#TBT: 'The Latte Index': A New Minimum Wage Measure
If you've been reading GradMoney for a while, you know how much I love coffee and using coffee as an economic metric. So I when I found this awesome economic piece on Business Insider recently, I just had to share! A professor at the University of Hong Kong has recently developed a new indicator that measures how many cups of coffee that the poorest people in a country can afford to buy, thereby providing an argument for raising the minimum wage among national governments.
Essentially, this new 'Latte Index' is used to measure how many cups of coffee minimum-wage earners in different cities can afford to buy with their hourly pay. Starbucks, which is widely noted as one of the more expensive cups of coffee yet one of the most widely consumed coffee chains on Earth, was used as the basis for determining this index. The index developer, noted that in Hong Kong, one person could buy 1.08 lattes with an hour of minimum wage pay. While this was among the lowest for developed cities, it was still far better than Lisbon (1.05 lattes), Athens (0.85 lattes), and Beijing (0.57 lattes). Sadder yet was Moscow at barely 1/10th of a latte for one hour of pay, and New Delhi at 0.31 lattes for one hour of minimum pay.
Most cities in Europe and the United States scored above 2.0 lattes, with the highest of all at 3.59 lattes in Zurich. These higher numbers ultimately note that the earning-power of minimum wage workers has not been drastically compromised.
The Economist ran a similar index back in 1986 called the Big Mac Index, which measured the price of Big Mac in 53 cities based on the minimum wage, and drew many of the same conclusions as the Latte Index at the University of Hong Kong. The end result? If the poorest citizens can't afford one of the most basic luxuries, a cup of coffee, for one hour of work, then something is clearly amiss in determining the minimum wage - either neglecting the cost of living, inflation or both. Below you can see how all the cities in the study compare with other coffees around the world.
I found it quite interesting that in the United States, minimum wage in Detroit will buy you more lattes than in Atlanta or even New York City.