High wage gaps between residents and cross-border workers

On Thursday 5 and Friday 6 May, the Staff Chamber (CSL) will host the Symposium on Work across Borders in Europe organized by Lesser. Following opening speeches by Minister of Labor Georges Engel (LSAP), UEL President Michel Rickinger, CSL Director Sylvain Hoffmann, Benelux Secretary General Alain De Muyser and Franz Clément du Liser, the first round table was devoted to the realities and challenges of cross-border action. Paul Reeve, Statec’s seconded professor, spoke privately on the crucial topic of salaries for cross-border workers in the Grand Duchy of Luxembourg, with this question: “Explainable differences?” Based on 2018 figures for a more global study, he explained that the average annual gross salary in Luxembourg is 65,801 euros, residents 73,251 euros compared to 57,489 cross-border workers, a difference of 21.5%.

Different margins by branch

“This gap has been stable over time for ten years. What we also note is that a distinction must be made between residents of Luxembourgish nationality and residents of a foreign nationality. Because the gap between wages for cross-border workers and foreign residents is much less than with residents of Luxembourgish nationality,” he notes Paul Reeve. “Many Luxembourgians choose the public sector where salaries are very high, which explains these salary differences.”

The differences also vary depending on the branch. For example, in the financial sector, the salaries of cross-border travelers are much lower than the salaries of the population, as well as in the field of information communications. On the other hand, they are very close to industry, hotels, restaurant industry and construction.”

Unexplained difference of 13%

To conduct his analysis, Paul Reeve broke down the wage gap between residents and cross-border travelers using the so-called Blinder-Oaxaca method: a method for breaking down the wage difference between one advantaged group and another disadvantaged (or supposedly discriminated) group within a regression analysis. “Of the observed gap of 21.5%, approximately 10% can be explained by the branch of activity in which the workers develop. In this case, cross-border workers work in lower-paid branches, in contrast to residents of Luxembourgish nationality who develop within the public service.

Firm size explains 2.3% of the wage gap, as workers across borders tend to work for smaller firms. On the other hand, there are factors that work in favor of cross-border workers’ which should theoretically increase their salaries, such as age, and therefore experience, education level or gender. There are actually more men than women among workers in Luxembourg. Then we found an explained difference of 8.5%, and no There is still an unexplained difference of 13% with the variants of this model,” Paul Reeve analyzes.

Workers across the Luxembourgish border in their own country

Language skills are one factor that should not be overlooked in the context of Luxembourg. Access to some paid positions is already prohibited, proficiency in Luxembourgish is required there, or even the nationality of the desired country, as is the case for police stations. “Cross-border workers also know the Luxembourg labor market less well, so they are less likely to negotiate their salaries when hiring because they are less aware of the salaries charged.”

The professor on loan from the Statec, however, links the high salaries of residents of Luxembourgish nationality. There is a significant difference in purchasing power between residents and cross-border workers. The differences are particularly significant in Luxembourg, where purchasing power is reduced by 23% due to the cost of living, especially housing. In Grand Est, the loss is less, about 12%, and therefore the cross-border traveler has higher purchasing power in his home region.”

Another key reading, which is found at the beginning of his analysis, is the presence of cross-border workers in Luxembourg in their own country, and thus benefit from high salaries, while also possessing the purchasing power of cross-border workers. “But we don’t have enough numbers yet on this still very recent phenomenon,” Paul Reeve concludes.

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