Soon after my arrival, I was looking into a possible new career in the UK. Like many of my fellow PhD students, I was looking for a job in the research and development department of a company. Not wanting to leave anything to chance, I circulated my CV to several headhunting agencies, with success. Soon I obtained my first job interviews.
But the interviews were sobering. Especially when it came to salaries, my expectations were disappointed. As a physicist with a Ph.D., I could have received an annual salary of 60,000 or even 70,000 Euros in a corresponding position in Germany at that time. Here I was offered a maximum of £35,000, with the prospect of earning maybe £50,000 in 15 years. And those were London salaries. Outside the metropolis wages were several thousand pounds lower.
I discussed my expectations with one of the headhunters. He was surprised. The wages offered were absolutely standard. How could I have such strange expectations? Such incomes are almost only possible in the financial sector. (And he had no contacts in that sector, nor was I interested).
Not wanting to believe him blindly, I did my own research, without much of a twist. The average salary of full-time employees in Britain is almost 25 per cent lower than in Germany. Moreover, engineers and similar professions are less respected in the UK than in my home country, so the difference here widens to the 40-50 percent described.
That was highly disappointing. And I still didn't want to believe the difference. The sums given were gross salaries. Perhaps there was much more left over after taxes than in Germany? And maybe the purchasing power of the pound was stronger than that of the Euro?
Both were true, at least partly. For example, the tax burden from taxes and social security contributions for mean wages is a few thousand euros less per year. And according to the exchange rate, at the time of my research, the pound was worth just under 15 per cent more than the Euro.
But what you get for your money, or what you get from the state for your taxes, is downright ridiculous (more on the latter later).
One of the worst items is the most basic: the cost of accommodation. For our flat, just over 40 square metres in a 1960s council building, we paid almost £1,400 a month, without costs for heating or electricity of course. In addition to those, there was the council tax, a levy to the district, in our case over £100 per month.
Now you will object: We lived in London, and of course rents are high there. You are right, especially since we lived in Islington, one of the (somewhat) better boroughs of the metropolis.
However, people there don’t earn a lot either. In 2018, the median household income in our area was just under £33,700. This includes not only the wages of everyone living in the household, but also their income from capital gains, pensions and social benefits. Since taxes are still deducted from most items, there is not much left to live on after rent is deducted.
One force to drive rents is, of course, demand. Living in London is attractive, especially compared to the rest of the country (more on this here). But above all, rents follow property prices. And these have quadrupled in London in the last 25 years, in real terms.
In England, the increase was less steep, but property prices still rose 4.8 times between 1970 and 2019 (again in real terms). By comparison, prices in Germany grew by a factor of only 1.2 over the same period.
Although real term wages also rose in the UK until the end of the 20th century, they have hardly changed since 2000. In recent years, they have even fallen below that level.
In short, the British wages are low, the costs of living are high, and the gap is widening. No wonder many Britons think they are worse off than they were 20 years ago. No wonder they are unhappy.
(In my later blogposts I will discuss other costs of living: e.g., nursey costs, school and university fees. They have experienced a similar development.)
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