Earnings in minutes to buy a Big Mac in 71 cities worldwide

International
Earnings in minutes to buy a Big Mac in 71 cities worldwide
By Finfacts Team
Mar 23, 2005, 19:27

Prices and Earnings survey from Swiss bank UBS

A comparison of purchasing power around the globe, 2005 update

Oslo, Copenhagen, Tokyo and Zurich are among the most expensive cities in the world. If rents are included in the comparison of living costs, London tops the list.
This update to the Prices and Earnings survey from UBS compares purchasing power in 71 cities around the world, recalculated to reflect exchange rate, inflation and growth trends.
Meanwhile, as the US dollar has lost value, US cities have become cheaper since 2003.

Since UBS conducted its most recent price and earnings survey in spring 2003, there has been a big shift in the relative values of currencies. And as exchange rates change, so do relative price levels in the countries concerned. The weak US dollar has seen US cities fall in the global price rankings, so that a shopping spree in the US is now an attractive proposition for Europeans. Similarly, Hong Kong is no longer among the costliest locations. Meanwhile, on the back of the rise in the Danish krone, Copenhagen has moved up in the rankings to become the world's second most expensive city. The latest price comparison uses the detailed statistics on living costs gathered in the spring 2003 survey, updated to reflect exchange rates and inflation as at end-2004.

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1. Net hourly pay divided by the cost of the total basket excluding rent. 2. Price of product divided by weighted average net hourly pay across 13 occupations

Higher earnings thanks to economic growth

As well as accounting for exchange rates and inflation, the recalculated earnings index also recognises that a slice of economic growth is passed on to the workforce in the form of real wage increases. In the updated index, the highest gross wages are paid in Scandinavia and Switzerland. The city with the highest gross wage level is now Copenhagen, ahead of Zurich, Basel and Oslo. But owing to higher taxes and social security contributions, the Scandinavian cities have all moved down the rankings on net wages.

1. The calculations are based on wage figures, social security contributions and working hours for 13 occupationss

Big difference in purchasing power between old and new EU members

On a global comparison, people now have to work one or two minutes less on average than in 2003 to earn a Big Mac or a kilo of rice or bread. Real wage increases have boosted purchasing power across most of the new EU states in eastern Europe, so Lithuanians, Poles and Czechs now have to invest less working time to pay for a Big Mac. However, the accession of ten new member states from eastern Europe in spring 2004 cut the average purchasing power in the EU by around 20%. There is still a gulf in purchasing power between the old and new EU member states, mainly because of the big difference in wage levels. On a global comparison, net purchasing power is highest in Swiss cities and in Luxembourg, Los Angeles and Miami.

1. Cost of a basket of 115 goods and services weighted in favour of Western European consumer habits (excluding rents)

Download report (in pdf format).

Background

Prices and Earnings is a survey published by the economists at UBS every three years. It compares the prices of goods and services, wages, wage deductions and working hours, along with the resulting purchasing power, in 71 cities across all continents. More than 35,000 data items are collected and analysed during research for the publication. Exchange rates and differences in inflation have a crucial impact on the comparison over time, and this update is simply based on the statistics from the 2003 analysis, adjusted for relative inflation and recalculated to reflect current exchange rates (as at end-2004). In addition, differing rates of productivity growth are factored into the recalculated figures for wages. The next full survey, collecting original data on prices and earnings, is scheduled for spring 2006.