Ever think of the above question? How much should you earn in Malaysia in order to live like an American? You might ask "why do we want to benchmark against American?" and "why not some other?" Well, it is just a reference point, since we know that Americans consume the most in terms of resources and money in the world.
We will use GDP per capita as our source of income here. According to Wikipedia,
"GDP per capita is often used as an indicator of standard of living in an economy, the rationale being that all citizens would benefit from their country's increased economic production."
Let's first look at some figures extracted for Malaysia using GDP per capita (2007, the latest year where official release available):
GDP per capita, current price: RM23,913.42
GDP based on PPP for Malaysia: I$13,385.13
GDP based on PPP for America: I$45,725.35
We will take the RM figure above as take-home annual income, net after all the compulsory deductions such as EPF, tax and SOCSO.
The ratio of GDP based on PPP for America to Malaysia is 3.42 based on the last two figures above. That means a Malaysian can live like an American if his income is 3.42x of the GDP per capita (current price). Hence, a Malaysian who makes a net income of RM81,691.34 per annum will be able to enjoy his life in Malaysia, like what an American does in USA. That translates to RM102,114.17 gross income.
Assumptions that we made here are that we will spend the 2.42x (3.42x - 1x) income on the same products/services as used in the PPP calculation.
