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Often when a news story is reporting on economic conditions in poor countries, they'll talk about people earning meager wages like \$10/day or even only \$10/month (I think I heard that in a story about the immigration crisis a few days ago, referring to conditions in the South American country people were coming from). To an American like me, this sounds ridiculous, that's less than the price I pay for a sandwich at lunch. Homeless beggars almost certainly make more than this. It's two orders of magnitude less than the US poverty line (a bit more than $1k/month).

But surely living expenses must be significantly lower in these countries, or these people couldn't even survive long enough to be interviewed. Does it really make sense to compare earnings between such different countries? To understand these figures, we need to know how much it can buy in the local markets.

Are they reporting earnings like this just to garner sympathy, by making the wages seem like practically nothing? Or are they really earning practically nothing, and just barely scraping by somehow?

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Does it really make sense to compare earnings between such different countries?

No it doesn't as you mentioned, in different countries prices are different so 1 dollar does not have the same purchasing power in US than in let's say Maldives.

However, they are ways to adjust for this. The most common way is to use Purchasing Power Parity (PPP) conversion rates (e.g. see OECD data). If the article you read used this adjustment rate then you can compare the salaries to US. There are still some caveats, these conversion rates are based on averages, clearly a cup of coffee will be more expensive in NY or San Francisco than in some midwestern flyover town. Same holds for developing countries. Nonetheless, as long as you keep this in mind PPP conversion allows you to look at differences controlling for this issue.

Are they reporting earnings like this just to garner sympathy, by making the wages seem like practically nothing?

There is no need to assume bad faith. Most people are mathematically, statistically and economically illiterate. Typical journalist does not have degree in statistics or economics. Moreover, most journalist degrees do not require any statistics education, and generally it is widely acknowledged that most journalist fail miserably when reporting on some statistical results (e.g. see Nguyen & Lugo-Ocando, 2016). More generally, you just can't make inference from some raw data, whoever presents it.

If you see such reporting from an economic journalist, without justifying it or using something like PPP conversion rates you could assume bad faith, but typically it will be just likely due to lack of statistical and economic education not some ulterior motive.

Or are they really earning practically nothing, and just barely scraping by somehow?

Even when you account for PPP there are still places where people are just barely scraping by somehow. Although, most of the absolute poverty around the world was eradicated in the last 100 years, there is still considerable number of people who are living in extreme poverty (e.g. see the map in the Our World in Data).

Hence depending on the country you are reading about there might still be large number of people in extreme poverty. However, two things can be true at the same time, that there is an extreme poverty in some countries, and that news might misreport on such poverty due to lack of statistical literacy.

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  • $\begingroup$ It wasn't an article, it was just a poor person being interviewed by a reporter , saying something like "I only make $10/month". So there's no accompanying material to review. $\endgroup$
    – Barmar
    Feb 9 at 17:13
  • $\begingroup$ @Barmar well the answer above still applies $\endgroup$
    – 1muflon1
    Feb 9 at 17:14

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