Key takeaways
- Compare take-home pay after tax, not gross salary: tax and payroll deductions differ a lot by country
- The exchange rate tells you what your pay is worth in Canadian dollars today
- Purchasing power parity (PPP) tells you what your pay buys compared with Canada
- Big cities cost more than the national average, mostly because of rent
- Enter current rates from the Bank of Canada and the World Bank for an accurate answer
Why a bigger salary may not mean more money
Three things change when you compare pay across countries:
- Tax and deductions. Income tax, social security and health costs differ. The UAE has no personal income tax. In the US, health insurance and retirement savings often come out of your pay. Always compare take-home pay.
- The exchange rate. This is what your pay is worth if you send it to Canada today.
- Prices. Rent, food and transport cost different amounts. Purchasing power parity (PPP) adjusts for this.
What is purchasing power parity (PPP)?
PPP is a rate that makes the same basket of goods and services cost the same in two countries. The World Bank publishes a PPP conversion factor for each country: how many units of local currency buy what one US dollar buys in the United States (indicator PA.NUS.PPP, "LCU per international $").
To compare Canada with a destination, divide Canada’s factor by the destination’s factor. That gives the "PPP rate": how many Canadian dollars buy what one unit of the local currency buys at home. Multiply the foreign take-home pay by this rate to get its Canadian buying power.
Get the factors from the World Bank PPP data and the daily exchange rate from the Bank of Canada. Use the latest year that has values for both countries, and write it down.
How the calculator works
- At the market rate: foreign take-home × exchange rate = value in Canadian dollars today.
- In buying power: foreign take-home × (PPP Canada ÷ PPP destination) = what it buys, in Canadian dollars at Canadian prices.
- It then compares the result with your take-home in Canada.
If you leave the PPP fields empty, you get the market-rate comparison only.
Worked example (made-up numbers)
These numbers only show the math. They are not current rates. Say you take home $5,000 a month in Canada and an offer abroad pays 5,500 a month in local currency. If the exchange rate is 1.40 CAD per unit, the offer is worth $7,700 at the market rate. If the PPP factors are 1.20 for Canada and 1.00 for the destination, the PPP rate is 1.20, so the offer buys what $6,600 buys in Canada: 32% more than now, not 54%.
What PPP does not capture
- City costs: PPP is a national average. Rent in New York, London, Sydney or Dubai is far above the average.
- Benefits: health insurance, paid leave, pensions and school fees can be worth a lot.
- Taxes in both countries: in the year you move, you may file in both. See foreign tax credits.
- Visa limits: some visas tie you to one employer.
For the full cost of the move itself, use the move-abroad budget calculator. Moving to the US? Read moving to the US from Canada. To find your Canadian take-home pay, use the net pay calculator.
This tool is for comparison only. It is not tax or financial advice.