flindophile and red (former will likely be returning to N. America to practice, latter will likely not, mind you
) are arguing which of two different measures is more meaningful -- gross income converted to a single currency vs. gross income also adjusted for cost of living. Both are meaningful. For example, for the $ that I am spending (since living) in Australia, the latter is chiefly important, while for what I save (invest) for future use, the former quickly becomes more important.
I'd also like to be able to start with net incomes (post-indemnity, post-taxes), but then there'd have to be some assumptions, such as field of specialty.
So as an example using a very simple model (these number are completely bogus mind you), let's say we're looking at GPs.
US doc:
(GP ave. salary - malpractice)*(1 - tax rate) = US 100k net
- US 40k (living expenses)
-----------------
US 60K surplus
Country Z doc:
(GP ave. salary - indemnity)*(1 - tax rate) = Z 100k = US 75k net
- US 20k (living expenses)
-----------------
US 55K surplus
Note that in a perfectly free and fluid international capitalist market, the cost-of-living fraction would be the same as the currency conversion fraction, but this is never the case in reality.
What I'd propose can then be compared is the surplus, the amount available for saving/investment. For sure,
where I later spend the saved money matters, but generally if one surplus is just a little more than the other, and I am a rational investor, then this initial difference would probably outweigh. For example, in the above, it is true that US 55k would go a lot further in Australia than US 60K would in US, but after 10+ years investment, that advantage would diminish significantly.
Notice that the more frugal I am (the lower my acceptable standard of living), the better it'd be to practice in US, and the converse. But keep in mind the simplicity of the model, which doesn't account for items whose costs should not be standardized by cost of living adjustments (e.g., a second or luxury car), and that therefore 'living expenses' for country Z will not remain at 1/2 that for US, as spending increases.
-pitman
