The Big Mac Index: Globalization At Work
Sure, McDonald's operates all over the world now, but that doesn't mean that everyone can afford their products easily. As proof, The Economist has spent years updating its Big Mac Index, which uses the local price of the McD delicacy to estimate the purchasing power of consumers in about 120 countries. Recently, UBS cooked up its own twist on the index, calculating how many minutes the average person would need to work at their job in order to earn that precious, precious Big Mac. Predictably, a worker in Nairobi must work the longest—over two hours—while a worker in Chicago would only need to work 12 minutes.
An alternative Big Mac index [The Economist] (Thanks, Therese!)
The Big Mac Index: Exchange rate theory [The Economist]
(Thanks to Esquire99 for the math-check — and to GitEmSteveDave for giving us an out!)
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This reminds me of that book "Your Money or Your Life" where they teach you how to break down your working dollars and how much each thing in your life costs. It was very eye opening and helps when I get a case of the "I wants".
I have been to a McD in Budapest and I had no idea I was among the privileged few.
For some reason I'm constantly doing this breakdown in my head - but silently figuring out the hourly wages of what I'd MAKE by saving money in certain situations.
I was headed home last night at midnight. A cab is about $15 with tip. The bus still ran and would take about 15-20 minutes plus a few minutes waiting. Cost is $2.
I figure saving 13 dollars for giving up 15 minutes of time is the equivalent of making $48 an hour.
So by not spending MORE I'm earning it- or at least I tell myself that.
So do Kenyans really love Big Macs, or is McD's considered gourmet? Because otherwise I don't see how they'd have any customers
I'm in Pakistan, and the average guy here working 8 hours a day will cost him about 6 hours worth of work for 1.
@plutonyum: Was it the ridiculous gaudy one in the Nyugati pályaudvar? That and the Oktogon Burger King are the only American franchises worth visiting in Budapest (and even then I wouldn't eat there, really).
It's a matter of time vs money. Oh, sure I could wash my own car and spend an hour getting the bucket out, setting up the hose, actually doing the dead and so on - or I could find a school charity carwash, give 'em 5 bucks and be out 10 minuets. When I was making 20 bucks an hour, that's a pretty healthy net gain.
(Now that I'm unemployed, I'm pinching pennies since time isnt a concern of mine.)
This is actually a very astute way of showing how people value money.
I was arguing with my two retired parents about a couple of things that would take them less than an hour each to do which would save them almost $1000 a year (Change insurance companies via an online quote website, and buy instead of rent the hot water heater [My dad was a plumber, so it's child's play for him to swap it]).
They just didn't care because the money is just "there". Once people stop having to work for the money, they stop valuing it. It explains a lot: The breakdown of lifestyles on indian reserves, the quality of life for people on permanent disability, even how people that win several million dollars are more likely to go brankrupt than the average person.
@jamesdenver: It's a good way of looking at it. It's important to consider the cost of your time when you're looking at how much you're saving.
I think of it in slightly different terms, starting with "How long did it take me to earn this money?" So, hypothetically, if I made $13 an hour, then the real "time" of the trip is an hour and 5 minutes - the time spent earning the money for it and the time spent on the trip. On the bus, (really, really roughly), it'd be half an hour. If there's no special reason I need to be home right away, then that makes the bus much more economical.
From the title, I was expecting a breakdown of where the meat comes from in your average Big Mac. It comes from a lot of cows from various countries.
@morlo: More importantly, is this the price of the Big Mac here, or that of the local equivalent of the big mac. Because a lot of McDs outlets in India do not sell the big mac at all.
And the things that they do sell, are not too expensive by indian standards. But if you converted the price of the big mac from dollars to rupees, it would be a fair bunch I assume, and no parents would let their kids eat out at McDs.
@shepd: Or may be it is because they have big enough pool of money saved away? My parents were very frugal while we were growing up. Once we kids finished college and moved out and started having our own careers, their costs dropped by a lot, and they had a big fund saved up for the "just in case" scenarios. So even though my dad is still working, and my mom was very very frugal when we were kids, she now spends money on fancy stuff that I wouldnt dream of buying.
The other thing to remember is that hours are not fungible. An hour of your time at 2AM on Sunday morning is not worth the same as an hour of your time at 2PM on a Tuesday. Calculations also get a little more complicated if you're salaried and not hourly.
@jamesdenver: They way I like to look at (and the defense I use when talking private jets versus commercial airlines) is, you can always make more money while time is the only truly limited resource.
Meanwhile, I have to work through August to pay for crappy government.
@morlo: Kenya (and most places) have a really wide income distribution, so while the "average" Kenyan needs to work 2.6 hours, the kinds of Kenyans (upper-middle and upper class) work just about the same amount of time we do in the states...
That's what makes the "Big Mac" index from the Economist so useless -- the average worker in most countries doesn't buy the product. The better index that the Economist did a few years ago (and maybe still does) is the local beer index where they look at how long the average worker needs to work to get their cold frosty...
@jamesdenver: This is better than the calculation people use to tell me how much their time is worth. Maybe you get paid $50 an hour, but an hour on Saturday isn't necessarily worth that, unless you are turning down a willing employer for that hour.
Your time is worth what you are willing to accept for work in that particular hour. Sometimes, waiting a half hour in line to get a free $7 burrito is worth it.
Exactly - I agree. My mom is retired and buys dirt cheap fares to come visit me - connecting all over the place. I work Mon-Fri and almost always fly non-stop - even if it's $25-$50 more. My vacation days and time off are valuable, and I don't want to waste them - so in that case it's worth it to me.
@Whitey Fisk: Not that I'm disagreeing with you, but then, you could also be living in an anarchy state. Then, you'd have to work the whole year to keep the undesirables out.
Really?
The highest tax bracket for 2009 is 35%. August is 2/3 of the year - 66%.
If you're working through August, you either started in May, or you're doing something wrong.
@elganador: Shhh! Don't confuse the Tea-Bagger with facts. It'll take him hours of Fox News viewing to re-combobulate himself.
@Trai_Dep: Honestly, I've paid my taxes through eight years of the Bush administration and hell I could have been throwing tons of tea parties then. But what these "people" fail to realize is--that this is our government for good and for bad. In the somewhat republic we have things like tax money being spent is decided by the government.
Sure I may not like where all of our tax dollars go like with the Iraq war but the government did vote to appropriate the funds. Just like they'd have to vote to appropriate funds for roads and other public infrastructure. That's why we pay taxes!
@seamer: Time can be measured in Metric. There is just no broadly accepted established singular unit(s).
@GitEmSteveDave_HasADDWRTRouter:
...didn't the French try switching to a metric clock a long time ago? 10 hours of the day, hundred minutes each, hundred seconds each...something like that?
@PageMagumbalee: i haven't read that book, but i do keep my hourly NET wage in mind when i look at a purchase that isn't necessary.
recently, after i went way more into debt [yay mortgage!] i started thinking about a lot more things, like fast food, as being really unnecessary.
not a mcdonald's fan but i know how many minutes i have to work for an arby's french dip sub. some days it's worth it to me but lately it's often not
@morlo: maybe they get more tourists? like when my sister met a fellow traveler in greece who said if there hadn't been a KFC down the street he would have starved. being a family of foodies, that's an appalling story to us. but for some people that's the way they live.
The Tokyo information in regards to purchasing power is highly misleading. It's cheaper to eat at McDonald's than to eat properly by a wide margin because of the high price of fresh food in Japan. If you want to buy just one peach, apple, or avocado, you're lucky to find one for the equivalent of a dollar each. Often, they can cost more than that (topping out at around $2.50 apiece).
McDonald's in Japan is extremely cheap relative to almost everything else so looking at the time it takes to earn a Big Mac skews the perception of buying power.
@plutonyum: Plus, I think the Tokyo demographic is off. The Yen/Dollar ratio right now isn't really in the dollar's favor. So, an 800-yen Big Mac meal is actually about $9. And, from what I know of Japanese salaries from my local friends, that's not even close to the 15-18 minute requirement UBS states. Not close at all.
@GitEmSteveDave_HasADDWRTRouter: Actually, life is so tough in Nairobi that the hours have eighty minutes.
@morlo: Could be tourists, like catastrophegirl says. Also ex-pats, diplomats, international NGO employees, and their dependents.
@GitEmSteveDave_MakesUJump!Jump!: Time has no meaning! Personally, I go by Mikey Time. 5 minutes late for everything, but it's typically made up by over staying my welcome for 20 minutes.
You still need to figure business taxes (in both the company you work for company and the companies you purchasing from), real estate tax, licensing and permit fees, speeding/parking/ticket fees, fuel tax, personal property tax, sales tax, state income tax, social security (yes, its really a tax not a savings plan and its really %12 not %6), and medicare/medicade.
@wfpman: The government is supposed to be for the people and by the people, but those who are in it seem to be faaaaaaar out of touch with How the majority of real people live. Similar to how reality shows portray life, the majority of people running this nation live in their own twisted bubble. Which has been appearant throughout recent memory.
it's about time for Chicago to be number 1 is a good way!
You should check your math on the Nairobi claim. Last I checked, 120 minutes was 2hrs. It appears to take a nairobian almost 160 minutes, which is well over 2hrs.