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stratodrew t1_jai9kzm wrote

Reply to comment by AverageAustralian111 in [OC] Real minimum wages 2021 by Klutzy_Ambition5445

I've not heard of this before, please would you mind explaining? Thanks

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AverageAustralian111 t1_jaif2lc wrote

Sure,

In some countries, prices are higher than in others. For example, a loaf of bread in Australia might cost around $3, but in China, around 2 Yuan (which exchanges to about 50c. So (measuring it only by bread prices) $1 in China is worth 6 times as much as $1 in Australia.

If you do this for all products and weight it by the amount of each product that normal people buy, you can find the cost of living in a country. Real wages are wages/cost of living

So in the example above, NZ has a minimum wage of $US14.18, but because things are slightly more expensive in NZ than in the US, that amount of money can buy the same amount of stuff in NZ that $US11.90 could buy in the US.

When you adjust for PPP, you take this into account. If you ever see "real" vs "nominal" figures, real means adjusted for PPP, and nominal means not adjusted

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capybarawelding t1_japzgy0 wrote

Another question: was a set uniform basket of goods selected, or was a combination and a quantity of goods somehow chosen by reporting bodies?

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AverageAustralian111 t1_jaquft7 wrote

Different countries tend to use different baskets of goods to reflect their own consumption patterns. The OECD probably pulls their data from state statistics agencies (although it is possible they conducted their own survey)

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