The Salary Ceiling in Europe for Developers

Or why one should vote with their feet and give Germany the Brain-drain it wants.

I've been job-hunting for about two months now and have even begun to fund a solo-entrepreneurial venture to try my hand at contract work and build my portfolio with inexpensive MVPs (Minimum Viable Products) to gauge market demand.

This experience has provided me with a deeper insight into the salaries and compensation packages within the IT sector, prompting me to write about IT careers in Germany - a country that frequently ranks in the top five destinations for IT professionals seeking to migrate, for instance, from India.

My previous salary was €90k per year, working a 30-hour week with 30 days of paid vacation, in addition to enjoying Bavaria's 13 holidays that are mandated as paid vacation days by law.

For the sake of this rant, let's consider my total compensation to be €120k when accounting for all benefits such as a paid gym membership, transport, food, and other perks.

The highest salary attainable for positions filled through recruiters is €140k. This figure includes roles that are hybrid or exclusively in-office, based in the three most expensive cities in Germany - Berlin, Frankfurt, and Munich.

Currently, rent for a 68m² 2.5-room apartment in a “Sozialbau” (loosely translated as social housing intended for those in need) costs €1250 a month. Traditionally, this housing was provided for long-term unemployed individuals who had received social housing permission. However, after 30 years, the investors contract with the city expired. Motivating him to carry out the cheapest renovation possible with paint so cheap that its chemical smell stayed in this apartment for 6 months and you could only endure switching the room in which you kept the windows open. To my luck it was summer time

With minimal effort, my landlord managed to increase the rent from €600 to €1250. However, that was the rate in 2020; the same apartment now costs €1600 in 2023.

Including electricity and internet bills, the monthly total becomes €1400.

Following the footnote one would see that with 4300 after taxes as a single I would be part of the 6% most rich Germans by the data of 2021.¹

Calculating my partner and daughter in we are at 5350 and part of the top 20%.

So if as a family we earn more than 80% of the population on would naively assume I should be able to fulfil my dream to buy a apartment in Munich no longer even dreaming about a house.

Before I continue writing further from my privileged perspective of working in one of the highest-paying sectors in Munich, I want to depict the reality for 50% of Munich's population. The average income in Munich is €56,600² but even this median is somewhat skewed and does not truly illustrate how the majority in Munich live. Some important salary benchmarks for comparison include the minimum wage of €24,960, the wage for someone working in garbage collection, which is €29,880, and the salary of those working in markets ensuring you can buy food, which averages around €30,900.

Assuming an income of €30,000, one would earn €2,500 a month. After taxes, with the cheapest insurance and without paying a church tax, you would be left with €1,985. If we ignore the recommended size for a single apartment of 40m², and consider a smaller 35m² apartment, the rent comes to €790. This would likely be an apartment with hundreds of applicants, and if you are unlucky, you might need to rent a furnished apartment for €1,200.

If you're not a student, then the cheapest room in a coed space costs €500 for 6m². The coed apartment business is often predatory. While there are laws preventing overcharging for rooms to the point where they cost more than the apartment itself, there is a lack of enforcement. Many landlords even furnish rooms cheaply, circumventing the law as it only applies to unfurnished rooms. For example, in 2019, I paid €720 for a 30m² room connected to a toilet via an old door that the landlord had simply closed off and painted over. Any noise or smell from the bathroom would seep into my room. After two weeks, I tried to seal the door with two old pairs of jeans, only to be woken up on weekends by one of the other residents masturbating loudly in the shower.

In my opinion to be forced into such living conditions as an adult is inhuman but I know there are people which don’t have such problems with it.

Only by renting a room in a coed apartment can you keep your rent low enough that it doesn't exceed the recommended 30% of income. The current cost of living in Munich is €1,017.³. This leaves you, in one case, with a potential savings of €178 or, in the other, €468. Birthday and Christmas gifts, as well as special occasions, new smartphones, insurance claims, medical costs, gym memberships, and any kind of subscription, can quickly eat these savings.

If you were to save 180€ a month with starting at age 30 you would have saved enough money by the age of 67 to have additional €1,315 per month in retirement, after taxes, on top of your €1,000 pension.⁴

And that is if you never decided to buy a car, a house or apartment or have children. A bad choice or an unfortunate event could wipe out all your savings or future savings forcing you into poverty in old age, if you manage to endure until than.

What would it look like to buy an apartment in Munich for a family of three?

An apartment of 70 m² with 3 rooms costs 700000€.

That means for a credit you need 10% of the price which would be 70.000€. With a saving rate of 2000€ a month that is roughly 3 years of saving and praying that the prices stop increasing.

After you finally you got your credit you would be paying for 30 years 3000€ a month for a credit with a interest rate of 3,6.

All while you can get in the whole of Germany beautiful renovated houses for 200.000€ with their own fibre glass connection.

And every time you shop or go out to eat you don’t pay the “Munich-Tax” the costs of everyone trying to live in Munich filling the pockets of the real estate speculators.

But that’s an argument against every high cost of living area in the time of remote work, CodeBastard!

Yes, and that is the part where we get to the meat of the story, the taxation in Germany and the higher salaries in German high cost areas.

In average the higher salaries are about 20% more. So if here is the maximums €145k everywhere else it would be €125k. But with that we would only follow the the tale of “old IT”. The feeling for need of control and old time tested ways of working against the remote first digital processes movement. These kind of companies develop for the global market and not only the German one. And they are not a glorified IT support of a manufacturer whose focus as far away from digitisation as he can afford.

And these remote first can used the saved costs on office, travel, cars and own hardware match the salaries in high cost areas and if they are working on global markets even surpass them.

In my ignorant case, the additional €20,000 falls within such a high German tax bracket that I could expect to see only an extra €10,000 in my bank account. That amounts to about €830 more each month. With the current rent prices, this increase would no longer cover the difference in rent.

When you talk about taxes you have to talk about the ultra rich because there is no easier way to find tax heavens than looking for the favourite places to live of the extremely wealthy.

Everyone knows the USA leading the charts of the ultra rich full of their own citizens. After USA follows China well known rival in the fight of the global wealth. But what may be unknown to many in third place follows Germany.⁵

Germany? You may ask, but why are there so many ultra rich?

While Germany is a tax hell for the working class⁶ it is heaven for the wealthy.

First you can put all your wealth into a corporation and let the corporation have the simple goal of wealth management. Then you pay on any wealth accumulation a Tax Rate sometimes as low as 8,5% and this only after a year of letting the wealth work for you.⁷ Then come the cost of business and the ability to pay your own salary. But a salary would be again taxed too much so you can just have the shares of the company distribute the winnings with a tax rate of 20%.

Of course there is also the possibility of cheap credits, costs for business parties, car leasing and all other bonuses you can enjoy and put on the tab of the company. Take our politicians as an example.

And when this is not good enough you can play with the concrete gold (“Betongold”) and create a owning as well managing entity while writing the costs of the building with 1% off each year. Letting the rent calculation return zero if not a negative number while the real value of the estates increases.

It is good to know that Germany has one of the lowest taxation on property the real money maker for the rich.⁸

How high is the taxation really?

Lets calculate with the 7500€ per month.

After all taxes I get 4.293€ but that are not all taxes that are paid my employers pays an extra 1.187€ that are not part of the salary calculation but come on top. We call it in Germany the hidden tax.

That means the original gross salary would be 8.687€. 4.293€ / 8.687€ = 49,4% left after the first taxation round.

Then comes the “Mehrwertsteuer” a 19% Tax for everything the state decided you don’t need and for things they decide you need you pay 7% extra.

As nearly everything has the 19% tax you can assume your buying power is 3.477€.

And 3477 / 8687 = 0,40% left. And I am ignoring the high taxes on for example electricity and other strange German things.

If you want the taxation of every additional euro above 3000€ you will realise that from 100€ you get to keep 33€ and 67€ go to the state.⁹

If you an believer in the social market as me you would think well if get my pension by 61 and can relax for the rest of my live than live could be worse but of course the rent age is moving every year back. We are now by 63 and many estimate that we will end up with a pension at 75€ especially with all the investments into anti-ageing technologies.

So if you are still an orientating yourself you want leave Germany for greener pastures but how not to repeat the erring of my youth.

Finding greener pastures

Lets get over the criteria what a great country to live in means for me, as I will use the “OECD Better Life Index” we will use their categories.

Housing:

Housing is a main criteria for me I think everyone deserves a house and the opportunity to work from home to spend their time on things that matter and they chose. I know that it is a privilege not beeing dependent on a location for you work but I think with automation we will with time improve our infrastructure so much that traditional shops and manfacturers can not compete.

Income & Jobs:

This one is obvious if you are moving around countries for your career you want the highest salary, because money speaks everywhere the same language.

In the same time you want to have employment mobility and security as this favours talent in the job market.

Community:

I am a loner and a Introvert so I don’t care about a felling of community at all it is nice to have but as long I am left alone in my house I am a happy cave dweller.

Education:

I have a daughter and maybe another child in the future as I don’t know any better way to give a child all the tools it needs to succeed in live I am also all in on education. Maybe I can even a diploma myself.

Environment:

With global warming cooking us slowly and weather extremes occurring more often I sit this one out and just want good and clean air around me.

Civic Engagement:

Don’t change a running system. As immigrant who follows his duty to vote that is all engagement I need maybe its similar to the point community.

Health & Life Satisfaction & Safety:

I think these points go hand in hand. It is hard to be happy when crime is a daily worry and your health deteriorating.

Work-Life Balance:

That is maybe on of these things that was in the right direction in Germany. But the 4 Day Workweek would be a dream come true.

That results in the following list¹⁰:

1. Switzerland, strong on the income part

2. Norway, stronger every where else

3. Netherlands, weak on the income site

4. Luxembourg

5. Sweden

6. Finland

7. United States

8. Iceland

9. Canada

10. Denmark

Software Engineer Median Salaries by country¹¹:

1. United States, 107.207€

2. Israel, 106.326 €

3. Switzerland, 97.405 €

4. Ireland, 82.047 €

5. Denmark, 81.763 €

6. Australia, 76.065 €

7. Iceland, 75.860 €

8. Norway, 74.728 €

9. Canada, 74,084 €

10. Luxembourg, 71.562 €

Lowest Tax-burden on childless Single by country ¹²:

1. Colombia, 0%

2. Chile, 7%

3. Costa Rica, 10,5 %

4. Mexico, 11.3%

5. Korea, 15,8%

6. Estonia, 18,4 %

7. Switzerland, 18,5%

8. Israel, 19,1%

9. Czech Republic, 19,5 %

10. New Zealand, 20,1 %

I create a Set of all the countries in the top 10 of these categories give them each a rating from 0 to 100 by their Value. The best placed one gets the 100 points besides in the better life Index category not to skew an already exisiting rating.

As one can see in the Table the top 10 are:

1. Switzerland

2. United States

3. Israel

4. Australia

5. Norway

6. Ireland

7. Iceland

8. Canada

9. Denmark

10. New Zealand

But what if you managed to establish yourself as a Freelancer and have already sweat contracts that pay more than 100€ an hour. Then you don’t really care about the job market and salaries in your country along as you are single, the sole bread winner or just egoistic. Then the rating in the last Row may be the just perfect one for you which results in the following top 10.

1. Switzerland

2. Sweden

3. Norway

4. Netherlands

5. Australia

6. Canada

7. New Zealand

8. Estonia

9. Finland

10. United States

In Germany there is the believe that switzerland is much more expensive and that taking the cost of living into consideration the difference is marginal. Lets test it with some big pain points of mine from munich against switzerlands most expensive city Zurich.

Per child a all day place in a kindergarten costs 2,400€ a month in Zürich. But if you were to leave your child with a daycare Family for 160 hours a month you would pay 1,404€ .¹³

In Munich if you manage to get one of the rare slots in a city sponsored kindergarten you have only a monthly cost of ca. 245€. Are you forced to relay on a private Kindergarten it may cost you about 1689 € a month.

Lets talk groceries 2kg of chicken tighs cost in the switzerland lidl 13€, that makes a kg price of 6,5 € while in Germany in a REWE sale you get them for 5,55€ a kg. A 15% price difference.

And a 65m² apartment with 3 rooms costs in Zürich now 1770€ while in Munich you pay 1600€ for a apartment with a slightly bigger balcony. A price difference of 10%.

My conclusion is as I speak already German and Munich is not far from Switzerland all number crunching just affirmed what my gut feeling told me that Germany just does not make the cut anymore and that may next destination should be Switzerland.

1. https://www.iwkoeln.de/fileadmin/user_upload/HTML/2021/Einkommensverteilung/index.html

2. https://news.kununu.com/durchschnittsgehalt-in-muenchen/

3. https://www.basicthinking.de/blog/2023/05/15/lebenshaltungskosten-muenchen/

4. https://frugalisten.de/rechner/

5. https://www.dw.com/en/germany-ranks-third-globally-for-number-of-ultra-rich/a-57838998

6. https://www.oecd.org/tax/taxing-wages-20725124.htm

7. https://firmensitz-grünwald.de

8. https://data.oecd.org/chart/77jo

9. https://www.nzz.ch/international/oekonom-warnt-vor-massiver-steuerbelastung-die-faulen-werden-in-deutschland-belohnt-die-fleissigen-bestraft-ld.1733578

10. https://www.oecdbetterlifeindex.org/#/55515115555

11. https://www.developersalary.com/

12. https://stats.oecd.org/index.aspx?DataSetCode=TABLE_I6

13. https://www.stadt-zuerich.ch/ssd/de/index/volksschule/betreuung_horte/beitragsrechner/beitragsrechner.html