Tuesday, August 25, 2009

Comparing prices, wages and purchasing power across cities

The Economist points to the latest version of UBS's Prices and Earnings Comparison Report, which offers a fascinating array of information about prices, wages and purchasing power for 14 professions in 73 cities across the world.

The report finds that Oslo, Copenhagen, Zurich, Geneva, New York and Tokyo are the world's priciest cities; Kuala Lumpur, Manila, Delhi and Mumbai are the cheapest cities to live in; employees in Zurich and Geneva have the highest net wages in the world; and people in Cairo and Seoul work the longest – roughly 600 hours more per year than their peers in Western Europe. It also finds that it takes a mere 12 minutes at work to afford a Big Mac in Chicago, Toronto and Tokyo, whereas employees must toil for over two hours to earn enough for the same fix in Mexico City, Jakarta and Nairobi.

Interestingly, the price comparison based on the weighted cost of a shopping basket geared to west Eureopean consumer hanits and containing 122 goods and services (without rents), shows that Delhi and Mumbai have the cheapest living costs among the sample of 73 cities. The wage levels arrived at from a weighted index based on wage figures and working hours of 14 professions shows Delhi at the 70th spot and Mumbai at the last with the lowest wages. It required 61 minutes of working time in Mumbai and 49 in Delhi to earn enough to buy a Big Mac, 37 and 58 minutes respectively to buy a kilogram of rice, and 177 and 122.5 hours respectively to buy an iPod Nano. Employees have to work a global average of 37 minutes to earn enough to pay for a Big Mac, 22 minutes for a kilo of rice and 25 minutes for a kilo of bread.

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A comparison of the prices of train (200km in 2nd class), taxi (5km within city), and bus/tram/metro (10 km) reveals that public transport is most expensive in Western Europe and North America. Local public transport is the cheapest in Delhi, with Mumbai being the third cheapest and Taxis are cheapest in Mumbai followed by Delhi.

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Interestingly, the prices of expensive furnished and unfurnished apartment units in Delhi are comparable with the more expensive cities. The normal rents paid by average households while cheap, are larger than the rents in many major East Asian, Latin American and African cities. This may be a reflection of the relatively limited stock of dwelling units available in our cities compared to their compatriots elsewhere.

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