There can be no unequivocal answer to this question, because ‘good’, like ‘fair’, are concepts which correspond to a subjective perception. And yet politics and companies should devote themselves to this question and try to shed light on it from as many aspects as possible. It immediately makes sense why companies must address this question, after all, they want to find and keep the best suited employees. But why politics? It is about the right political framework, so that on the one hand the economy can get the right key workers from abroad, and on the other hand the people in this country can afford enough with their hard-earned money.
Politics and business, both must give an attractive answer to the question of what a good salary means.
Let’s state the obvious:
Salary serves as material security
And so, it guarantees one of the basic human needs according to Maslow’s pyramid of needs: security.
Only when people feel that their salary ensures a reasonably carefree life – pay rent, enable children to study, save money for emergencies, save for their own apartment, be financially secure in the event of illness and be able to afford leisure activities such as vacations every now and then, only then you will at least perceive the salary as ‘ok’ – we are still far from ‘good’.
How well protected are Austrians by their wages and salaries?
According to Statistics Austria the mean net annual income in 2019 was 22,104 euros (women: 18,233 euros, men: 25,938 euros) and has increased by 37% compared to 2004.
According to the Austrian Chamber of Commerce, the consumer price index rose from 115.9 to 153.5, i.e., also by 37.6%. – in the same period from 2004 to 2019
Excluding part-time and non-year-round employees as well as apprentices, according to the statistics authority the mean net annual income was a total of 30,766 euros (women 27,995 euros, while men earned an average of 32,126 euros), which is an increase of 45.5% compared to 2004. Interestingly, over the same period the mean net salaries of full-time women increased by 53% and that of men by 41.8%.
Conclusion: At first glance, our purchasing power has remained stable, and Mr. and Mrs. Austrian have been able to afford more or less the same things for their salaries over the last 15 years (2004-2019).
BUT: according to WIFO, in the twelve years from 2000 to 2012 rental expenses rose much faster than the consumer price index, namely by 44.6%. And this dynamic has continued from 2013 to 2017, when rents have increased by 15%, but average salaries only by 9.2% !!
Now theoretically all federal states except Vienna could breathe a sigh of relief, as the proportion of apartment owners predominates: 51% -72% of all households are property owners (except for Vienna), but the Austrian National Bank published the residential property index on October 18, 2021, which illustrates how the costs for home ownership have exploded during recent years and are in no relation anymore to the development of wages and salaries for the same period. Property prices rose by 7% in 2020 alone, and the increase will be even steeper in 2021.
Österreich ohne Wien
Veränderung zum Vorjahr in %
Quelle: OeNB, DataScience Service GmbH (DSS), TU Wien, Prof. Feilmayr..
Lots of statistics, but what does it all mean in concrete terms:
Let’s assume a 28-year-old full-time worker who has already been working as a mechanic for the last 10 years. She will earn at least EUR 2,850 gross per month or EUR 28,000 net per year.
A university graduate from WU who starts in controlling can expect a monthly gross amount of EUR 2,600 in the first year and thus receives EUR 26,000 net annually. Both are not far from the Austrian median net income for full-time employees of EUR 30,766.
If you think long-term and want to buy a 100 square meter apartment in the country or a 75 square meter apartment in Vienna instead of renting – these are the average apartment sizes in Austria or in Vienna per household, according to Statistics Austria
then they must reckon with a minimum purchase price of EUR 300,000 and currently repay annual loan installments of around EUR 15,000. All just exemplary – but it shows how tight it turns out, although our two examples clearly belong to the higher earners.
In 2019, the percentage of low wage earners, who receive less than 2/3 of the average gross hourly wage, was 13.4% of all employees. According to Statistics Austria, the proportion of people at risk of poverty has increased
by 16.7% from 1,047 million people to 1,222 million people between 2004 and 2020!
Conclusion: If living is one of our basic needs, then we must seriously worry about the current development.
How good is our salary compared to other countries?
According to Statista.com, Austria was the 10th richest country in Europe in terms of gross domestic product in 2020 – and thus claims a place ahead of Germany (11th) and Belgium (12th) – and the 14th richest country worldwide. According to Salary.de, the German median salary is EUR 43,200 gross in 2021, and just under EUR 28,000 net – well below the Austrian median wage level for full-time employees of EUR 30,766 in 2019, and for years, it was the other way around. However, the cost of living in Austria is around 6.4% higher than in Germany (2020) – despite this, our wage level currently enables higher purchasing power.
In this context, it’s interesting to consider a report from 2020 provided by länderdaten.info, which calculates the cost of living and purchasing power in relation to income and uses data from the OECD, the World Bank, Eurostat, and the IMF. Please note, this document doesn’t consider the median salary, but the gross national income per inhabitant, and Germany was used as point of reference for the comparison with a value of 100 for its cost index and purchasing power. According to this source, Norway, Luxembourg, Iceland, and Switzerland are at the top, followed by Austria and Denmark, just ahead of Germany.
Our good salary level is particularly evident in a study shown by OECD where Austria assumes the 10th place out of 35 countries. The report considered the average annual wages for full-time and year-round employees and showed the real wage development since 1990 in US dollars, adjusted by the purchasing power of 2019.
Despite our top position, the salary in Iceland has increased by a remarkable 76% (adjusted value) over the last 30 years and Norway’s wages have increased by 74% since 1990 – Austria – with only 25.5% wage increase -should learn from these countries.
Within Austria, how good are the average salaries by industry and region?
StepStone released its latest salary report in June 2021. Attention: Median salaries (i.e., the central value, which is exactly in the middle of all salaries analyzed) are not used here, but average salaries, which of course must always be viewed critically:
52,000 euros gross per year – this is currently the average annual salary of employees in Austria.
When comparing cities, the picture is surprising: Linz and Bregenz (55.600 euros) lead the top salaries – even before Vienna (54.931 euros), followed by Innsbruck (51.700 euros), Graz (51.000 euros) and St. Pölten (50.250 euros).
Top is the banking world with an average of EUR 64,250, followed by consumer goods, chemicals, pharmaceuticals, and medical technology – all of which still have an average annual salary of over 60,000
Executives in top management earn more than twice as much as employees without personnel responsibility. While executives with up to four subordinates earn an average of 53,300 euros, executives with at least 100 subordinate employees already earn a salary of 96,600 euros.
Education: Those who study earn an average of 34 percent more
It plays an important role in which company you are employed. In general, the following rule of thumb applies: the larger the company, the higher the salaries.
Can salaries be so good that they make you happy?
This question inevitably leads to Nobel laureate in economics, Daniel Kahneman and his co-author Angus Deaton. in 2008/2009 they asked 450,000 Americans how much they earned and how they had felt the day before. Their conclusion: those who earn more are usually happier, but only up to a certain point. Beyond the threshold of a gross household income of $ 75,000 (the equivalent of 60,000 euros), the assessment of personal happiness remains the same with every additional dollar earned.
But be careful, this survey was conducted over 10 years ago, EUR 60.000 are not worth as much today as they were back then, as prices in Austria alone rose by over 30% over this same period.
And the salary level in the USA is not comparable to the Austrian one, the gross median salary in 2020 was 67,521 USD, while the Austrian gross median salary for full-time employees was 43,719 in 2019.
Conclusion: the law of diminishing marginal returns may apply to salary increases, but the amount at which this effect starts should be re-determined.
In a new study, the psychologist Matthew Killingsworth of the University of Pennsylvania showed that the daily emotional well-being increases with a household income increasing well beyond the amount of 80,000 US dollars – with no upper limit: rich people feel like they are more in control of their lives.
How good is my salary?
Wie gut ist mein Gehalt?
Even if we live in a rich country with fairly high salaries, only the subjective response of each individual counts as to how good their own salary is perceived.
In June 2020, Randstad US clustered its study by age group and found out how regular salary increases are important drivers for each age group to want to stay with the company.
Gen Z (18-24)
Gen X (35-49)
Baby Boomers (50- 64)
Salary increases are particularly important to millennials – and yet in this survey 64% say that they would rather take a position where they would be positively challenged and where they could develop professionally than a job with a higher salary but without personal growth opportunities.
Salary is important – but not only, this result is confirmed by a survey from ZenJob in 2021: Gen Z rank honesty and open communication in the corporate culture first and good salaries.
Career and salary alone are no longer the only needs to be satisfied – in the Gen Z hierarchy of needs, work-life balance (69%) comes first, then flexibility (54.8%), personal identification with the company (54.7%), diverse tasks (52.5%), job security (45.4%) and the wish for a company to be particularly digital and progressive (23.6%).
What do all these findings mean for politics and companies:
offer affordable housing, so that work pays off
Paying good salaries – this is just the tip of the iceberg; or it ensures the ‘hygiene factors’, according to Frederick Herzberg’s empirical study of 1959! about job satisfaction: money and status are not suitable for long-term motivation, but rather…
…real incentives arise when individuals get professional growth opportunities and work in…
…a culture of fairness and inclusion, where each one can develop one’s strengths regardless of age, special needs, gender, nationality, status