + 500 per month" this is, indeed, be about in line with U.S. benefits which average $300 per week (~1300 per month); our housing payments average $684. Not sure how to reconcile that with the 60 percent figure from OECD and elsewhere.
What I meant on the German and US systems is that they're both pay-in-get-something out. Germans pay about double for social security, so it's not a huge surprise that the benefits are higher. My point was not that Germans do not get more benefits, but that's it's not a large factor in contrasting wages. (i.e. if American professionals put the money into a 401k that would go into the required German pension funding, then the benefits would probably work out to being roughly comparable).
For unemployment the housing costs that are reimbursed are "reasonable" costs, not "whatever your costs are", i.e. they're capped per region. The 60% you're seeing there is for those who have paid for "Arbeitslosengeld I", which is only available to those who have been full-time employed and are terminated (though if you quit on your own, you're eligible after 3 months). Freelancers, recent grads, business owners, etc. are not eligible for "ALG I". There's also a time limit on how long you can receive it.
That time limit is two years. After that you get "Hartz IV" unless you still have enough money to live by. Sure if that happens you may have to drastically change your lifestyle but if you are well educated getting a job in under two years should be achievable.
The timelimit is actually one year or less for most people. You only get 2 years when you're older than 58.
For anyone else it depends on how long you've been employed before applying for unemployment support. Been employed for longer than 24mo? You get 12mo support. Been employed for only 12mo? Then you get only 6mo of support.
That retirement you mention is only partly true (unless there is a misunderstanding). It all depends how many years you have paid into the fund. For a women with lots of breaks due to kids or for self employed people who have not opted in paying into the fund, this is getting lower and lower.
And at the end of that 20 years you own a piece of property. Or you could take that down payment and invest it. Will that property appreciate more than the return you can get for your money? Don't forget about property taxes too.
Renting gives you greater mobility too, which can be used to maximize income.
Also don't forget the home mortgage deduction on the income tax, which once you are itemizing opens the door to a whole host of other deductions. My effective federal tax rate this year was 4.6%, back when I was renting I could not have accomplished that.
True, but buying a house now is betting that that tax deduction is going to exist for the next 20 years. The financial situation of the US is insane. The next 20 years aren't going to look anything like the last 40.
I spent it entirely on things I now do not have. Going out to eat, buying books and CDs, etc. There were times I genuinely could not have afforded to save five or ten percent of what I was making, but lots of times I could have.
and now you own a place with one bedroom, that can be sold for 2/3 (if you are lucky) of the price you paid in full for the mortage.
if you spent the same in rent, you would have lived in a 2-3 bedroom for 20 years, moving every time you changed jobs
20yrs is a LOT of time to be living in the same place you can afford downpayment when you are 20yr old. and a LOT of time to work/study on the same area
Well, it's a three bedroom, 2 1/2 bath with a two car garage. I've been in it since '93 Just after I turned 27. I'm the first owner. Original as built price ~$85,000. I'm not on the either coast and property prices were, and still are, a lot lower here. Last appraised value ~$122,000 (appraised 5 years ago), and similar sized homes in the same neighborhood are currently going for ~$135,000+. I'm in a nice neighborhood with relativly low crime compared to other parts of the city. In the intervening 18 years I have changed jobs once and stayed in the same city, and the new job is closer to home. I did refinance once to shave 2% off my interest rate so it will be another 7 years till it's paid off. Yes, mortgage interest does add up, but when you are renting an apartment you are basically paying the landlords mortgage interest anyway. If I did need to sell to move for a job I'd be able to roll the proceeds into the new home and have a much smaller, shorter mortgage to begin with. If I had rented for the same time period I would not have any built up equity. It would hurt to sell though, this house has seen me get married and gain two children. There are a lot of memories here.
I'm not sure that really proves your point. You've made about 2.8% annually over 13 years, not including your borrowing cost, agent fees, etc.
On the other hand, the S&P 500 returned 8.25% annually between 1993-2006. Say you put 10% down ($8500) and spend $800/year total on taxes, repairs, etc. (probably low). If you'd invested in an index fund, you'd have made $42,000.
If you'd invested in an index fund, you'd have made $42,000.
And also likely have moved several times at an average cost of around $2000 per move, seen rent increases above what his current mortgage is and so on. The odds are poor that all other things would have remained equal. I owned a house at one time. I benefited by about $2000/year over the time I owned it. When I refinanced, I got my escrow back and had no mortgage payment for a month. Then my payments after that were lower. No landlord in the world is going to drop by your apartment and leave you with a nice hefty check, say "Don't bother to pay me rent this month and, oh, next month your rent is going down. Cheerio!"
Great, then it worked out for you. I'm not saying there are no advantages to owning a house, but it's not a magical investment vehicle. Many people seem to just compare the purchase price to the sale price and think, "Wow, what a gain!" without considering all the other costs, or as what they could have made with another investment over the same period.
At the end of that twenty years, you can keep renting for another twenty years. Or you can spend the remaining thirty or forty years of your life in the home you own clear and free without paying rent or mortgage any more. I sure as hell don't want to still be making out a monthly check for a place to live when I'm 50, 60, or even 70 (not that I seriously think I'm going to live to any of those ages).
You guys are doing it again -- idealizing the other side of the fence as if everything was all rainbows and unicorns in Europe.
I used to live in Britain. After having gone to doctor a few times there, I'd rather have the customer-pays model of America. I was just pointing-out that it's (obviously) expensive over here.
You can have the 'customer pays' model in Britain too if you want it - just roll up to a BUPA (or some other private) hospital and whip out your wallet.
I was just talking to an elderly person who had a heart attack 2 months ago. Before insurance cost was around $200'000 and if she went with the more invasive option, it could of been $500'000. For one bloody heart attack.
The US and UK are both bad examples. Here in Aus we have universal healthcare and private - if you want to jump waiting lines or have carpet on the waiting room floor, pull out your wallet and go private.
There are a few problems, but there is no perfect health system as there is always more demand than supply.
Your ideas intrigue me ... seriously, I'd like to know more about this. Which nationalities are you speaking for, and in which contexts? For example, I believe Americans think Brits are very odd for having fitted carpets in bathrooms.
Mostly, I know that Italians think carpet is illogical and disgusting. It dropped heavily in fashion in the mid-nineties in Ireland, and now parquet and tile are close to God. Now I think of it, the last couple of German hotels I stayed in had some type of carpet; very industrial looking.
We Irish have for a long time tended to avoid carpet in bathrooms, but maybe we just don't piss as straight.
Comparing apples and oranges, or rather, the ecosystems that produce apple trees vs the right ecosystem for growing oranges?
These discussions just go around and around. I vote that we ban them in favor of people who want to know what it's like in Europe vs the US buying those of us who have spent significant (more than 2 years) on the other side a drink, while they listen to our anecdotes.
The fact that from an administrative POV, some part is split between the employee and employer is just that: an administrative convention, but don't be fooled by it.
I don't know where people are getting the idea that Europe pays software developers $3000-$4000 per month. Maybe in eastern Europe, but in Switzerland, you can expect double that amount.. after tax.
Well, from European software developers actually :) .
I guess it depends on your definition of software developer, but my sister's Austrian boyfriend (a software engineer) makes less than U$ 4.000, and so do some of my Magic:the Gathering acquaintances.
Granted, they're in their 20s and will probably command higher wages later on (I hope :) ), but I do know of a guy in his 40s making less than that in Vienna as well (working for IBM)
Cost of living in Europe is higher than in the US.
Consider cost of gasoline and real estate.
It's just that Europeans have lower income, so they do not buy things that wealthier Americans do.
Europeans on average are driving smaller and older cars, they drive less.
Other things you mentioned - Europeans are buying less gadgets.
Who's making the right choice is hard to say. Does larger house worth more than long vacation? The answer depends on who you ask.
Generalizations like Europe is more expensive than the US make no sense. Where in Europe, where in the US ? There is quite a difference between cost of living in London, Paris and Munich already, and the cost of living in the Bay Area is not the same as Austin.
Even within a given country, the cost of living is very spread out (London and Paris are extremely expensive compared to the average of their respective country for example).
In Germany and many European countries, you pay for healthcare and it costs a lot -- you simply don't have the option of not having healthcare and the cost is proportional to your income rather than your health condition. Also note that the employee caries the full cost of health insurance as opposed to the employer usually covering it in skilled professions in the US.
The social security model is also somewhat similar: you pay (high) social security taxes and get money back based your contributions.
Unemployment, also like in the US, is pretty sane if you're a full-time employee and are fired. You don't get it for several months if you quit on your own and if you haven't payed unemployment taxes, you get put on unemployment that's just at the edge of livable (housing costs + about $500/month).
And note, those taxes come after the lower salary. A pretty common take-home salary for a European software developer would be $3000-4000/month.
And really, how many 20-somethings that complain about the cost of living are doing it because they're stashing away too much in their retirement fund?
Public transit is a valid one, but then, the two highest paid areas for software developers in the US, New York and San Francisco, also have quite good public transit. (Not to mention that a one-month pass costs $100-200/month depending on the area.)
The truth is that I've heard people say that while they eat out every day, have a new car every couple years, live in swanky places and spend money on a constant stream of new gadgets. Americans also have a weird fetish that you don't find other places about buying homes in their 20s. While there are some valid reasons that make the total cost of living in Europe comparatively lower, I'm really not convinced that's the core of the difference. It's just that people quickly grow into their incomes and start seeing things as essential that aren't.