How can I calculate which country has the best wage to living expense ratio?

Question

Suppose, I have the following data in my hand:

1. PPP Index
2. Cost Index
3. Monthly income
4. tax rate
5. living expense
6. etc.

How can I calculate which country has the best wage to living expense ratio?

Answer 1

Monthly income minus living expense minus taxes, gives you Disposable Income.

Next, use a PPP index such as the Big Mac Index to calculate how much your disposable income can purchase.

The country with the most Big Macs wins.

Answer 2

You probably can't short of drawing up what your personal budget would be in each country and determining which set of trade-offs you prefer.

Aggregate statistics like this have their uses but they tend to obscure as much as they illuminate. A lot of the difference in overall tax rates across developed countries, for example, relates to how you account for health insurance. If you follow the Swiss model where everyone is required to buy health insurance but those health insurance premiums aren't part of your assessed tax burden. If you follow the French model where the government pays for health care, the government has to collect more in taxes. From the perspective of an average worker, it doesn't really matter whether you're getting health care by buying a private policy with after-tax dollars or whether you're getting it by paying more in income taxes. But it is exceedingly difficult to see that from aggregate statistics short of putting together a budget.

You get similar issues where your actual tax burden depends heavily on your income, your dependents, etc. One country might be more advantageous if you have two kids who need day care and for whom you'd need to pay more for housing to get in a good school district. Another country might be more advantageous if you're a high income singleton.

And if you're willing to live most anywhere, you really don't want to be looking at countries as a whole. You want to look at smaller regions within countries-- living in Silicon Valley in the US has a very different set of expenses than living in Alabama. Using averages for the country isn't particularly helpful in those cases.

Most likely, you want to use other factors to narrow down where you'd really want to live (language spoken, the attractiveness of the typical lifestyle to you, the available infrastructure, etc.) and prepare a few sample budgets to see where you'd be happiest living.