Can you earn more in another country? Engineering Salaries Worldwide.

Quite often in conversations with people from other countries we start comparing salary levels. Though the gross income might be significatnly different, the purchasing power will likely stay at approximatelly the same level, which is particularlty evident on the real estate market. 

Is the grass really "greener" on the other side?

Thanks to #LinkedIn, - I talked to many people in my industry working in other countries and collected the salary data (also with the help of payscale.com)  specifically for my job "#BIM construction engineer" and compared the parity salary (#PPP from Numbeo.com) to the salary in my hometown - St. Petersburg (Russia).

The map shows the difference in gross salaries, with the same net salary (PPP to Saint-Petersburg (Russia)) by country, in percent.

How can countries be compared by cost of living now?

The constant increase in prices for goods and services in the world, which is associated with lower interest rates around the world since 1980, today does not allow a person who is planning to move to another country to get an idea of the cost of living and the cost of services in a foreign country.

The graph shows the median interest rates in the world over the past 200 years, which until 1980 were around the world at a balanced and reasonable level: about 4-6%

Lowering interest rates and decoupling the dollar from the gold standard in 1971 led the world to inflation, which became a 21st century phenomenon.

The same phenomenon is described by German analysts at Deutsche Bank.

As a result of these events, in countries - are established:

F1. Different interest rates of central banks 

F1 -> F2. Heterogeneous inflation 

F1& F2 -> F3. Different real estate prices

F1 & F2 & F3 -> F4. Unequal price levels


F1 & F2 & F3 & F4 -> Unequal cost of living

How can we now compare the “Cost of Living” in different countries of the world?

To assess life in another country, we can use the concept - Purchasing Power Parity (PPP)

About Purchasing Power Parity (PPP)

In my research - I have taken the index of PPP Cost of Living which is based on best guess of average expenses in a given city for a four-person family (Open Data and Methodology from the Numbeo.com). The data is relevant if you are invest and spend money in the same city where the money was earned.

PPP is an economic theory that compares different countries' currencies through a "basket of goods" approach.

Calculating indices PPP

For example - Big Mac (only) in PPP monthly net salary to Saint Petersburg:

Big Mac Price: 
P1. Berlin-4,70$ / New York-5,70$ / Saint Petersburg-2,10$

Big Mac PPP (Purchasing Power Parity) to Saint Petersburg (x/2,10):
PPP1=P1/2,10$. Berlin-2,2 / New York-2,70 / Saint Petersburg-1

Monthly Net pay = after Tax:
P3. Berlin-2085$ / New York-3900$ / Saint Petersburg-1150$



PPP (Purchasing Power Parity - Big Mac) monthly net salary to Saint Petersburg:
PPP2=P3/PP1. Berlin-940$ / New York-1470$ / Saint Petersburg-1150$

How many burgers (Jan 2012) you get for $50 (In Russia-19 burgers, in USA-11 burgers )

Read more: about the Big Mac Index

The same calculations can be made for other goods: from jeans and eggs to the cost of Tayota cars and utility services. In this article, the salary faculty calculates over 50 different positions. These weights are as follows:

To do this, thousands of people fill out data on the cost of goods and services in their city on the Numbeo.com website (only data from the last 12 months are used, after which these “costs” are mathematically averaged). Additionally, volunteers: manually collect data from established open sources and these prices of goods and services are supplemented by city twice a year.

An example of comparing the cost of living Munich (Germany) vs St. Petersburg (Russia)

And comparing the cost of living San Francisco (US) vs Mumbai (India)

Why BIM (engineers and coordinators)

The share of real estate under construction using BIM is 80% of the total number of real estate under construction. In Germany, the share of the construction accounting for about 5% of GDP (In the world: from 3% to 12%). BIM engineers and coordinators are former construction project engineers. Soon, all the engineers working in the planning area will work with BIM technologies one way or another.

Some cities appear in the table twice - because there was a lot of data on these cities, and two similar positions were chosen. The salary ratio in each country: BIM Engineer/BIM Coordinator/BIM Manager: 100%/125%/150%. Soon, all the engineers working in planning will somehow work with BIM technologies and all engineers can apply the BIM prefix to their position.

These calculations are also suitable for engineers, working in other fields.

Conclusion

1. Depending on the country the gross income varies a lot, while the net income translated into the purchasing power is nearly the same.

For instance, the gross income for San-Francisco is 8 times as higher as for Kiev, while the net #income will be only twice as higher.

2. The lower your annual income, the more square meters you can buy within 10 years in your country.

For the earned money (assuming half of the #salary during 10 years is saved) one could afford buy 46 m2 of real estate in Kiev and only 31 m2 in San Francisco.

In the countries listed here, the quality of medical and educational services will be commensurate with your monthly income. Countries that have been considered in the calculations are approximately equal in security level, quality of education and health services. Each of these aspects has its drawbacks and advantages in each of these countries.

All these mentioned aspects are difficult to analyze, in contrast to the prices of goods and services.

Аre high salaries just an illusion?

The following visualisation show how very high global income inequality still is: The cut-off to the richest 10% of the world in 2013 was 14,500 int-$; the cut-off for the poorest 10% was 480 int-$.

On the last chart, you can compare - what annual gross salary in the world corresponds to an annual gross salary in St. Petersburg of $ 15,800 ($ 1,150 net per month)

Even though this is a subjective opinion I do think it could be relevant. 

I'm looking forward to your comments and to new contacts: https://www.dhirubhai.net/in/boikoartem/

Link to the table (Google Spreadsheet)

Where did the data come from?

• The discussion of salaries was conducted in the group "BIM Russian expats" (thanks to those who participated): https://www.dhirubhai.net/groups/8834618/
• Research and compare average salaries -"Gross Income – yearly": https://www.payscale.com/research  
• Income Tax Calculator - "Total TAX": https://neuvoo.com/tax-calculator/  
• Property Prices - "Price per m2 to Buy": https://www.numbeo.com/property-investment/  
• Cost of Living Comparison -  "Cost of Living PPP (Purchasing Power Parity) to Saint Petersburg (Russia)": https://www.numbeo.com/cost-of-living/comparison.jsp  

All values - with an error of ± 10%

Calculating indices PPP

Cost of Living Index is built based on best guess of average expenses in a given city for a four-person family. Weights are subject to change over time. But since the methodology is not hidden, as the moment of writing these weights are as follows:

Local_Puchasing_Power_Index = 
(Average_Disposable_Salary(This_City) / BasketConsumerPlusRent(This_City)) / 
(Average_Disposable_Salary(New_York) / BasketConsumerPlusRent(New_York))
      
BasketConsumerPlusRent(City) = sum_of (Price_in_the_city * 
(cost_of_living_factor + rent_factor))

#recruiting #salary #hr #gehalt #netto #brutto #gehalt #career #job #salarysurvey #salarycheck #usa #russia #ukraine #canada #germany #norway #turke

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