Monday, September 03, 2012

Big Macs Per Hours Worked

How do you compare the wages of workers in one country versus another? It's not an easy task because standards of living also differ. Here's an ingenious way: compare the hourly wages of McDonald's workers with the price of a Big Mac, by country.

That's what economist Orley Ashenfelter did for more than 60 countries, and the results are presented in the National Bureau of Economic Research study, "Comparing Real Wages" (NBER Working Paper 18006, $5). To make the comparison, Ashenfelter creates a new measure--Big Macs per Hours Worked (or BMPH). He takes the average hourly wage of a McDonald's crew member in each country and divides it by the price of a Big Mac in that country. He finds considerable differences in real wages by country, with BMPH ranging from 3.09 in Japan to just 0.35 in Latin America and India.

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