As grocery prices continue to climb, middle-class families in the United States might be wondering how their financial situation compares with middle-class families living in Europe.
In the U.S., grocery food prices were 1% higher in February 2024 compared with a year ago, according to the U.S. Department of Agriculture. Meanwhile, Europeans are seeing a drop in food prices from 3.9% in February to 2.7% in March, according to Eurostat data.
Add to that, the rising cost of housing, healthcare, childcare and college tuition in the United States, and many middle-class families might be looking wistfully across the Atlantic at their European counterparts.
“One of the major causes of bankruptcy in United States—medical bills—doesn’t exist in Europe,” says Joan C. Williams, founding director of the Equality Action Center at University of California, College of the Law in San Francisco.
Childcare, another costly item for most America families, is subsidized in Europe. “Those are two dramatic examples of the different situation that people in Europe and the U.S. are in,” Williams says.
How the middle class looks different in Europe vs the US
Another difference between the two continents is how Europe defines the middle class.
The U.S. defines middle class based on income levels as does the Organisation for Economic Co-operation and Development (OECD), which defines middle class as households with an income between 75% and 200% of the median national income.
However, some European researchers define the middle class based on occupation because it groups together people with similar levels of income, education, skills and working conditions, says Jad Moawad, a postdoctoral research officer at the Department of Social Policy and Intervention at the Institute for New Economic Thinking in Oxford, England. Middle class includes managers who are self-employed as well as all associate managers, associate professionals, and technicians, Moawad says. Upper-middle class includes all managers, and the skilled working class includes all occupations that require a few years of vocational training.
In recent years, job opportunities have expanded for managers, professionals, and technicians in most European countries, while job openings have declined for laborers, assemblers, craft workers and clerks due to the use of technology, globalization and off-shoring, Moawad says. “The great loser of the last four decades was not the middle class, but the people laboring below them, the working class,” Moawad writes in a paper titled, The Myth of the Middle Class Squeeze: Employment and Income by Class in Six Western Countries, 1980-2020.
While salaries in Europe aren’t typically as high as in the United States, European families have a safety net because of subsidized healthcare, childcare and other benefits, Moawad says. There is also greater social mobility in Europe because college tuition isn’t as high, removing the barrier to higher education or the need to take out a student loan and incur long-term debt, Moawad says.
We asked two middle-class households—one in Madrid, Spain, and another in Chicago—to share a snapshot of their yearly earnings and expenses, as well as how much they save and invest.
“It’s cheaper to live in Spain but we also make significantly less money,”
Family: John, 42, a sales representative, and Carmen, 40, a senior international consultant, and their two children, ages 7 and 9
Location: Madrid, Spain
Income after taxes: $95,635 (converted to US dollars)
Annual expenses
Babysitting: $1,308
Rent: $26,814
House cleaner: $2,616
Property taxes: N/A
Home insurance: N/A
Car insurance: N/A (John’s work pays for this)
Gas: N/A (John’s work pays for this)
Vacations: $11,990
Life insurance: $637
Private health insurance: $2,289
Afterschool programs, classes, and gym membership: $6,801
Clothes: $3,924
Utilities: $3,488
Groceries: $10,464
Retirement savings: $5,450 for an IRA.
Haircuts: $1,569
Gifts: $1,308
Annual expense total: $78,840
Amount remaining: $16,795
After living in Kansas City for 14 years, John and Carmen decided to move their family to Spain, where Carmen and their daughters have dual citizenship, after the U.S. company John worked for was bought out.
However, John’s employer in Spain pays him significantly less than his U.S. employer. “It’s cheaper to live in Spain but we also make significantly less money,” he says. John’s salary is less than half of what it was in the U.S., and Carmen is earning about 75% of what she made in the United States.
Salaries in Spain are significantly less than in the United States, with $32,700 being the average salary in Madrid, John says. He went from earning $97,000 a year in the United States to $40,875 plus up to a 20% bonus in Spain. “I feel less secure but not financially insecure,” he says.
The family’s biggest expense right now is paying $27,893 a year for their daughter’s private school because they missed the deadline to enroll them in a local charter school. However, they are paying tuition with a 529 account.
Gas is extremely expensive, costing about $87 each week to fill up John’s sedan but his employee reimburses him for that expense. Housing, whether you rent or buy a home, also is more expensive, John says. In addition, John is paying $2,289 for health insurance while he waits for his residency, which will allow him to register for public insurance.
Despite that, John says they live a comfortable life in Spain and have no plans to return to the United States.
Groceries and the cost to go out to dinner is noticeably less expensive in Spain, John says. The family typically spends $163 a week for groceries and that includes several bottles of wine. Dinner at a nice restaurant is about $54 a person so John and Carmen eat out at least twice a month.
Because the family spent part of their savings on their move to Spain, they are focused on building up their savings. While they plan to save $5,450 in an IRA this year, John admits they aren’t too concerned about saving for retirement or college if they stay in Spain. “If we retire here, it’s a non-issue,” John says. EU citizens receive a pension when they retire. “College is a fraction of the cost in Europe compared to the US,” he says.
“We’re comfortable but we’re a disaster away from not being comfortable.”
Family: Lauren, 41, a special education teacher at a public school, and Josh, 44, a freelance commercial photographer and their children, ages 11 and 8.
Location: Chicago
Income after taxes: $125,000
Annual expenses:
School supplies and field trips: $500
Mortgage: $17,400
Home maintenance/improvement: $2,000
Property taxes: $10,300
Home insurance: $2,500
Car insurance: $440
Gas: $1,700
Vacations: $4,000
Life insurance: $1,800
Health insurance: $4,600
Afterschool programs: $5,000
Clothes: $2,000
Charity: $250
Utilities: $8,000
Groceries: $18,000
Health Savings Account: $6,000
Haircuts: $650
Gifts: $500
Student loan debt: $804
Annual expense total: $86,444
Amount remaining: $38,556
Lauren receives a regular paycheck every two weeks from her employer but as a freelance photographer, Josh’s income is more sporadic. “During the pandemic his work dried up and it’s been slow building his business back up,” Lauren says. While Josh is making more than he did two years ago, it’s just enough to keep up with expenses, she says.
“We’re comfortable but we’re a disaster away from not being comfortable,” Lauren says. Rising grocery costs, car repairs, property taxes and quarterly taxes on Josh’s freelance income all take a sizeable chunk out of the family’s earnings. Lauren is also paying off her student loan. While she pays only $67 a month, Lauren says, “I’m basically paying the minimum amount for most of my life.”
Lauren spends close to $2,000 a month on groceries. Last month the family took a trip to Phoenix and the airfare alone was more than $2,000 for the four of them. “Things are expensive, and it all adds up,” she says.
Earlier this year, Lauren and Josh didn’t have enough cash on hand to pay their property taxes, so Lauren’s parents gave them $1,500 to allow them to pay the bill on time. Lauren and Josh also rarely go out to dinner. “We only go out just the two of us if we can get a grandparent to watch the kids and we don’t want to ask for that all the time,” she says.
Lauren and Josh moved to their neighborhood in 2010 specifically for the school district. She has noticed that most households in her neighborhood both parents work full-time and probably have combined salaries that are more than double what she and Josh earn each year and therefore are able to afford a larger home and second car, and travel outside the United States when they go on vacation.
“Compared to our friends and neighbors we feel like we have less, and things are harder than it is for our peer group,” she says. But Lauren says she recognizes that they have made a lifestyle choice to have more flexibility to spend time with their children and to earn less.
