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Luxembourg: highest purchasing power in the world

Published Monday October 05 2015

Workers in Luxembourg have much higher purchasing power than their peers in Frankfurt (24% higher), Paris (31%), Brussels (32%), London (37%), Tokyo (40%) and pretty much everywhere else. This finding features in the latest “Prices and Earnings” study published by the bank UBS.

Purchasing power means a comparison between earnings and prices. UBS collected figures in 71 business capitals around the world. They measured average hourly salaries after tax and the price of an average “shopping basket” for all types of spending for an average three-person household. Unfortunately, rent and mortgage payments are excluded because the quality, size and location of homes vary too much to make for a meaningful comparison.

With earnings and the cost of living measured, they were able to see in which town you would have the greater ability to buy the stuff on offer. As the graph shows, Luxembourg has similar purchasing power to Switzerland, but is about 15% ahead of the USA and is much higher than everywhere else. Mr and Ms average in Luxembourg have twice the purchasing power as their equivalent in Hong Kong, five times that of a resident of Shanghai and almost ten times that of someone in Mumbai.

The report also looked at it another way. In Luxembourg you have to work 9 minutes to afford a Big Mac and 28 hours to pay for an iPhone 6. This day out would cost you 15 minutes plus 43 hours in Dublin, 16 minutes and 50 hours in Amsterdam and 19 minutes and 61 hours in Madrid. However, life is easier in Zurich if you live on McDonalds and WiFi. Although you would need to work for two minutes longer to get your Big Mac in the Swiss business capital, the iPhone would cost you seven fewer hours at work.

All these figures come with a health warning. They are only averages, they depend on fluctuating exchange rates, and, crucially, housing costs (which often take up a third of our budgets) are not included. Nevertheless, the study confirms what we know already: life is pretty good here. Download the report here