Comedians for Worldpeace – Do they know it’s Europe?
I found the perfect example to explain the difference between “GDP per capita” and “GDP per capita, PPP”.
Denmark vs Germany
We all know that Denmark has some of the highest salaries in the EU. But, as everybody who ever been there will be able to tell you, living there is also really expensive.
Within the EU: Luxembourg, Denmark and Ireland have some of the highest salaries. But what does that actually buy you? This is what PPP (Purchasing Power Parity) tries to answer.
But first, let me go one step back and quickly point out the obvious. Comparing the GDP (Gross Domestic Product) as a total over nations, especially with very different population numbers, isn’t going to be that useful in most of the cases. data source
The obvious solution is “GDP per Capita”, where one simply divide the GDP of a nation by the amount of people living there. This gives a very different picture indeed. data source
That doesn’t necessarily translates directly to salaries, but gives a very good example of what people there earn. It also does not say anything about how well that wealth is distribute between poor and rich, this is another topic for another day.
But have a look how far apart Denmark with a GDP per capita of $56k is from Germany with $44k.
But Denmark isn’t part of the EuroZone and, as mentioned, living there is noticeably more expensive.
What purchasing power parity does, is to look at how expensive some products are compared in $ USD to find out how much that money actually buys you. So what do you think, Germans or the Danish, who will get more for their salary? data source
Despite a 20% difference in salary, Germany and Denmark are almost identical.
So if you want to save a lot of money, Luxembourg and Ireland look a lot more attractive.
Money isn’t everything.
Despite that, Denmark and Germany usually ranks as one of the best places to live in the world. Typically ahead of both Luxembourg and Ireland.
See ONI Quality of Nationality Index
So what does that tell you?
If the accumulation of money is more important to you than the quality of life, you need to look at how much the cost of living is and not just the size of your pay-cheque.
Happiness isn’t about money or how expensive life is. It is a question of what you get for it. Not enough will guarantee misery, true. But after a certain threshold other factors start to become more important. Things like personal safety, a clean environment and being surrounded by other happy people is much more important than how big the balance on your current account is at the end of the month.
The 2019 update of the worldhappiness.report is out.
8 of the top 10 happiest places on earth are in Europe, and 5 are EU member states. 🤔
But not just Europe, the EU has signed comprehensive free trade deals with countries all across world. The ones that extend to services, typically will also allow some movement of labor. For example CETA, the EU/Canada agreement:
CETA is a free trade agreement between Canada, the European Union (EU), and its member states.
CETA facilitates entry to Canada for certain eligible persons by removing the requirement for a Labour Market Impact Assessment (LMIA)
to be obtained before that person can legally perform work in Canada.
The LMIA process ensures that companies in Canada may only hire
internationally if it is determined that no Canadian citizens or
permanent residents were ready and able to perform the role. The LMIA
process also includes advertising requirements and processing times.
being exempt from the requirement to obtain a LMIA can make the process
of coming to Canada for work purposes much easier.