Yet Another Big Mac index

From Rising Hegemon:

Rising Hegemon: How long does it take to buy a Big Mac?: "How long does it take to buy a Big Mac? The folks at the Asian Labour News have created a Big Mac index, which asks the eternal question: How long does it take employees at McDonalds restaurants in the Asia-Pacific region to earn enough money to purchase a Big Mac at their own place of work?

The scale is quite illuminating: Australia %u201417 minutes; New Zealand %u2014 28 minutes; Hong Kong %u2014 41 minutes; Malaysia %u2014 1 hour, 26 minutes; South Korea %u2014 1 hour, 29 minutes; Philippines %u2014 2 hours, 19 minutes; Thailand %u2014 2 hours, 45 minutes; China %u2014 3 hours, 58 minutes; Sri Lanka %u2014 5 hours, 53 minutes; India %u2014 8 hours, 34 minutes; and the winner is Pakistan, where it takes a McDonalds worker 14 hours, 14 minutes to buy a lousy burger...

Comments

[A. Zarkov]

Possibly very misleading numbers. I suspect most Asians have no desire for a Big Mac or any other size of Mac—they don’t like hamburgers. I’ll make a conjecture: These outlets are selling to a population that’s different from the population that’s working in these outlets. Moreover, the Muslim Asians might even be afraid the hamburger contains pork—and it could.

[Julian Elson]

What's misleading about the numbers, then? No one said that a typical Pakistani McDonalds worker actually works 14 hours and 14 minutes, then says, "hey, I think I'll spend all my money on a Big Mac!" It's just a ratio the price of a basket of goods (like wheat, cattle, tomatoes, processing equipment, etc) and the price of unskilled labor.

Most illuminating to me, it also shows how far India has overtaken Pakistan. Pakistan has almost double the time for a Big Mac!

The Philippines also did better than I expected, by this metric. I wouldn't have thought it would be ahead of Thailand.

[P.M.Lawrence]

There's another way the numbers can be misleading. In general, cash wages in developing countries do not compare well with their equivalents in more developed countries, because the former countries have more subsisrence resources around. That is, apart from the landless and otherwise dispossessed, people there do NOT have to live on their wages but only need them for top up purposes on top of their subsistence resources. This allows the iron law of wages to push wage rates below a living wage.

So a more meaningful comparison would be, what is the comparison after allowing for non-cash arrangements? In the poorer countries do MacDonalds workers get discounts or even a basic free allocation from what is left at the end of the day?

In my experience, in poorer countries most locals do not normally eat out at all, but rely on home resources. The exceptions come up when they have to travel, and the cheapest form of travel is usually bus so you can get the most cost effective authentic food near bus stations. If the MacDonalds are anywhere else, they aren't aimed at most locals anyway.

[dsquared]

In the poorer countries do MacDonalds workers get discounts or even a basic free allocation from what is left at the end of the day?

Almost certainly not; the quantity "what is left at the end of the day" can be influenced by workers and McD's is pretty well aware of the moral hazard issues. I seem to remember it has some very strict policies on this.

Doug Henwood has a fun chart of the S&P500 stock index deflated by the average wage. It's incredibly stable for years then shoots off into the stratosphere around the mid-Clinton years.

[trevelyan]

Stephen Frost deserves commendation for his great site and the idea of putting together such an intuitive wage-centered index. The direct link to his site is:

http://www.asianlabour.org

I've contributed some figures for China, and so am curious where the stats for Pakistan and many of the other countries are coming from, since they aren't on Stephen's online table. China is blocking all of Blogspot so the link above doesn't work. Anyone help out here?

Lawrence -- the subsistence income hypothesis is not accurate for China at least. People work these jobs full-time and live off the wages.

One think worth noting is that developing countries are likely to have strong regional variation in wage costs -- so the statistics are probably more useful for showing the degree of economic stratification and variation in labour market conditions within a country than across them taken on average. I was surprised to learn that wages in Tangshan outstripped those in Xian significantly, anyway.

[Ginger Yellow]

" Moreover, the Muslim Asians might even be afraid the hamburger contains pork—and it could."

This is a rather bizarre comment. Not least because India (largely Hindu) is on the list and there definitely is beef in a Big Mac.

[radek]

Whether or not the numbers are misleading depends on the question you want to ask of them. If you wanna take them as indicative of relative incomes between the countries then yeah they're probably misleading, it being only one good among many and all. It's a cute sort of thing that is more meant to make you think about the issues involved then really provide any real answers. Like the original Big Mac index.

[pgl]

Big Macs are lousy. My preference is the QuarterPounder - but do folks in India even eat burgers. One would think we could find a more universal metric to measure living standards that "two all beef patties ... "

[WECO]

It also depends on the relative 'social' status of a Big Mac.

I remember that in the early to mid 90s, Big Mac is regarded by many in Asia, particularly in China, as a luxury item. (Arrgh, I know) Even a status symbol/fashion item. You do not just go and buy a burger under the Golden Arch. Having a Big Mac is an event, and the pricing therefore reflects this.

And dsquared is right. The Big Mac has strict rule regarding leftovers. My cousin used to work for them. You don't get the leftovers. You're allowed one meal only after you work a 8-hour shift.

It'd be interesting to constrast the price of a Big Mac to local fastfood (kebab, noodle shop). Here in London, Big Mac is the cheapest food you can get (and the taste reflects this).

[Alexei McDonald]

I seem to remember that the Indian branches of McDonalds don't sell beef or pork products at all, only lamb and chicken, since they don't want to offend either Hindu or Muslim customers.

[Ginger Yellow]

Didn't stop them selling fries cooked in beef fat. Idiots.

In China, KFC is far, far more popular than McDonalds. Beijing has the world's largest KFC.

[Dave]

Why the big difference between Australia and New Zealand? 64% longer in NZ? I don't know much about either economy, but I would expect them to be more similar. Does Australia have a much higher minimum wage?

[Steven Rogers]

Ginger Yellow,

McDonalds claims that it never sold fries cooked in beef fat in India.

Mickey Dees market research is second to none, so I do tend to believe them on this matter.

[Mihir]

Living in India I know that its true, or was true upto fall 2000, that McDonalds in India does not sell beef products. Not sure about pork though.

[Auros]

In addition to the issues of local buyers' opinions (Big Mac as status item -- loony, but then, I've heard that the Japanese have somehow become convinced that the traditional meal for Christmas is KFC), I'd also expect there's a relationship to how wide the gap is between rich and poor. Big Macs would probably be, at least in part, a product made available for the benefit of ex-pats and visitors -- rich tourists, folks who work for multinationals, etc. Since the local working class isn't interested in buying, the price is set solely by the demand of the rich. In countries where the gap is very large, it may take a long time for the poor worker to earn enough to buy a burger, but that's not really relevant to the worker's standard of living. (The burger, I mean -- the wide gap certainly is, as wide differentials between rich and poor are well-correlated with the poor doing extremely poorly, with the US being currently a possible exception, though I imagine most of us here figure that if the differential persists, the misery will follow.)

[P.M.Lawrence]

Trevelyan, your information about China is incorrect, at least for enough cases to set the pace for the structure as a whole. A few months ago I attended a presentation at which conditions in one Chinese factory were described. It seems that the workers never actually received their promised cash wages but survived on rations and in quarters provided by the employers, staying in hope that eventually they might receive their wages.

So no, the bottom end of the Chinese economy is working in subsistence conditions, not using cash wages for survival. It's the bottom end that defines the parameters of a race to the bottom, not the normal or typical conditions of employment.

[DOR]

Two key factors left out of Big Mac-type indices is the cost of real estate and the level of taxes.
.