Imagine paying a high tax for owning a gas-guzzling SUV, enjoying six weeks of paid vacation each year, or giving half of your paycheck to the government. In this guest post, Emily Starbuck Gerson, of the CreditCards.com blog Taking Charge, describes some of the differences between the personal finances of Americans and Europeans.
I just returned from two weeks in Europe, where I stayed in Hamburg, Germany, for a few nights with my friend Flo. He is a German native but studied at my high school for one year. We got to talking about problems currently facing our countries. I complained about illegal immigration, a broken healthcare system, and a broken retirement program. I had the impression that things in Europe were so much better. After all, Europeans enjoy universal health care and tons of vacation days, what more could you want?
When I expressed these opinions, Flo looked at me like I was crazy. He said Germany—especially Hamburg—has been deluded with immigrants from Turkey (many illegal). And while Germany has a government-regulated healthcare system, there is also private health insurance, so citizens much choose between private and public insurance, and everyone pays premiums. He also said Germany’s retirement program is struggling much like ours.
I was shocked. As I talked to Flo, I realized that just because America is mired in an unpopular war and struggling with a sagging economy doesn’t mean things are perfect in other countries. While Europeans may be benefiting from a strong Euro and—thanks to widely available public transportation—a lesser reliance on petroleum, they face many of the same financial struggles as Americans.
Some things, however, are very different in Europe.
Car taxes and fuel economy. After speaking with an elderly woman on a train in England, I learned that British citizens pay an annual car tax that is rapidly increasing. She said for tiny cars, it may only be 200 pounds, but soon may be 1,000 pounds or more, and will be higher for big cars that pollute heavily. Flo says Germans also pay an annual car tax that includes penalties for gas guzzlers.
Gas prices. Gasoline is currently about $9/gallon in the United Kingdom. According to an L.A. Times article, taxes account for 81.5 percent of London’s gas prices. And we thought we had it bad. On average, taxes account for 19% of the cost of a gallon of gas. Can you imagine if, on top of rising oil prices, we had to pay 60% more in taxes?
Coins, cash, and credit cards. I was surprised to discover just how much people in Europe use coins. Here in the States, our dollar coin,is a novelty that nobody uses. In the U.K. people commonly use one- and two-pound coins. Often I would hand over a five pound note for a one or two pound purchase and receive all my change in coins. Then I discovered that the automatic subway ticket machines in France accept European credit cards and coins only—no bills or American credit cards! My coin purse was heavy, but it came in handy buying subway fares—and whenever I came across an unattended pay toilet.
Vacation. In Germany, I met many of Flo’s friends, who asked me how long I was going to be in Europe. When I told them two weeks, they laughed and asked: Why would I come all the way there for such a short time? I told them that it was all the vacation time I had at work—I was using all 11 days for this trip. The Germans were flabbergasted. Most of them enjoyed between 25 and 30 vacation days annually, not including holidays. According to the German Embassy in Washington, D.C., “[German] law requires a legal minimum for vacation time of 18 workdays for adults, and 25 – 30 days for young adults up to the age of 18 years. However, due to collective bargaining agreements, 70 percent of all employees enjoy at least six weeks of paid vacation, and most of the others get between five and six weeks.”
In France, things were similar. Citizens had much more vacation time and work hours were more lax. While employers may not appreciate the reduced productivity, I have a feeling the workers are happier and healthier because they get more breaks and are less burn-out.
Employment notice. In Germany, if you are fired or resign from a job, you must work for two more months. I asked Flo what happens if you’re leaving on bad terms, and he said not all employees continue working that long, but they are still technically employed. He also explained that German law makes it very difficult to fire an employee. Essentially, employees have to steal or harm somebody else before their employer will give them the ax. That’s quite a contrast to America, where companies will lay-off qualified, hard-working employees at a moment’s notice.
Payroll taxes. On average, Federal income taxes are much higher in Europe that in the U.S. Because of these taxes, Flo never sees a whole fifty percent of his paycheck.. And I thought it was bad to lose about a third of my check!
Government assistance. Germany is very much a welfare state, Flo explained, and the indigent can get government money with few requirements. The government will offer you jobs, and if you keep turning them down you will get less money, but you still get some, so many abuse the system.
Flo complained about the money from his paycheck that goes toward this welfare program, but there are many citizens who don’t take advantage of it, as evident by the large homeless population. Shopping in the Hamburg city center, it was nearly impossible to find a bench. Flo said the city limited benches to avoid attracting the homeless.
I am happy to be home, with our standard conveniences of air conditioning, ice, and free toilets, but I am so glad I went–it was a very eye-opening experience!
Emily has been busy since she’s returned from Europe. Not only did she write this great guest post, she is also hosting this week’s Carnival of Personal Finance. Great work, Emily!