Common Scenarios & Examples
Earn $80,000 in the US but moving to Thailand? Find out what that salary feels like in local purchasing power.
Offered £50,000 in London vs €60,000 in Berlin? Use PPP to see which offer actually buys you a better lifestyle.
Have a fixed pension of $4,000/month? Check how that income translates to local purchasing power in Portugal or Mexico.
Living in India but billing US clients? Calculate the equivalent US salary to ensure your hourly rate reflects a premium global standard.
What is Purchasing Power Parity (PPP)?
Comparing salaries using simple Exchange Rates is misleading. Exchange rates fluctuate based on speculation, interest rates, and trade, but they don't reflect the cost of rent, groceries, or services.
PPP (Purchasing Power Parity) solves this by comparing how much local currency is needed to buy the same "basket of goods" in different countries.
The "Big Mac Index" Explained
The most famous example of PPP is the Big Mac Index invented by The Economist. It suggests that exchange rates should adjust so that a Big Mac costs the same everywhere. If a burger costs $5.00 in the US but only $2.50 in a developing country, the local currency is "undervalued," meaning your dollars go twice as far.
Negotiating Salary for Relocation
When moving countries for work, never accept a 1:1 exchange rate conversion. If you move from a low-cost country to a high-cost one (e.g., India to the UK), a direct conversion will likely leave you poor.
Use this calculator to find the "Lifestyle Equivalent" salary. If you make $50k in a cheap city, you might need $120k in a generic expensive city to rent the same size apartment and eat the same quality food.
Hidden Relocation Costs (What PPP Misses)
While PPP is excellent for daily expenses (food, rent, local services), it does not apply to global commodities.
- Electronics: An iPhone or Laptop costs roughly the same (or more!) in Vietnam as in the US. PPP won't help you there.
- Student Loans/Debt: Your debts back home are fixed in your home currency. A lower "PPP adjusted" salary abroad makes paying off home debt much harder.
- Travel: International flights are priced globally, not locally.
Data Source: This calculator uses the PPP conversion factor, GDP (LCU per international $) dataset provided by the World Bank.
Frequently Asked Questions
Is this 100% accurate?
No calculator can be perfect because "lifestyle" varies. PPP is a macroeconomic average. It works best for comparing standard middle-class lifestyles. It may not reflect the cost of imported luxury goods (like iPhones), which tend to cost the same everywhere.
Why is the PPP result different from Google's currency converter?
Google uses Market Exchange Rates. We use PPP Factors. Market rates tell you how much money you can send to a bank account. PPP tells you how much that money feels like when you spend it locally.
Further Reading & Resources
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World Bank Data: Purchasing Power Parity
Official dataset and methodology for PPP calculations.
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Investopedia: What is PPP?
A beginner-friendly guide to the economics of purchasing power.
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The Economist: The Big Mac Index
Interactive tool visualizing currency valuation using burger prices.