Stepan Jurajda (CERGE-EI)

“Comparing Real Wage Rates using McWages”

abstract

Thanks to the standardized work protocol and technology of McDonald’s restaurants across the globe, the hourly wage rate of Basic Crew McDonald’s workers offers consistent, easy-to-interpret, and up-to-date wage comparisons. First, the wage rate expressed in a common currency measures the costs of labor in prices of tradables and can be linked to the country’s marginal product of labor and TFP. Second, the wage rate in PPP or in Big Macs (earned) Per Hour (BMPH) measures the purchasing power of labor income and provides an indicator of workers’ living standards. We compare up-to-date McWages across 80 countries and track their evolution back to 2000 for a subset of countries. Wage rates of workers providing the same human capital input and using the same technology are an order of magnitude higher in the richest countries compared to some of the less productive economies. We illustrate the application of McWages in economics by testing the implications of recent macroeconomic output accounting exercises.