Business: How They Live So Well in Europe

"Black work" and a thrift ethic help them handle those prices

It used to be that Americans returned from a vacation across the Atlantic full of tales of shopping bargains and cheap travel. No longer. Today, most return with their wallets empty, their credit cards fully charged and their spirits shaken by how little the dollar now buys. Many wonder just how Europeans can afford to live at all in Western Europe, let alone so well.

Prices are indeed high. In the shopping meccas of Paris' Rue du Faubourg-Saint-Honoré, Munich's Maximilianstrasse or Brussels' Avenue Louise, a Pierre Cardin tie costs $40, a Réty suit $440 and a Balenciaga handbag $370. Even the cost of window-shopping is steep. Hotel rooms in a smart area of a capital city can easily cost $75 a night, a good dinner for two starts at $60 or more, and a week's car rental often tops $300. Local residents, of course, avoid the stores and services that tourists frequent. Even so, their everyday costs are hefty. A modest two-bedroom house in a suburb rents for $1,600 a month; a gallon of gas costs $2.30 or more, a pair of Levi's about $40, cigarettes $1.10 to $2.70, newspapers at least 40¢ and a pound of steak up to $11.

But while surveys show that compared with America, living costs are up to 73% higher in Switzerland and about 40% higher in West Germany and France, it is also true that European salaries are occasionally richer. A recent study by a U.S. management consulting firm, Towers, Perrin, Forster & Crosby, calculates that the chief executive of a typical medium-size company in Germany earns 50% more than his U.S. counterpart, 40% more in Belgium and The Netherlands, and 20% more in France. Business International, a Geneva research firm, notes that in Switzerland today, a receptionist now gets $19,700 a year, an executive secretary $27,000 and a salesman $37,000.

Though part of the rise in European pay (and prices) when expressed in dollars reflects the slump in the value of the greenback, this does not explain all the difference. In real terms, incomes have simply risen much faster in Europe than in America. According to the Paris-based Organization for Economic Cooperation and Development (O.E.C.D.), between 1972 and 1977 the annual increase in the average hourly wage in the U.S. was less than 1% above the inflation rate. But in Europe, wages have stayed ahead of prices by much greater margins: more than 5% in France, Belgium, Norway and Italy, and over 3% in Germany.

Part of Europeans' gains have been wiped out by their higher taxes; a typical Belgian family earning $56,000 will keep no more than $32,000. But though their taxes are generally lower, Americans must shell out more of their incomes for medical and educational expenses, both of which are largely free in Europe. The net result is that many Europeans end up with somewhat fatter disposable incomes than Americans but they also face generally much higher prices. So how do they do it? How do they afford the rows of doubled-parked Mercedes and BMWs and the expensive smart clothes that are so conspicuous to visitors?