How this calculator works
Purchasing power parity asks what an amount of money actually buys where you live. A PPP conversion factor is the number of local currency units that buy the same basket of goods that one international dollar buys in the United States, so dividing a salary by its home-country factor turns it into international dollars and multiplying by another country's factor restates it in that country's prices. The result shows what salary would give a comparable standard of living in the target country. It is not the amount a bank would exchange: the market rate is the price of the currency, while the PPP factor is a price-level comparison. Converting at the market rate and at the PPP rate gives two different numbers, and the gap between them is the basis of the currency-valuation idea behind PPP.
Formula
Adjusted salary = salary × (PPP target / PPP source). The PPP exchange rate is PPP target / PPP source. The market-rate salary is salary × market exchange rate, and the gap is adjusted salary / market-rate salary - 1. To recover the source salary, divide the adjusted salary by the PPP ratio.
Worked example
A salary of 60,000 source units with PPP factors of 1.2 and 9.6 becomes 480,000 target units, a PPP exchange rate of 8. With a market rate of 7.2, the market-rate salary is 432,000, so the PPP value is 11.11% higher.
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Frequently asked questions
Where do I get PPP conversion factors?
The World Bank and OECD publish them annually. Look for the PPP conversion factor for household consumption or for GDP, stated as local currency units per international dollar, and use the same vintage for both countries.
Why is my adjusted salary so different from the exchanged amount?
The PPP factor reflects local prices, which are often lower in middle-income economies. The market rate reflects currencies and capital flows. A higher PPP value than the market-rate value means the target country is cheaper for the same basket, which PPP language describes as an undervalued currency.
Is this a cost-of-living index?
No. PPP is a national average built from a comparable basket. Your own housing, schooling and travel costs can differ sharply, and city-level differences are not captured.