How to Calculate Purchasing Power Parity
TL;DR: The Purchasing Power Parity formula is: equivalent salary = (your salary ÷ your country's PPP factor) × the destination country's PPP factor. Below is a step-by-step walkthrough with real examples.
The formula, explained
Equivalent salary = (Your salary ÷ PPP factor of your country) × PPP factor of the destination country
The "PPP factor" is the World Bank's PPP conversion factor: how many units of a country's currency are needed to buy the same basket of everyday goods and services that one international dollar buys in the United States. Dividing your salary by your own country's factor converts it into that common baseline; multiplying by the destination country's factor converts it back out into local terms there.
Step-by-step: how to calculate it yourself
- Look up your country's PPP factor and the destination country's PPP factor (see our full country ranking).
- Divide your salary by your own country's factor.
- Multiply the result by the destination country's factor.
- The number you get is the salary you'd need in the destination country to match your current purchasing power.
For example, Canada's current PPP factor is 1.241 CAD and Australia's is 1.427 AUD (2024/2024 World Bank data).
Worked examples
Canada → Australia: 60,000 CAD is roughly equivalent to 69,017 AUD.
India → Singapore: 60,000 INR is roughly equivalent to 3,142 SGD.
Canada → Philippines: 60,000 CAD is roughly equivalent to 1,002,988 PHP.
See the full working for these pairs on their dedicated comparison pages: Canada vs Australia, India vs Singapore, Canada vs Philippines.
Common mistakes when calculating PPP by hand
- Applying the formula backwards: dividing by the destination country's factor instead of multiplying by it.
- Confusing the PPP factor with the market exchange rate. They measure different things and are usually different numbers.
- Using an outdated factor. Each country's figure is only updated when the World Bank publishes a new report, so check the year attached to the data.
Frequently asked questions
What is the PPP formula in simple terms?
Take your salary, divide it by your own country's PPP factor to get a common baseline, then multiply by the destination country's PPP factor. The result is what you'd need to earn there to match your current purchasing power.
Do I need the exchange rate to calculate PPP?
No. The whole point of PPP is that it replaces the market exchange rate with each country's PPP conversion factor, which reflects relative price levels rather than currency trading value.