Big Mac Index Flaw Exposes Hidden Costs Behind Strong Swiss Franc
The Big Mac Index, a widely used benchmark for currency strength, may be overstating the Swiss franc's value. For 40 years, The Economist has published this index, which compares the price of a Big Mac in various countries.
The most expensive Big Mac is found in Switzerland, costing US$ 9.04 (CHF 7.30), while the cheapest one is in Indonesia at US$ 2.38. However, the high price in Switzerland may not be solely due to the exchange rate.
According to The Economist, many components of the Big Mac are not freely traded, such as rent, labour, and electricity. These non-tradable elements account for 64% of the cost of a burger, with labour alone making up 46% of the expense.
A Swiss store operator pays roughly 80% more in wages compared to the US, where the average wage is US$ 15 per hour. Additionally, rent costs on average 40-70% more in Switzerland than in the US.