Economy Japan's Big Mac coefficient

[thomas]

The Big Mac highlights Japan's low purchasing power based on hourly wages. However, a lower hamburger price does not always equate to affordability.

A Nikkei analysis using the price of McDonald's Big Mac—a globally available fast-food item often used as an international price index—reveals that Japan's wages are low by global standards. The study found that a restaurant or retail worker in Japan can afford 2.18 Big Macs with an hour's wages, compared to 3.95 in Australia and 2.56 in Hong Kong. This figure for Japan has declined by 0.2 Big Macs over the past five years, as wage growth has lagged behind rising prices. Comparing economic data across countries is challenging due to factors like exchange rates and differences in work environments. However, one way to neutralize currency fluctuations is to analyze the price of a widely available item, such as the Big Mac. This method was applied in the latest assessment of wages in Japan and other nations.

The price of a Big Mac, according to The Economist, was $3.2 in Japan as of July 2024, nearly 50% lower than in the U.S. and the U.K., making a general impression that the fast food item in Japan is relatively inexpensive. But the retail price of the hamburger is not necessarily "a bargain" for workers in Japan, said Yusuke Aoki, an economist at Indeed Japan. The chart above depicts the reality. The number of purchasable Big Macs has dropped by 0.2 in Japan over the past five years. During the period, hourly pay increased 11% while the price of a Big Mac rose 23% in Japan. While wage levels had been relatively static since the collapse of the bubble economy in the 1990s, the COVID-19 pandemic and the Ukrainian crisis have sent the prices of goods and services ascending, resulting in faster inflationthan increases in wages. It is far from the virtuous cycle of wages and prices that the Japanese government and the Bank of Japan have vowed to achieve. "Wages are level in each service area. Pay hikes for improving skills are rare and, if any, about 10 to 20 yen ($0.065 to $0.13)," said a worker at a McDonald's restaurant in Tokyo's bustling Ginza district.

The stalled growth of wages in Japan, calculated in dollar terms, is especially noticeable. Workers earned $7 per hour in 2024, down from $8.6 in 2019. Hourly wages in Japan have fallen below those in Asian neighbours such as Singapore, Hong Kong and South Korea due partly to the yen's depreciation.

Paywall alert:

Big Mac exposes Japan's weak hourly-wage purchasing power

Lower price of hamburgers does not necessarily mean inexpensive for workers

asia.nikkei.com

 

[johnnyG]

Purchasing power parity (PPP) as poor measure of things is discussed in this blog. (And while that's also a negative view of Japan, a far more positive outlook on Japan is this one.)