BERLIN — Just days ahead of Tuesday’s midterm elections, the U.S. Labor Department released new wage growth figures last week showing the strongest annual year-on-year rise since 2009. Private workers now make $27.30 per hour on average.
Measuring the extent to which wages have improved here since the financial crisis is a bit trickier, however. One reason for that is Europe’s “13th salary” phenomenon. While most Americans receive 12 months of salary each year, many Europeans receive 13. Similar arrangements are in place in Latin America and parts of Asia.
With U.S. unemployment dropping and wages on the rise, a 13th salary in the United States might not appear as far-fetched anymore as it did in prior years. But would it make sense?
Originally conceived as a way to get people to spend more money on gifts ahead of Christmas, the practice now widely varies across Europe. In Germany, nine out of 10 employees benefit from a 13th salary each year under terms that are usually agreed between unions and employers, according to new figures released Monday. While contractors benefit least, employees in the gas or pharmaceutical industries often receive additional bonuses that are higher than their pay in a normal month.
Some countries, including Austria, have lower tax rates for “13th salary” payments than for normal salaries. Elsewhere, there are deadlines for employers to transfer a specified rate or even rules for a 14th salary. But the vast majority of European countries have provided employers with a lot of leeway to determine how much and to whom they pay additional money, making total income less transparent.
The practice might appear strange to most Americans, but some European employees have also long been unaware that they would be entitled to extra money. Last year, the government of Cyprus launched a campaign to inform employees of their right to demand a 13th salary. Noncompliance is a punishable offense in Cyprus, with a maximum fine of $17,000 or six months in prison.
While the idea of adding a 13th or 14th month’s salary payment might sound intriguing to many American employees, some critics insist that the United States is better off without it. The extra payments are usually not included in average salary figures, and they can unpredictably vary from year to year, even if wages themselves may stall or grow more rapidly.
Given its strong association with Christmas celebrations, the practice has also become politicized in some countries such as Austria, where far-right groups suggested in 2016 that Muslims should be excluded.
More recently, far-right groups also circulated unsubstantiated rumors that refugees were paid almost $1,000 each ahead of Christmas celebrations — adding a political spin to what was long a popular measure to boost wages and domestic spending.
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