September 21, 2009 -- The Big Mac index, which measures the price of a standard hamburger around the world, is legendary for its interpretation of consumer purchasing power. But there's a new economic scale in town: The Billy, tied to Ikea's most popular shelving unit.
Journalist Pam Woodall wasn't particularly serious when she started the now-legendary "Big Mac" index for business magazine The Economist in 1986. But in decades since, the index -- which measures the prices of the archetypal McDonald's burgers in different countries -- has become one of the best known ways to compare purchasing power in the world. The fast food chain can be found almost everywhere, as can their flagship snack, the Big Mac.
The Big Mac index makes Hong Kong one of the cheapest cities in the world -- there a Big Mac costs $1.72. And the scale indicates that the Swiss city of Zurich must be one of the most expensive. Leading everyone, though, is Oslo, in Norway. There a Big Mac costs a staggering $6.15. But now a new index, developed by Bloomberg reporter Kristian Siedenburg, is coming up with some interesting comparisons.
Ikea The McDonald's Of The Furniture Industry
Perhaps motivated by the fact that Ikea has been accused of being the McDonald's of the furniture industry, Siedenburg decided to compare the prices of a popular, standard shelf made by Ikea -- known as the Billy shelf -- in 38 countries around the world. And where the Big Mac is expensive, the Billy shelf can be cheap.
The Billy shelf is cheapest in Dubai, in the United Arab Emirates, selling for the equivalent of $47.64. In Israel, on the other hand, the shelf is the most expensive, costing $103.48. The average price around the world is $60.09 and Norway comes in around the middle; there the Billy costs $60.15. Switzerland lies lower on the scale and Britain is sensationally cheap, with the Billy costing just $49.34 there.
As yet, nobody has looked into why the prices vary nor the significance of the differences. But the idea has already caught on, particularly when used in conjunction with the Big Mac index. For example, the world now knows that it is much more expensive for anyone living in Hong Kong to find a good place to put their books. The Billy shelf costs $64.38 there, the equivalent of almost 40 Chinese Big Macs.
Bookshelves Not The Best Economic Indicator
The Billy shelf scale has its weaknesses. Economists will complain that the bookshelf isn't a suitable consumer good by which to measure general well being. Ikea's prices for the shelf stay the same for a year and too few of them are bought, both factors which make the Billy a less reliable tool for economic measurement.
This isn't the first time an agency has used Ikea to make a statement about the financial soundness of various currencies in various countries. In 2004, the European Consumer Centre in Düsseldorf looked at 75 Ikea products across 17 European countries. Back then, the survey found that prices differed substantially across Europe, with sofas in Poland being far cheaper than sofas in Germany, for instance. The survey was supposed to give price-conscious EU consumers information but it also indicated how unified -- or not -- the euro zone was with eastern countries, like Poland and the Czech Republic.