Using the Big Mac Index to calculate real income

Last Updated on Wednesday, 31 March 2010 04:49 Written by admin Monday, 29 March 2010 07:42

Besides being an excellent investing tool, the Big Mac Index can be used to calculate changes in real income. In Big Mac terms, real income is basically the amount of Big Macs you can buy. You can also think of real income as purchasing power.

Real Income = Nominal Income / Price Level

Since Price Level is related to inflation, you can think of real income as “the income of nations or individuals after adjusting for inflation”. Business Insider did a story about the purchasing power of $100,000 in 20 cities worldwide. The thing is though, they used the price of a Big Mac as the price level (or cost of living) in their calculations. For calculations relating to price levels or costs of living, a “basket of goods” is usually used. This time though, it’s the good old Big Mac Index. Here are the results …

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In Zurich, $100,000 will get you …

a one bedroom, 39 sq. m. modern,

open floorplan apartment for

approximately USD 271,000.

Adjusted post-tax income Estimated Tax Compared cost of living
41,000 30% 172%

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In Berlin, $100,000 will get you …

a centrally-located, one bedroom,

one bath apartment with 70sq.m.,

for approximately USD 313,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$42,000 46% 129%

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In Tel Aviv, $100,000 will get you …

a 50sq.m. two room

apartment for approximately

USD 299,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$51,000 43% 112%

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In Sydney, $100,000 will get you …

a stylish studio in an affluent

inner-city suburb for

USD 302,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$54,000 40% 111%

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In Paris, $100,000 will get you …

a 24sq.m. studio in Paris’

3rd arrondissement for

approximately USD 293,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$55,000 39% 129%

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In Toronto, $100,000 will get you …

a three bedroom, three bath

home on less than half an acre

of land in a Toronto suburb for

approximately USD 299,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$55,000 38% 113%

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In Sao Paulo, $100,000 will get you …

a 720 sq.m. fully furnished,

five bedroom beach house two

hours drive from Sao Paulo, for

USD 320,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$60,000 26% 124%

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In San Fransisco, $100,000 will get you …

a one bedroom San Fransisco

home for USD 302,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$62,000 38% 100%

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In Istanbul, $100,000 will get you …

a 200 sq.m. villa located 3

miles from the city center,

for approximately USD 300,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$64,000 33% 104%

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In Boston, $100,000 will get you …

a two bedroom, one bath

900 sq.ft. co-op on Commonwealth

Ave. for USD 305,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$67,000 33% 100%

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In London, $100,000 will get you …

a centrally-located 270 sq.ft.

studio apartment for

approximately USD 300,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$68,000 34% 97%

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In New York, $100,000 will get you …

an Upper West Side studio

apartment for USD 284,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$72,000 38% 100%

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In Tokyo, $100,000 will get you …

a one bedroom in

Tokyo for USD 300,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$75,000 26% 99%

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In Capetown, $100,000 will get you …

a two bedroom, two bath

modern apartment with a view,

for approximately USD 245,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$96,000 35% 68%

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In Mexico City, $100,000 will get you …

a 168 sq.m. apartment

in a new construction for

approximately USD 301,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$100,000 28% 72%

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In Dubai, $100,000 will get you …

a two bedroom 1,153 sq.ft.

apartment in the Emirates Living

District for approximately USD 294,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$113,000 5% 84%

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In Moscow, $100,000 will get you …

a newly renovated and

fully furnished 30 sq.m.

studio for USD 290,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$115,000 13% 67%

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In Bangkok, $100,000 will get you …

a two bedroom, two bath brand

new centrally located68 sq.m. condo

for approximately USD 298,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$120,000 28% 60%

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In Shanghai, $100,000 will get you …

a one bedroom, one bath

centrally located apartment for

approximately USD 285,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$139,000 29% 51%

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In Hong Kong, $100,000 will get you …

a two bedroom on the

outskirts of Hong Kong for

approximately 296,000.

Adjusted post-tax income Estimated Tax Compared cost of living
$175,000 16% 48%



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