Luxembourg is an attractive country. Its economy is thriving and unemployment is low. It attracts a workforce from neighboring countries and other continents.
However, in spite of the fact that remuneration levels are higher than in the OECD countries as a whole, the cost of living is high. Setting up a business in Luxembourg requires taking all these aspects into account. We tell you more here.
Inflation up in 2021
Like everywhere else in the world, inflation has risen sharply in 2021 from 0.8% in 2020 to 2.5% in 2021. Driven upwards by the price increase on petroleum products (+27.6%), other services are also impacted by the price increase in 2021.
The price increases were particularly felt in the following sectors:
- energy: households had to face in 2021 an increase in heating oil prices of +50% and city gas prices of +18%. Diesel was up by 25.1% and gasoline by 22.6%.
- housing + 13.9% – see the latest real estate market trends
- financial services +5.2
- maintenance and repair services + 5.2%.
- hairdressers for women +3.6
In March 2022, the annual inflation rate was 6.1% (Source: Statec).
Indexation of salaries, pensions and minimum social benefits
It is important to know that in Luxembourg a system of indexation of wages and salaries has been in place since 1921. Based on the evolution of household consumer prices, the index is calculated on a number of common consumer products.
In 1921, the index was calculated on 8 products of daily consumption like butter or bread. Today, the index lists more than 8,000 everyday consumer products, grouped into 255 categories. It includes energy and housing, but also airline tickets, household appliances, clothing,… The index is regularly monitored by Statec, Luxembourg’s statistics institute.
The increase of this index of 2.5% systematically leads to theincrease of salaries, pensions and social minima of 2.5%.
Recently, the index was activated in October 2021 and April 2022.
Beyond the salaries, which appear to be very attractive in Luxembourg, it is therefore necessary to evaluate the cost of living in the Grand Duchy.
Budget of Luxembourg households
According to the latest figures published by STATEC (Luxembourg’s statistics agency), an employee in Luxembourg will earn an average annual salary of 4,932 euros for a full-time job in 2021. This is confirmed by the OECD which states that the average salary in Luxembourg is the highest among OECD countries according to the latest study with 65,854 annual average.
Nevertheless, if the minimum wage is now more than 2,000 gross monthly, it appears according to the latest STATEC survey in 2019, that it Must at least count an average net income of 4,213 euros (+3.3% compared to 2018) for a couple with 2 children, 2,912 euros (+7.6%) for a couple without children, 2,110 euros (+6.1%) for a single person.
Housing plays a major role in the budget of Luxembourg households. It is necessary to count a minimum of 1,542 euros per month to house a family of 4, 1,292 euros for a couple and 1,101 euros for a single person (heating costs included). This is equivalent to 38% of income for a couple and 55% for a single person!
Food is the 2nd largest expense. A family of 4 must count on approximately 920 euros per month to feed itself. A couple will need 565 euros and a single person at least 271 euros. This item represents up to 25% of the budget for a couple.
Social life represents the 3rd largest expense item with approximately 13% of the budget for all household types.
Transportation is the 4th largest expensewith 421 euros per month for a family of 4 and 235 euros for a single person.
A Eurostat study published in 2019, established that housing accounted for a quarter of the household budget (attention, excluding the cost of purchase), in the European average. We can bet that since the continuous rise in housing costs, the housing share has increased significantly in the household budget.
The second largest expenditure item would be transportation, with 14.4% of the budget. Fuel consumption represented 1,440 euros per year per household, i.e. 2% of expenses. The recent increase in fuel prices must have had an impact on this proportion as well.
Expenses related to services (insurance, social protection,…) represented 14% of expenses. Food and non-alcoholic beverages accounted for nearly 9% of the budget.
A study is currently underway on the budget of Luxembourg households. We will update our data as soon as the latest figures are published by Statec.
Price levels in Luxembourg
If we look at services and other consumer goods, prices in Luxembourg appear higher than in other European countries.
Electricity and gas prices will reach record levels in 2021, even higher in 2022 with the war in Ukraine. According to the latest figures for 2021, a household spends on average more than 2,000 euros per year to heat its home. In total, the energy bill amounts to 335 euros per month for heating and pump costs.
Theinternet subscription costs about 50 euros per month on average depending on the speed of the connection.
The average price of a pack of cigarettes is 5.3 euros.
The average price for a dish in a regular restaurant is 17 euros and for a coffee 3.5 euros. A small bottle of water will cost on average 2.8 euros and a draft beer 5 euros;
At the supermarket, 2.5 kg of potatoes will cost you about 4 euros, 1 kg of tomatoes or apples 3 euros. A kg of minced beef will cost 17 euros, 1 liter of milk 80 cents and a box of 12 eggs about 3 euros. You will find the bottle of shampoo at 4 euros and the shower gel at 2 euros.
Some products are cheaper than in neighboring countries. This is the case for alcohol (1 bottle of crémant of 75 cl is 7 euros). Tobacco costs 5 euros per pack.
If for a long time, fuel was cheaper in Luxembourg, it is no longer the case since the Russian-Ukrainian crisis. The prices are close to or even exceed 2 euros per liter today. However, it is important to note that prices at the pump are strictly regulated by the government and are identical at all gas stations in the country.
The cinema is 12 euros for adults.
The sports subscription will cost between 20 and 30 euros per month depending on the formula. A sports coach will charge about 40 euros.
An entrance to the museum will cost between 5 and 7 euros for an adult. Children and teenagers receive free tickets.
Luxembourg is the first country in the world to introduce free public transport in 2020.
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