2026-02-25 · NextMigrate Team
The Purchasing Power Trap: Why a "Good Salary" at Home Buys Less Every Year
You earn a good salary. Your parents are proud. Your friends think you have made it. You are in the top 10% of earners in your country. And yet, every year, the list of things you cannot afford grows longer. The international flight that used to cost a month's salary now costs three. The laptop that was expensive but reachable now feels like a luxury purchase. The overseas master's degree you were planning has tripled in local currency cost. Your savings, which you thought were growing, are actually shrinking in terms of what they can buy.
Welcome to the purchasing power trap. It is the economic phenomenon that silently impoverishes millions of skilled professionals across the developing world, and most people do not fully understand it until they run the numbers.
What Is Purchasing Power, Really?
Purchasing power is not your salary number. It is what your salary number can actually buy. And these two things are increasingly disconnected in countries with weakening currencies and persistent inflation.
Here is the simplest way to think about it: if you earn 1,000,000 naira per month in Lagos and a loaf of bread costs 5,000 naira, your purchasing power for bread is 200 loaves. If next year your salary stays at 1,000,000 but bread now costs 7,500, your purchasing power has dropped to 133 loaves — a 33% decline, even though your bank statement looks exactly the same.
Now multiply that across every category of spending — food, housing, electronics, education, healthcare, transportation, fuel — and you start to see the trap.
The Illusion of the "Top 10%" Salary
Let us look at what it means to earn a top-10% salary in several developing countries, and what that salary actually buys compared to a median salary in destination countries.
Top-10% Salaries in Source Countries (Annual, 2026)
| Country | Top-10% Salary (Local) | Top-10% Salary (USD) | USD per Month |
|---|---|---|---|
| Nigeria | NGN 15,000,000 | $9,700 | $808 |
| India | INR 2,000,000 | $23,500 | $1,958 |
| Philippines | PHP 1,200,000 | $21,100 | $1,758 |
| Egypt | EGP 360,000 | $7,200 | $600 |
| Pakistan | PKR 3,000,000 | $10,700 | $892 |
Median Salaries in Destination Countries (Annual, 2026)
| Country | Median Salary (Local) | Median Salary (USD) | USD per Month |
|---|---|---|---|
| Canada | CAD 62,000 | $44,900 | $3,742 |
| Australia | AUD 72,000 | $45,500 | $3,792 |
| United Kingdom | GBP 35,000 | $44,100 | $3,675 |
| Germany | EUR 45,000 | $48,600 | $4,050 |
| UAE | AED 180,000 | $49,000 | $4,083 |
| New Zealand | NZD 65,000 | $38,400 | $3,200 |
Here is the critical comparison. A top-10% earner in Nigeria — someone in the elite of the Nigerian workforce — earns less in dollar terms than a below-median worker in any of these destination countries. An Egyptian professional in the top 10% earns roughly $600 per month, which is less than a part-time minimum wage worker in Canada.
But wait, people say. The cost of living is lower at home. That is true for some categories. Let us see if it is true enough to matter.
The Big Mac Index, Except It Is Your Whole Life
The Big Mac Index is a famous informal measure of purchasing power parity — it compares the price of a McDonald's Big Mac across countries to estimate whether currencies are overvalued or undervalued. It is clever but limited. You do not eat Big Macs for every expense in your life.
Let us build a more comprehensive picture. We will compare the cost of a standardized basket of goods and services across cities, then measure how many hours a mid-level professional must work to afford each item.
Hours of Work Required to Afford Common Items (Mid-Level Professional)
| Item | Lagos | Mumbai | Manila | Toronto | Sydney | Dubai |
|---|---|---|---|---|---|---|
| iPhone 16 Pro ($1,200) | 195 hrs | 75 hrs | 89 hrs | 25 hrs | 22 hrs | 18 hrs |
| Year of private school (1 child) | 620 hrs | 310 hrs | 380 hrs | 200 hrs | 180 hrs | 250 hrs |
| Economy flight to London | 280 hrs | 95 hrs | 110 hrs | 18 hrs | 28 hrs | 12 hrs |
| New Toyota Corolla | 4,800 hrs | 2,400 hrs | 2,900 hrs | 850 hrs | 780 hrs | 600 hrs |
| 1-year gym membership | 48 hrs | 35 hrs | 42 hrs | 18 hrs | 16 hrs | 14 hrs |
| Monthly internet (50 Mbps) | 12 hrs | 6 hrs | 8 hrs | 3 hrs | 2.5 hrs | 2 hrs |
| Laptop (MacBook Air) | 260 hrs | 100 hrs | 120 hrs | 35 hrs | 30 hrs | 24 hrs |
| Annual health insurance (family) | 390 hrs | 180 hrs | 220 hrs | 0 hrs (public) | 0 hrs (Medicare) | 65 hrs |
A professional in Lagos must work 195 hours — nearly five full work weeks — to buy an iPhone that a Dubai professional can afford with 18 hours of work, or roughly two days. A car that takes 600 hours in Dubai takes 4,800 hours in Lagos. That is a 8x difference, from a salary that is supposedly "good."
This is the purchasing power trap in action. Your salary looks adequate on paper, but the purchasing power it delivers shrinks every time you need to buy anything that is priced against international markets.
The Two Economies Problem
Here is something that most cost-of-living comparisons miss entirely. In many developing countries, there are effectively two economies running in parallel:
The Local Economy: Locally-produced goods and services — street food, domestic produce, local transportation, rent in non-premium areas. These are genuinely cheaper than their equivalents in developed countries.
The Global Economy: Anything imported, anything priced in or pegged to USD/EUR/GBP — electronics, vehicles, international education, medical equipment, flights, online subscriptions, fuel, many pharmaceuticals. These are priced at or above global market rates, but you are buying them with a currency worth a fraction of the dollar.
The problem for professionals is that as your career advances and your lifestyle expectations grow, more and more of your spending shifts from the local economy to the global economy. You want a reliable car (globally priced). You want quality education for your children (globally priced or internationally benchmarked). You want good healthcare (dependent on imported equipment and drugs). You want to travel. You want technology.
Percentage of Monthly Spending in the "Global Economy"
| Income Percentile | Lagos | Mumbai | Manila |
|---|---|---|---|
| Bottom 50% | 15-20% | 10-15% | 15-20% |
| 50th-75th percentile | 30-40% | 25-35% | 30-40% |
| 75th-90th percentile | 45-55% | 40-50% | 40-50% |
| Top 10% | 55-70% | 50-65% | 50-60% |
The more successful you become in a developing economy, the more of your spending is exposed to global pricing — and the more the purchasing power trap bites. This is the cruel irony: upward mobility in your career leads to downward mobility in your purchasing power relative to the rest of the world.
The Inflation Multiplier
If purchasing power erosion only happened through exchange rate movements, it would be bad enough. But it is compounded by domestic inflation that consistently outpaces salary growth.
Annual Inflation vs. Salary Growth (2020-2026 Average)
| Country | Average Annual Inflation | Average Annual Salary Growth | Real Salary Growth |
|---|---|---|---|
| Nigeria | 22.5% | 12% | -10.5% |
| India | 6.2% | 9% | +2.8% |
| Philippines | 5.8% | 5% | -0.8% |
| Egypt | 28.3% | 10% | -18.3% |
| Pakistan | 19.7% | 8% | -11.7% |
| Canada | 3.8% | 4.5% | +0.7% |
| Australia | 4.1% | 4.2% | +0.1% |
| UK | 4.5% | 5.0% | +0.5% |
| Germany | 3.9% | 4.0% | +0.1% |
| UAE | 2.8% | 4.5% | +1.7% |
The numbers are devastating. Nigerian professionals experience a real salary decline of 10.5% per year. Egyptian professionals lose 18.3% in real terms annually. Even the Philippines, which has relatively moderate inflation, sees negative real salary growth.
Meanwhile, professionals in destination countries experience slight positive real salary growth. Their purchasing power is stable or slowly increasing. The gap compounds year after year.
What Happens to a "Good Salary" Over 5 Years
Let us track what happens to a purchasing-power-adjusted salary of $1,000/month over five years in different countries, accounting for inflation and exchange rate movements.
| Year | Nigeria | Egypt | Pakistan | Canada | Australia | UAE |
|---|---|---|---|---|---|---|
| Year 0 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 |
| Year 1 | $762 | $640 | $795 | $1,007 | $1,001 | $1,017 |
| Year 2 | $581 | $410 | $632 | $1,014 | $1,002 | $1,034 |
| Year 3 | $443 | $262 | $503 | $1,021 | $1,003 | $1,052 |
| Year 4 | $337 | $168 | $400 | $1,028 | $1,004 | $1,070 |
| Year 5 | $257 | $107 | $318 | $1,036 | $1,005 | $1,088 |
After five years, a Nigerian professional's purchasing power has fallen to roughly 26% of where it started. An Egyptian professional retains just 11% of their original purchasing power. Meanwhile, professionals in Canada, Australia, and the UAE see slight gains.
This is not a theoretical exercise. This is what is happening right now to tens of millions of skilled professionals. Every month, they go to work, earn the same or even higher nominal salary, and can afford less.
The Rent Test: A Simple Way to See the Trap
Here is a simple test anyone can do. Look at what percentage of a mid-level salary is consumed by rent for a 2-bedroom apartment in a safe, middle-class neighborhood.
Rent as Percentage of Net Monthly Salary (2-Bed Apartment, Good Area)
| City | Monthly Net Salary (USD) | 2-Bed Rent (USD) | Rent as % of Salary |
|---|---|---|---|
| Lagos (Lekki/VI area) | $752 | $320 | 42.6% |
| Mumbai (Andheri/Powai) | $1,400 | $580 | 41.4% |
| Manila (Makati/BGC) | $1,250 | $480 | 38.4% |
| Cairo (New Cairo/Maadi) | $500 | $280 | 56.0% |
| Karachi (DHA/Clifton) | $650 | $300 | 46.2% |
| Toronto | $3,875 | $2,100 | 54.2% |
| Sydney | $4,392 | $2,200 | 50.1% |
| Dubai | $5,992 | $1,800 | 30.0% |
| London | $3,800 | $2,000 | 52.6% |
| Berlin | $3,500 | $1,100 | 31.4% |
| Auckland | $2,850 | $1,400 | 49.1% |
Interesting. Toronto, Sydney, and London have high rent-to-income ratios too. But there is a crucial difference: after paying rent in Toronto, the professional still has $1,775 remaining for everything else. After paying rent in Lagos, the professional has $432 remaining. After rent in Cairo, just $220.
The absolute remainder after rent tells the real story. And that remainder is what determines whether you can save, invest, build wealth, and eventually achieve financial freedom.
The "Things I Used to Afford" Effect
One of the most psychologically painful aspects of the purchasing power trap is the gradual loss of things you used to be able to afford. This creates a ratchet effect where your lifestyle expectations, formed during a period of higher purchasing power, constantly clash with your declining ability to maintain them.
What Professionals Report Losing Access To
Nigerian professionals (earning NGN 15M+):
- Annual international vacation (was affordable in 2018, now costs 3-4x in naira terms)
- New car every 5-7 years (used to cost 6-8 months' salary, now costs 18-24 months')
- Children's international school education (fees have tripled in naira while quality of alternatives has declined)
- Regular imported goods (basic items like olive oil, cheese, toiletries now feel like luxury purchases)
Indian professionals (earning INR 20L+):
- International holidays have become significantly more expensive
- Premium housing in cities like Mumbai or Bangalore has outpaced salary growth
- Quality healthcare costs have risen faster than inflation
- International education for children has become increasingly out of reach
Filipino professionals (earning PHP 1.2M+):
- Imported goods pricing has become painful
- Private hospital costs have risen sharply
- Savings targets for education abroad seem to move further away each year
Egyptian professionals (earning EGP 360K+):
- Almost everything has become dramatically more expensive since the 2022-2024 devaluation cycles
- Car ownership has moved from standard to aspirational
- Previously routine purchases now require careful budgeting
The Comparison That Changes Perspectives
Here is the comparison that tends to shift thinking. We will take a top-10% professional from each source country and compare their purchasing power to a specific percentile worker in each destination country.
Where Does a Top-10% Source Country Salary Rank in Destination Countries?
| Source Country (Top 10%) | Equivalent Percentile in Canada | Equivalent Percentile in Australia | Equivalent Percentile in UK |
|---|---|---|---|
| Nigeria ($9,700) | Below minimum wage | Below minimum wage | Below minimum wage |
| India ($23,500) | Bottom 15% | Bottom 15% | Bottom 20% |
| Philippines ($21,100) | Bottom 15% | Bottom 15% | Bottom 20% |
| Egypt ($7,200) | Below minimum wage | Below minimum wage | Below minimum wage |
| Pakistan ($10,700) | Below minimum wage | Below minimum wage | Below minimum wage |
A top-10% Nigerian professional earns less than the minimum wage in Canada, Australia, or the UK. Not less than the median. Less than the legal minimum. This is what the purchasing power trap looks like when you zoom out.
Why "Just Get a Remote Job" Is Not the Full Answer
Many professionals in developing countries have pursued remote work for international companies as a way to escape the purchasing power trap. And it helps — earning in USD or EUR while spending in a local currency can dramatically improve your financial position.
But it is not a complete solution for several reasons:
-
Currency depreciation continues: If you earn $3,000/month remotely but keep your savings in naira or rupees, those savings still lose value every year.
-
Tax complexity: Many countries are cracking down on remote workers earning foreign income. Nigeria, India, and others are tightening enforcement.
-
Career ceiling: Many remote roles for developers in developing countries pay 40-60% of what the same role pays locally in the hiring country. You are better off than local-salary peers, but you are still earning less than you would in-person.
-
Access to benefits: Remote workers rarely get the full benefits package — pension contributions, health insurance, unemployment insurance, parental leave — that on-site workers in developed countries receive.
-
Instability: Remote roles are often the first to be cut during downturns, and you have fewer legal protections than in-country workers.
Remote work is a bridge. For many, it is a bridge to accumulating enough savings and experience to make a permanent move.
The Compounding Tragedy
The purchasing power trap does not just affect current spending. It affects wealth accumulation over a lifetime. Consider two professionals who start their careers at the same time:
Professional A: Works in Lagos for 30 years, saves diligently, earns local returns. Professional B: Works in Lagos for 5 years, moves to Canada, works for 25 years, saves in CAD.
Lifetime Wealth Accumulation Comparison
| Metric | Professional A (Lagos, 30 yrs) | Professional B (Lagos 5yrs + Canada 25yrs) |
|---|---|---|
| Total career earnings (USD) | ~$320,000 | ~$1,650,000 |
| Total estimated savings (USD) | ~$15,000 | ~$380,000 |
| Pension/retirement fund | Minimal | $250,000+ (CPP + RRSP) |
| Property equity | $30,000 (if purchased early) | $350,000+ |
| Net worth at retirement | ~$45,000 | ~$980,000 |
Same person. Same intelligence. Same work ethic. Same career length. The difference in retirement net worth is roughly 20x, driven almost entirely by where the work was performed and what currency the earnings were denominated in.
The Numbers Do Not Judge — They Just Report
Nothing in this article is a judgment about any country or the people who live there. Nigerian professionals are among the most resilient and entrepreneurial in the world. Indian engineers have built companies that shape global technology. Filipino nurses and healthcare workers are the backbone of health systems in dozens of countries. Egyptian and Pakistani professionals demonstrate extraordinary skill and determination.
The purchasing power trap is not about people. It is about currencies, monetary policy, infrastructure costs, and structural economics. These are systemic forces that no individual can outwork.
Understanding the trap is the first step. What you do with that understanding is a personal decision that depends on your circumstances, your family, your values, and your goals. But you deserve to make that decision with clear numbers, not comfortable illusions.
The data is clear. A "good salary" in a country with a depreciating currency and high inflation buys less every year, no matter how hard you work. That is not pessimism. It is arithmetic.
