First of all, where are you getting this $120k number for entry level people from? Very few actually get $120k right out of school. According to WSJ we just surpassed $100k as average, and remember that includes senior people making $200-400k at Google et al. Top companies who are selecting the cream of the crop can afford to pay this because they know how to get great talent and make the most of it.
If startups are paying $100k+ to people straight out of school (mine certainly isn't) then it's an unfortunate symptom of easy money and does not bode well on the fiscal responsibility of founders which is key to early-stage success. Bubble or not, money will not stay this easy indefinitely and that will have a direct impact on low-end salaries.
Finally, European benefits are not to be underestimated when put up against US salaries. 2-3x vacation, free healthcare, inability to be fired, cheaper education, etc, etc.