Wages and the Famous Big Mac: How Far Does Your Income Go?

It sounds like a riddle: how many Big Macs for your entire daily wage? Granted, many of our readers may not even have access to a Big Mac where they live (not to mention those who wouldn’t buy Big Macs if they were vegetarian, among other reasons). So, why is the Big Mac Index from the Economist a well-known concept around the world? It’s simple: Big Macs are easier for the overwhelming majority of the world’s population to understand as opposed to economic concepts like “GDP per capita in purchasing power parities,” which is a mouthful and a complicated concept. The answer to the riddle, of course, depends on many factors, including where you live.

• In the United States, the home of the Big Mac, the average daily wage would afford you 33 burgers. That’s a lot of burgers. And, yet, in Australia, you could get 40 Big Macs despite the fact that the GDP per capita in the US is roughly $10,000 higher than in Australia.
• Let’s venture to a lesser developed country with far lower average earnings: Pakistan. In Pakistan, local average daily wages would not even get you two Big Macs. You get the idea.

Traditional metrics, like GDP per capita in purchasing power parities (PPPs), may give a sense for the economic well-being of populations but they also require training to interpret: what exactly does it mean, or does it even matter, that the difference in GDP per capita between the US and Australia is $10,000? It would be more straightforward to think in terms of how many goods — Big Macs or otherwise — a person could purchase with his or her wage. In the case of the Big Mac Index, simply divide the average daily earnings of each country’s workers by the local price of a Big Mac, and compare. You’ve now accounted for differences in price levels and mean earnings and you have a measure that is friendlier to interpretation to the masses. What’s lacking?

• A Big Mac is a single product (good) versus a basket of goods that would better approximate real consumption.
• No one claims a Big Mac measure should replace traditional metrics such as GDP per capita. Life simply is more complicated than that. We cannot directly compare GDP per capita and the number of Big Macs per day because GDP includes not only compensation of employees, but also net profit of corporations and taxes, for example.

But, for today, let’s indulge. In our visualizations below you can examine the economic performance of a variety of countries based on local Big Mac prices as well as traditional economic measures. We’ve also introduced a bit more complexity with the addition of the concept of the relative productivity of workers. In general, as you will see below, workers’ Big Mac purchasing power is positively correlated with worker productivity, measured in GDP per employee.

View original infographics, live dashboard and download data at knoema.com