> Why do people earn only 5k after tax ? It's not clear what your point of reference is. If you're wondering why it's much lower than in the US (where the 90-p

> Why do people earn only 5k after tax ? It's not clear what your point of reference is. If you're wondering why it's much lower than in the US (where the 90-percentile household is probably around 170k USD pre-tax or 9k-10k post-tax), there are many many factors that contribute to the difference. The most important ones (unordered) are IMO: - USD is probably overvalued by 15%-20% [1]. In the past 10 years, the EUR/USD rate fluctuated between 1.05 and 1.55, currently it's 1.12. It's unlikely that the relative living standards between the US and Germany fluctuated as much as 50% in this period, so a lot of the nominal incomes differences are not real. - Americans work 30% more hours than Germans [2] These two factors can explain most of the pre-tax income differences. The net difference is a bit higher still, due to higher taxes/mandatory payments. I don't have references at hand, but at the €100k level, take-home pay is around 60%-62% of gross, while for an American at $112k it's closer to 70% (federal, state and payroll). No comment about justness, proper accounting for transfers, subsidies, other taxes, mandatory insurances, etc. This is a huge sprawling debate topic, but it's indisputable that disposable income at the same gross is higher in the US than in Europe. IMO, the first 2 factors accounting for differences in gross incomes are more important anyway. A fairly mainstream economic theory is that the higher European (marginal) taxes are actually a major cause of the lower working hours (and hence lower personal income) [3]. The highest marginal rates actually don't differ that much (typically around 50% in Europe, 45% federal+state in the US), but in Europe the higher rates typically kick in at much lower levels: US marginal rate at $100k is probably around 30%, whereas in many European countries it's already in the 40%+ bracket. [1] https://www.bloomberg.com/news/articles/2019-06-11/trump-has-a-point-the-euro-is-22-too-cheap-using-oecd-measure https://www.bloomberg.com/news/articles/2019-06-11/trump-has... [2] https://en.wikipedia.org/wiki/List_of_average_annual_labor_hours_in_OECD_countries https://en.wikipedia.org/wiki/List_of_average_annual_labor_h... [3] https://www.wsj.com/articles/SB109830788286551061 https://www.wsj.com/articles/SB109830788286551061