What is Purchasing Power Parity?
TL;DR: Purchasing Power Parity (PPP) tells you what a salary is really worth in another country by comparing local prices, not just the exchange rate. Using World Bank data, a $60,000 US salary needs about ₹1,193,815 in India, or about CHF 66,433 in Switzerland, to buy the same standard of living.
The foreign exchange rate tells you that a salary of 80,000 Euros converts to roughly 87,000 US Dollars. What it doesn't tell you is whether 87,000 USD in America can buy the same standard of living as 80,000 Euros does in France. How much money would you need in America to buy the same things you'd buy in France?
This is where Purchasing Power Parity (PPP) comes in. Converting your salary using PPP, instead of the exchange rate, gives a much better approximation of what your standard of living would actually be like in a different country. This is useful if you're planning on moving, working remotely, negotiating a job offer abroad, or sending money to another country.
The formula
Purchasing Power Parity compares two currencies through a "basket of goods" approach: two currencies are at parity when that basket costs the same amount in both countries, once exchange rates are accounted for.
Equivalent salary = (Your salary ÷ PPP factor of your country) × PPP factor of the destination country
Read the full formula walkthrough with more examples →A worked example
Imagine a burger costs 5 US Dollars in America and 10 units of a foreign currency in another country. If the market exchange rate says 1 USD = 1 unit of that currency, the burger looks twice as expensive abroad — the local currency has less purchasing power. PPP adjusts for exactly this kind of gap across an entire basket of everyday goods and services, not just one product.
Using real World Bank data: a $60,000 salary in the United States (PPP factor 1.0) is equivalent to roughly ₹1,193,815 in India (PPP factor ~19.9) or about CHF 66,433 in Switzerland (PPP factor ~1.11) — not the much larger or smaller figures a plain exchange-rate conversion would show.
Why it matters more than the exchange rate
A job offer that converts to a much larger number at the exchange rate doesn't necessarily mean a better standard of living — if prices in that country are also much higher, your real purchasing power might barely change, or even shrink. PPP strips out that noise so you're comparing like for like.
Advantages and disadvantages of using PPP
Advantages
- Adjusts for real price-level differences instead of relying on volatile market exchange rates.
- Gives a fairer basis for comparing a job offer, salary, or standard of living across countries.
- Backed by a consistent, publicly available World Bank methodology used across economics and policy.
Disadvantages
- Reflects a national average, not a specific city — costs in a capital can be well above the country's average.
- Doesn't capture non-market factors like quality of life, safety, or access to services.
- Updated periodically, so figures can lag the most recent local inflation or price shocks.
How PPP affects different people
Job seekers comparing offers
A higher headline salary abroad can still mean a lower standard of living once local prices are factored in. PPP lets you compare two offers on equal footing before you negotiate or decide to relocate.
Remote workers and digital nomads
If you're paid in one currency but living in another country, PPP helps you understand how far that salary actually stretches locally, beyond what a currency converter shows.
Employers setting international pay
Companies hiring across borders use PPP-style thinking to set compensation that's fair and competitive in each local market, rather than paying every employee the same nominal amount regardless of where they live.
Popular country comparisons
Dedicated comparisons for country pairs people ask about most, each with the calculator pre-filled:
Country PPP snapshot
PPP conversion factors for a selection of countries, in national currency units per international dollar. Lower than 1 means the currency buys more locally than the US dollar does in the US; higher than 1 means it buys less.
| Country | Currency | PPP factor | Year |
|---|---|---|---|
| United States | USD | 1 | 2024 |
| United Kingdom | GBP | 0.68 | 2024 |
| Canada | CAD | 1.24 | 2024 |
| Australia | AUD | 1.43 | 2024 |
| Germany | EUR | 0.7 | 2024 |
| France | EUR | 0.72 | 2024 |
| Switzerland | CHF | 1.11 | 2024 |
| Japan | JPY | 99.38 | 2024 |
| China | CNY | 3.55 | 2024 |
| India | INR | 19.9 | 2024 |
| Brazil | BRL | 2.52 | 2024 |
| Mexico | MXN | 10.8 | 2024 |
| Singapore | SGD | 1.04 | 2024 |
| South Africa | ZAR | 7.7 | 2024 |
| United Arab Emirates | AED | 2.56 | 2024 |
| Philippines | PHP | 20.74 | 2024 |
See the full ranking of all 184 countries, or use the PPP salary calculator to compare any two.
Our data source
This site uses the World Bank PPP conversion factor (private consumption), most recent year available per country (2021-2024) — the same dataset economists and international organizations use to compare living standards across countries. Coverage and recency vary slightly by country depending on what each government has most recently reported to the World Bank. See exactly how we source and refresh this data, or view the original World Bank indicator directly.
For the general economic theory behind PPP, see the Wikipedia entry on Purchasing Power Parity.
Frequently asked questions about PPP
Is PPP the same as cost of living?
They're closely related but not identical. PPP compares an entire national basket of goods and services between two countries and produces a single conversion factor. Cost of living indexes are often more granular (city-level) and can weight categories like rent differently. PPP is the better tool for comparing a whole salary; a city cost-of-living index is better for city-to-city budgeting.
Does PPP account for rent and housing costs?
Yes, in aggregate. The World Bank's PPP conversion factor is built from a broad basket of household consumption that includes housing, but it reflects a national average, not a specific city or neighborhood. Rent in a capital city can differ significantly from the national average used in the calculation.
What is the difference between PPP and GDP?
GDP measures the total size of an economy. 'GDP (PPP)' is GDP converted using purchasing power parity instead of market exchange rates, so it's a way of comparing the size of economies fairly. That's a different use of PPP than a personal salary converter, which applies the same underlying conversion factor to an individual's income instead of a national economic total.
Read the full PPP vs GDP comparison →What is the Big Mac Index, and is it the same as PPP?
The Big Mac Index, published by The Economist, is a simplified, informal version of PPP that uses the price of a single product (a McDonald's Big Mac) as its basket of goods. It's a fun, easy-to-understand illustration of the same idea behind PPP, but the World Bank's official PPP conversion factor is based on a much broader and more representative basket of goods and services.