If only Big Macs could be traded for happiness.
Low-wage workers in the United States still earn several times what most workers outside the country earn for exactly the same work, as measured in a novel way by Princeton economist Orley Ashenfelter, who spoke this week at the Nobel Conference at Gustavus Adolphus College.
Ashenfelter, speaking Tuesday to an audience of about 2,500, explained that he used McDonald’s Big Macs as a standard unit of consumption — the burgers are roughly the same across the globe and historic prices are available. And he used work at McDonald’s as a standard unit of labor, since the franchiser’s system is uniform across the world.
By asking students and audience members to order Big Macs in far-flung places and send him the receipt with the restaurant’s wage rates scribbled on them (the professor for a while reimbursed his correspondents for their trouble), Ashenfelter developed a data set that gave him a “measure of the amount of consumption you can earn with a certain amount of work,” or, the number of Big Macs Per Hour that McDonald’s workers earn around the world.
Despite the relatively high cost of living, there are few places where an hour of work at McDonald’s earns as much as it does in the United States. American McDonald’s workers earn about 2.4 Big Macs per hour. Only the Japanese earn more — just over 3.
In China, workers earn about half a Big Mac for the same work that earns an American almost two-and-a-half. In India, real wages are even less, about a third of a Big Mac for an hour of labor.
“It shows this huge gap across the world,” said Ashenfelter.
The research is not new, but in general still holds true.
Real wages, Ashenfelter said, have been roughly the same for most of human history, until they started to diverge with industrialization.
The best economists can tell, though, wages in India and China are more or less in line with historical norms. The modern-day anomaly in wages is the United States, where even pay for the lowest-wage workers is historically high.
Ashenfelter was one of several economists attending the Nobel Conference, now in its 52nd year. Event organizers expected about 4,000 attendees at the college in St. Peter. The title of the event was “In Search of Economic Balance,” with presentations Tuesday and Wednesday by author Deirdre McCloskey, behavioral economist Dan Ariely, and Vanderbilt theologian Joerg Rieger, among others.
The data Ashenfelter presented showed wide variation in real wages within the U.S.
“There are very high real wage rates along the West Coast, across the northern part of the U.S. into the eastern side, and then everything else is lower,” Ashenfelter said. “So there are actually two countries.”
Ashenfelter said that getting people to move can be a good anti-poverty strategy.
“Low wage workers could move from these poorer places to richer places,” he said, “and at least measured in Big Macs, they would be better off.”