salary - taxes - costs of living [including health insurance] + expected future revenues [in particular pensions]
Can you provide me evidence that, say, Germany, is so much worse than the USA with respect to this metric?
Cost of living is fungible. If I buy a property in an expensive city, then I have to invest a lot of my money, but I can also recoup that later if I sell the property. In boom cities the property will appreciate and create more wealth. Other costs like food and transportation provide the opportunity to be significantly frugal if you desire to be. But with the high compensation available to top workers in tech, it's possible to not be frugal and still save a large amount.
Having done this out of school, I found myself literally borrowing money for first/last/security. Not much money, and not for long, but that's of course because I had a signed contract before I settled on an apartment. Cheap living is pleasant, but it can leave you in a serious cash crunch should you try to move - especially as a young person.
I get contacted by recruiters from Germany (and other EU countries) quite often and they could never match London contractor pay even remotely.
Germany also has higher taxes and health care coverage is comparable in UK and Germany (both have national healthcare).
I think that's a microcosm of US vs EU salary situation in software engineering. IT job market in London is very different from any place in Europe, I'm not sure why that is.
The living costs in London are enormous. A fellow student has a highly payed analyst job at Goldman Sachs in London, but still does room sharing in a flat somewhere in London.
The point I was making even in top cities in Germany (Munich for example) where living costs are also enormous, salaries are not very competitive compared to SF/NY or London (this only applies to contracting, permanent salaries are low in London).
In London contractor market is very active and large so you can go from contract to contract basically without gaps and function basically as if you had a perm job but with much higher salary.
In Germany contracts are more sparse and I don't think it's easy to pull off a full time contracting there. The rates are also quite a bit lower (at least from emails I get from time to time about contracts in Netherlands & Germany) so there's that as well.
And of course, Tokyo is much much worse in this respect. I know some people who live in Tokyo so I know that being a programmer there is pretty bad.
A rule of thumb in Germany: If you earn double the amount as a contractor as you would as an employee this is about the same standard of living. In other words: If you don't really earn a lot more as a contractor than as an employee, it is not worth the hazzle.
Another problem for contracting are the laws concerning Scheinselbständigkeit (fictitious self-employment) - cf. https://de.wikipedia.org/wiki/Scheinselbst%C3%A4ndigkeit - which make it really difficult for companies to contract someone for a longer time.
First problem with that was that public sector IT in the UK depends on contractors so they have shot themselves in the foot (already many public agencies started relaxing the rules and working around IR35 to be able to hire anybody).
Also most contractors usually change contract every 6-12 months so it's not a problem. You don't work at a single company for longer than that (1 year 11 months is maximum, after that you get in trouble because of IR35).
> A rule of thumb in Germany: If you earn double the amount as a contractor as you would as an employee this is about the same standard of living
Well what if it is 3 or 4 or even 5 times more. With top market contracts the rates can be really good. If a company urgently needs to hire somebody skilled to come in and do some firefighting you can negotiate a very high daily rate for 6 months contract.
Also keep in mind you pay lower taxes as contractor as most of your income is via dividends. And you can also expense a lot of things you buy if it can be justified as cost of running business.
The only reason it hasn't blown up yet is that the value of € is kept low by southern European countries that are struggling to stay afloat. Since the living costs remain relatively low, employees don't have to ask for more.
Source: recruiters trying to convince me that €60k is what senior software engineers make in Germany. If you are wondering, that leaves you with €2900/month after taxes and insurance. The wonders of progressive income tax.