Why American Salaries Are Higher, but Europeans Have More Money
A cultural analysis of how individualism and collectivism shape wages, benefits, and real income.
A friend of mine works for a global firm that just made a shocking announcement: They will no longer hire Americans.
Another friend works for a large international firm based in Malta. This corporation hires people worldwide, but its policy has changed to hire from Malta—and not for an obvious reason.
The Real Reason Behind This Shift
Businesses exist to make a profit. For most businesses, payroll is the largest expense.
This change in hiring policy was not about protectionism, which Europe does not engage in, or retaliation to Trump’s US protectionism. It was purely about saving money because Maltese workers are paid less than US workers in the same position.
Why the (significant) pay difference? It’s not what you expect.
The Maltese government provides services to their citizens that Americans don’t get. Their citizens don’t have to pay for these services out of their pocket like Americans do. Therefore, salaries can be lower, AND (here’s what most people miss) people still have more money to spend.
Let me explain. These services are paid for through tax.
How Taxes Cover Essential Services
Malta employs a progressive tax from 0% to 35%. This covers generally the same items Americans receive: running the government, roads, police, the military, and so on. However, it also includes medical treatment.
Malta has excellent health care, ranked 18th in the world. The government funds it with a 0% to 35% tax, slightly lower than in the US under Trump. Maltese citizens get treatment in state-run hospitals—for free. They don’t have to pay out of pocket every time they see a doctor or have a hospital stay.
The average monthly premium for individual health insurance in the US is around $477, which is just under $6,000 annually. It’s less if the employer pays part of it. American citizens then have to pay every time they see a doctor, pay a deductible, and then 20% of the total. In 2023, the average spend per person was $14,570.
The US tax rate is between 10% and 37% (slightly higher than Malta’s). In addition, Americans pay an additional $14,570 for medical care. Therefore, Maltese citizens can be paid $14,000 less than their American counterparts and still have more money left over than Americans.
Education Is Another Major Cost Factor
But health care isn’t the only benefit the government provides. The government also pays for university tuition. In the United States, tuition for an undergraduate degree is between $40,000 and $120,000.
With just these two variables, a Maltese company could pay its employees $23,000 less than their American counterparts, and the Maltese worker would still have more spending money.
The Cultural Divide That Shapes These Systems
But here’s what most people miss:
The U.S. system is based on the cultural characteristics of individualism, particularism, low power distance, and specific culture, emphasizing personal responsibility and market-driven solutions.
The European system reflects the cultural dimensions of collectivism, universalism, higher power distance, and diffuse culture, emphasizing state-managed, universally accessible services.
This is why it is doubtful that the US will ever provide its citizens with health care or higher education. The people don’t want it, not everyone, but enough to make it unlikely. It’s just not part of the American culture.
It takes generations to change a cultural perspective. In a political system where citizens vote for government representation, it will take generations before Americans vote for a government that provides for its citizens.