22 February, 2006

the big-mac wage index

The Big Mac index for currencies is a well known feature of the Economist newspaper, but the Big Mac wage index has never really taken hold. AsiaPundit expects that this alternative index is of less value than the currency index; the latter is not a serious study and the Economist admits it’s mostly in jest. The wage-related index should be enjoyed with equal grains of salt (as would be done with a tequila shot).

Wages are harder to empirically measure than prices or input costs. There are additional variables. 

AsiaPundit has lived in Kuwait - where McDonald’s employees are low-paid migrant labor; in Singapore - where McD’s employees often are retirees or the disabled; and in Canada, where the employees are mostly teenagers holding their first jobs. In each country the wage would be close to the bottom of the scale.

However, in China the McDonald’s wages - where in major coastal centers English-speaking staff are also employed - the average wage is likely well above the average rural income.

So, like the currency index, this is something is interesting - but it doesn’t necessarily disclose much that is useful.:

BigmacAshenfelter devises inventive real-world tests to illuminate labor economics, by Eric Quiñones, Princeton Weekly Bulletin: To address the current debate about whether China’s and India’s growing economies will soon rival that of the United States, Princeton economist Orley Ashenfelter poses a simple question: What is the going rate for flipping burgers?

Ashenfelter is conducting a study of McDonald’s employees’ wages in many countries to illustrate the relative strength of their economies, and early results indicate that developing nations still have a long climb. While the average hourly “McWage” is around $6 in the United States and other western nations, the same job in China, India and other developing countries pays less than 50 cents.

“A Big Mac is the same everywhere. The job is the same,” Ashenfelter said. “What makes a country wealthy is the wage rate that the market can guarantee for someone who wants to work. To most people in the developed world, a $6 job would seem to not be much of an accomplishment — in fact, it is a huge accomplishment that most of the world cannot yet even aspire to.” …

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by @ 11:59 pm. Filed under China, Asia, East Asia, Economy

One Response to “the big-mac wage index”

  1. chelsea Says:


    I’m a radio producer working on a show about robots. I’d like to talk to you–if you are interested in this please email me so we can correspond at length via email.


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