Would the claim that Liechtenstein is richer than Luxembourg be correct? Both of these jurisdictions are extremely small, both of them are located at the center of Europe, and both are extremely prosperous.
Below please find the IMF, World Bank, and UN estimations of the GDP per capita in the richest countries and territories of the world:
As far as the GDP per capita is concerned, it is only a little bit higher in Liechtenstein than it is in Luxembourg.
Let’s try to find the answers to the following questions:
- Is it true that living in Liechtenstein feels more comfortable than living in Luxembourg, one of the wealthiest European countries?
- Is the GDP per capita the only indicator of national welfare? (For instance, the USA always ranks high among the richest countries of the world but nearly 15% of the population live below the poverty line.)
Below we consider several factors that show the overall living standards in Liechtenstein and Luxembourg.
1. The number of High Net Worth Individuals in Liechtenstein and Luxembourg
The number of millionaires, multimillionaires, and billionaires living in a particular country is an important indicator of the overall quality of life there. The ultra-rich will always choose the most comfortable places to live.
This is where Luxembourg stands as far as the HNWIs living there are concerned, according to Henley & Partners:
The total number of people living in Luxembourg exceeds 600 thousand people and 46 thousand of them have 1 million euros or more in capital. This means that 8% of Luxembourgian people are ultra-rich.
The number of HNWIs in Liechtenstein has been estimated by Knight Frank Company. The figures are as follows: 6 thousand residents of Liechtenstein have 1 million francs or more. As the total number of Liechtenstein population is only 40 thousand people, 15% of them are ultra-rich. Thus, Liechtenstein has a higher percentage of HNWIs while Luxembourg has a higher number of them.
We must note that the number of the ultra-rich living in Luxembourg has been growing due to the residence-by-investment program that has been functioning in the Duchy over the last few years. On the other hand, the migration regulations are highly complicated in Liechtenstein and acquiring legal residence (let alone citizenship) in the country is a real challenge for a foreigner.
2. Quality of life in Liechtenstein and Luxembourg
CeoWorld Company studies the quality of life in 165 countries of the world. They take into account the following parameters:
- Consumer purchasing power;
- Economic stability;
- Family values;
- Job market;
- Income distribution;
- Political neutrality and stability;
- Personal security;
- Cultural events;
- Education system;
- Healthcare system.
According to the research, Luxembourg ranks 25th among all countries with 86.08 points out of 100 points. Liechtenstein ranks 27th with 84.75 points.
This shows that the two Duchies are almost equally attractive as far as the quality of life is concerned. It must be noted that the amount of money that people spend on the territories of the jurisdictions is not exactly a relevant indicator. Consumer prices are high in both Duchies and their residents like to shop in the neighboring countries where the prices are more affordable. Going to a foreign country from Liechtenstein or Luxembourg doesn’t take too much time.
3. Living conditions in Liechtenstein and Luxembourg for the elderly and children
The way vulnerable categories of people (such as children, retirees, single parents, etc.) are treated is indicative of the overall welfare in any country. Below please find some data indicating where things stand in Liechtenstein and Luxembourg in this respect. The data have been borrowed from various sources.
Both countries have low birth rates. According to the World Bank, 11 children are born in Luxembourg per 1,000 people per year. Only 10 children are born in Liechtenstein per 1,000 people per year. The birth rates are low but they are not the lowest in the world. For instance, 8 children are born in Monaco and Japan per 1,000 people per year.
Luxembourg ranks high among the countries best for raising children there while Liechtenstein does not. This doesn’t mean, however, that children in Liechtenstein suffer in any way or lack access to certain facilities. The number of children is small in the country but there are 9 primary and secondary schools there and 4 universities.
The educational system of Liechtenstein is considered one of the best such systems in the world. The average number of school students per one teacher is 7 to 8 in the country. Foreign tourists report that it is highly comfortable to visit Liechtenstein with children. You can walk with a stroller even along mountain paths and huge playing grounds can be found all over the place.
This shows that even though children are not born very often in Liechtenstein or Luxembourg, life is wonderful in both countries for those who are.
In Luxembourg, a new mother can qualify for a five-month maternity leave keeping 100% of her salary. The condition that needs to be satisfied is having a job for at least 6 months before the leave is taken. Besides, both the mother and the father of the newborn child can take a 6-year parental leave while keeping their jobs. The child can also start attending a kindergarten when it turns 3 months. The average cost of the kindergarten services is 6 euros per hour. If the price is too high for the parents, the state can contribute to covering the costs. The parents then will have to pay only 1 to 2 euros per hour for their child attending a kindergarten.
In Liechtenstein, an expecting mother can take a 20-week maternity leave but she will be able to keep only 80% of her salary. Unemployed mothers can count on a maternity allowance from the state if they need financial assistance. Fathers cannot qualify for a parental leave in Liechtenstein.
According to the international ratings, Luxembourg is the best country for comfortable retirement. The reasons for that include the following ones:
- Simple and clear legislation regulating retirement. Salaried workers and self-employed people can count on a pension after turning 65 on the conditions that they have been making contributions to the pension fund for 10 years (120 months) while having the employment.
- Those who have been working for 40 years (480 months) can retire as early as 57 years of age.
- Pensioners have access to high quality healthcare services in Luxembourg.
- Minimum pension is 2,000 euros (gross) in the country.
- Life expectancy is 83-85 years.
Liechtenstein does not rank so high in the international ratings but the conditions for the retirees are quite favorable in the country too:
- Life expectancy is 84-86 years in Liechtenstein.
- The retirement age is 65 (applies to both men and women). It is important to note that the retirement conditions have remained unchangeable since 2008. Unlike in some other European countries where ‘pension reforms’ happen regularly, people in Liechtenstein feel certain of their future. Under certain conditions, the retirement age can be 60. If you wish, you can keep on working after turning 65 in Liechtenstein.
- People of Liechtenstein are eligible for state pensions of approximately 1,200 francs per month if they have been contributing to the pension fund for one year only. The retirement pension amount is 1.6 times lower than the amount of the last salary that the person was paid. This figure is impressive indeed, because in other countries, the pension amount can be 2, 3, or even 4 times as low as the last salary. At the same time, residents of Liechtenstein have to make non-stop contributions to the pension fund since the age of 20 if they are to qualify for retirement pensions. Every year that you fail to make the contributions will deduct 2.3% from the overall amount of your pension.
As you can see, people who cannot work because they have little children or because they are too old are treated well in both countries. We have to note, however, that the amount of the parental allowance and the amount of the pension is going to be different in each particular case whatever country you look at – Liechtenstein or Luxembourg. Individual payment schemes are applied. This said, the relevant legislation looks more understandable and more loyal in Luxembourg than it does in Liechtenstein. For this reason, the former country is considered more comfortable for raising children and retiring.
4. Salaries and taxes in Liechtenstein and Luxembourg
As of march 2023, the unemployment rate was 4.7% in Luxembourg and 2.4% in Liechtenstein.
Since April 2023, the minimum wage of an unqualified adult worker has been set at 2,408 euros per month (full-time employment) in Luxembourg. The minimum wage is not specified in the legislation of Liechtenstein.
Below please find the data from the official website of the Pension Insurance Fund of Liechtenstein. The figures show what payments a person with a gross salary of 50,000 francs per year has to make.
This is what a single childless person with a gross salary of 50,000 euros per year has to pay in Luxembourg:
Overall, the salaries are higher and the taxes are lower in Liechtenstein in comparison to Luxembourg. The worker gets to keep more in the former country. The matter is that salaried workers have to make larger contributions to the state funds in Luxembourg. However, a high salary in Liechtenstein means longer working hours! The average working week lasts for 45 to 48 hours in the country. On other hand, the shortest paid vacation lasts for at least 4 weeks in Liechtenstein plus there are 15 more days of national holidays.
As far as Luxembourg is concerned, paid vacations last for 25 days per year plus 10 more days of national holidays. The working week lasts for 40 hours in Luxembourg, which is a standard figure for many countries.
5. Other social and economic welfare indicators
| In Liechtenstein: | In Luxembourg: |
| The highest VAT rate is only 7.7%, which has a positive effect on pricing. | The standard VAT rate is 16%. |
| No foreign debt because Liechtenstein is not exactly an independent country: it is in association with Switzerland. | The foreign debt is 26.3% of the GDP. |
| The highest number of cars in Europe per 1,000 people: 775 cars. | The number of cars per 1,000 people is 669. |
| Corporate income tax rates are low and 74 thousand foreign companies are registered in Liechtenstein, which exceeds the total number of people living in the country. | Public transport is free. |
| Average number of robberies per year: 11 per 100,000 people. Average number of inmates per year: 192 per 100,000 people. Average number of thefts per year: 521 per 100,000 people. Average number of murders: 0; two or three murders per year may happen. | Average number of robberies per year: 76 per 100,000 people. Average number of inmates per year: 111 per 100,000 people. Average number of thefts per year: 1,843 per 100,000 people. Average number of murders: one or two per year. |
To conclude, we have to agree that Liechtenstein is a richer country in comparison to Luxembourg and this concerns both the amount of money that the states have and the amounts that their residents have. An important reason for that is the lack of Liechtenstein membership in the European Union and NATO. Besides, the local currency – the Swiss franc – is probably the most stable currency in the world. Even though Luxembourg may rank higher in various international ratings on some social parameters, people are generally wealthier in Liechtenstein than they are in Luxembourg or most other European countries.
