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by zaptheimpaler 3189 days ago
Read up on purchasing power. Purchasing power is what your money can buy, which is the more correct measure.

Its the same reason it doesn't make sense to directly compare programmers salaries in San Francisco vs. Pittsburgh. If (made up numbers) 120K$ in SF buys the same lifestyle as 90K$ in Pittsburgh, it means someone making 120K in SF is roughly as wealthy as someone making 90K in Pittsburgh. Certainly saying that the SF programmers make 1.3x more is true, but the more fundamental question is the lifestyle that the income affords you.
1 comments
jogjayr 3189 days ago
Kinda-sorta. With a higher salary, living a below-average lifestyle for the area can lead to staggering savings rates and savings in absolute terms. For instance, saving even 23% of 120k is better than saving 30% of 90k.

And of course a lot of things cost the same regardless of where you live. Manufactured goods cost pretty much the same in India as in the US and sometimes more, because of import duties. Gasoline is significantly more expensive.

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zaptheimpaler 3189 days ago
Right.. now going back to the India/US comparison, its pretty fair to say 99% of people in India will not immigrate to the US. So the hypothetical value of saving lots of money in the US to spend in India doesn't really apply. The SF/NYC analogy does not hold exactly to US/India.
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jogjayr 3189 days ago
Who said anything about saving in the US to spend in India? Saving in the Bay Area to spend in rural Montana is an equally valid comparison, cost-of-living wise.

The point I was making is that some things cost the same no matter where you live. The Indian dentist who wants to take a foreign vacation, buy an iPhone, or a car needs to spend more, relative to her income, than the American dentist. Purchasing power only holds for things that are labor-bound (mainly services, and goods that are labor-intensive to manufacture) rather than resource-bound.

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zaptheimpaler 3188 days ago
Purchasing power is based on a basket of goods for the average consumer. It takes into account expenses like phones and cars - as you say, iPhones are still expensive but the basket would take that into account and purchasing power would be lowered accordingly.
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