PPP Adjusted Income

Reader Empiricman sends a link to this story:

Interestingly enough, this one change in statistical methodology has very different effects on the middle classes in different OECD countries.

While the United States saw a decrease in average income of 10 percent—the biggest decline of all 30 member states—the income of the British middle class rose by 32 percent. Similarly, France’s, Germany’s, and Japan’s average income increased by 28 percent, 20 percent, and 17 percent, respectively.

A small consolation for US middle-class workers would be that the incomes of its nearby Canadian brethren also declined by 5 percent.

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The result of all this is that today, the richest middle class in the OECD is found in Britain. In 2006, an average single British middle-class worker earning the average wage, net of taxes, and in purchasing power parity (PPP) terms, had an income nearly 50 percent higher than his US counterpart—$35,000 compared to $25,000.

As a matter of fact, US middle-class workers found themselves outside the top 10 in the OECD.

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And it doesn’t even help to marry. A British middle-class family with two children and two incomes of 100 percent and 67 percent of average wages still earns over 40 percent more (in PPP terms, net of taxes) than their US counterparts ($65,000 compared to $45,500). In fact, US families in this category rank only 15th in the OECD.

It may well be outside the realm of sanity to an American visiting London that a small lunch salad at Wimbledon is £8—or more than $16. But the truth is that it is probably not outside the purchasing power of the middle classes—or at least not the British one.

Empiricman notes this is an adjustment to PPP. The OECD site is moving like molasses right now, so I can’t find the original report. I imagine that the drop in the value of the dollar must affect PPP. After all, some things that are bought have to come from abroad.