When using it, it doesn't matter if the person makes 150 euros an hour if it costs them that much for a meal but the person in Italy only has to work half as long for a meal.
That's great when talking about people who spend the vast majority of their wealth on "cost of living" type stuff. But does it work in this case?
If a person in Italy makes just enough to live comfortably, you can compare that to a person in Norway who makes just enough to live comfortably. But if a person wants a new iPhone on top of that, they're gonna be paying around $1250 whether they're in Norway or in Italy ($1295 in Norway, $1253 in Italy).
So it seems to me that the calculation is a bit more complex than just some purchasing power parity factor. Even if $1 in Italy was $2 in Norway adjusted for PPP, I would much rather be making $8000/month in Norway than $4000/month in Italy because the price of luxury goods don't vary as wildly as the price of cost-of-living stuff.
If a person in Italy makes just enough to live comfortably, you can compare that to a person in Norway who makes just enough to live comfortably. But if a person wants a new iPhone on top of that, they're gonna be paying around $1250 whether they're in Norway or in Italy ($1295 in Norway, $1253 in Italy).
So it seems to me that the calculation is a bit more complex than just some purchasing power parity factor. Even if $1 in Italy was $2 in Norway adjusted for PPP, I would much rather be making $8000/month in Norway than $4000/month in Italy because the price of luxury goods don't vary as wildly as the price of cost-of-living stuff.
Or is my understanding wrong?