First of all, PPP is not perfect but it is a theoretical scaling instrument that helps us understand our salary difference using the exchange rates provided and cost of goods in the particular country.

In simpler terms, to calculate which things we can afford if our salaries remain the same in the same country where I want to buy things.

Let me clear your confusion by presenting you with an example here how it goes, Imagine you have a ₹ 10,000 salary, you want to move abroad to the United States of America, should you directly convert your currency to check how much you should be paid ?

Well actually No, let's check with a burger, check if the price of 🍔Burger is the same in the United States of America as you have right now in India. Even if you have tried to convert the price of it, you will find it slightly expensive or affordable so are you convinced now why exchange rates are not correct to check your salary.

So instead of checking exchange rates use Purchasing power parity values provided by 🌐World Bank, this index will guide and keep you informed about keeping inflation, expensive places in mind to negotiate it with your hr.

PPP index is used in salary conversion, if you move to a different country to evaluate you get the same value as you used to get in your motherland/work country to the country you moved or from the previous company to your country which can be expensive or lower as per exchange rate but as I said earlier it only converts the currencies.

Importance of PPP in economics

PPP is important because it helps us compare how well-off people are in different countries. It's like a fair way to see who can buy more with their money, regardless of the currency they use. It helps economists understand the standard of living and economic productivity across the globe.

Importance of PPP is very significant in economics to help economists, investors, enthusiasts and a closer check for governments also to check their ppp as it helps them understand how much affordability is there in a country. It also helps them understand -

• Fair way of checking all the countries where who can buy more with their money regardless of currency they use.
• Living standards across the nation.
• Economic productivity across the globe.

What is a PPP Calculator?

A PPP (Purchasing Power Parity) Salary Calculator by (Banksforyou) is a financial tool made to help job seekers, expatriates, employers, hr, economists, researchers and by IMF themselves to compare salaries or wages between different countries by taking into account the differences in the cost of living, simply to check if their current salary aligns with the local cost of living.

How PPP Salary Calculator Work?

A PPP (Purchasing Power Parity) salary calculator works by adjusting salaries or wages from one country to another considering the differences in the cost of living.

Let us check the breakdown of this-

1. Salary Input - only numeric digits are allowed. Type the salary that you get in your current origin country i.e India
2. Input Boxes - one is the origin country and another is Target country. In your country, your current country you are living in and the salary you're expecting from India and the salary that should align with the United States of America. Select the countries from the boxes.
3. Data Retrieval - Data provided by World bank is stored into our databases then retrieved from it and calculates the ppp based on the selected origin and target country. The formulae goes by this - Select the countries from the boxes.

Salary you get in India (origin country) whole divided by total multiplication of (source country India index value multiplied by Target country USA index value provided by World Bank)

Salary (s)- ₹ 10,000

Index Value of IND (a)- 22.88213035

Index Value of USA (b)- 1

(s) / ((a) * (b)) = $437.02

Cost of Living Comparison

This is how they can impact their cost of living standards by adjusting salaries based on the relative purchasing power of different currencies and locations.

1. Standardizing Salary Comparisons
2. Ensuring Fair Compensation
3. Informing Relocation Decisions
4. Budgeting and Financial Planning
5. Negotiating Job Offers

And for companies it gives them a relative index value so they are aware of their costs and the expenses and their product launch price is also affected.

Benefits of Using a PPP Salary Calculator

A PPP (Purchasing Power Parity) salary calculator works by adjusting salaries or wages from one country to another considering the differences in the cost of living.

Let us check the breakdown of this-

1. Estimated Cost of Living Comparison -

PPP salary calculators help in understanding the difference and comparisons of salaries across different nations in context to your current country’s salary. Thus you can have an informed decision.

2. Fair Compensation Practices -

It ensures that employers will provide a living standard salary to the employee.

3. Effective Job Search -

It is an absolutely great tool to search for a job and based on your skills and market rate in your country you can search salary ranges in other countries as well with this tool.

Disadvantages of using PPP Salary Calculator

1. Accuracy Concerns -

As the data depends on the salary entered and the current market conditions like inflation, disaster or any unexpected incident also sometimes due to use of non-latest index value. The data is fetched from the World Bank so if they have not collected the new data it is not possible to update to the latest year from our side.

2. Non-monetary benefits are not calculated -

Non monetary benefits such as training opportunities, career development courses or flexible work opportunities differ from person and places.

3. Risk of Misinterpretation -

Misinterpretation of salary figures without considering crucial factors such as job satisfaction, work life balance or long term career growth.