People often talk about how expensive it is to visit Japan, but I wonder how expensive is it to actually live there.
If you live in the US and take a vacation in Japan, you have to exchange your dollars for Japanese yen at the current exchange rate. The price of goods in Japan is such that you end up spending far more dollars than you would for equivalent goods in the US.
If you live and work in Japan, you are (probably) paid in Japanese yen. Assuming you are working a job in Japan comparable to what you would have in the US, how does the price of goods compare to your salary? Would a week’s worth of groceries cost me the same percentage of my annual salary in Japan as it would in the US?
Similarly, news articles often mention the low wages paid in third-world countries. The latest was a headline about Mexicans in the quake-stricken area near Acapulco who are earning just $8 a day. Presumably they are paid in pesos, not dollars, and then of course the question is how much do things like groceries cost in that area. For example, if a small bag of flour costs me $1 here in the US, and the exchange rate is 13 pesos per dollar, does the same quantity of flour sell for 13 pesos near Acapulco?
It’s called Purchase Power Parity (can’t link to wiki just now) and is how most income comparisons are done. Economist might be dumb sometimes, but the difference in price levels across countries has been noticed ;).
Also, a slightly different point from exchange rates: some of the most expensive cities to visit are in poor countries.
For example Luanda in Angola. Although still a fairly poor country, there are plenty of people doing well out of oil and diamonds. Such people desire western goods, especially the foreign workers, which are expensively imported. Plus it means a lot of competition for any half-decent property.
So if you’re visiting there and don’t fancy staying in a slum, it’s very costly indeed.
The Economist publishes what it calls the “Big Mac Index”, a practical example of Purchasing Power Parity. Currency comparisons, to go
Basically, McDonalds attempts to buy local, and sell for a fixed profit; so the price of a Big Mac is a good indicator of how much the cost inputs - local agricultural products and a basic wage - compare around the globe. A Big Mac in China, for example, I found to be about half the North American price, thus proving the contention that the Chinese currency is artificially low. This is about the closest formal answer to the OP you might find.
This won’t necessarily account for “standard of living” levels - groceries might cost relatively more in percent of wages, but maybe as a result in some countries they eat less meat, don’t own two cars, etc.
(Another point I saw in a travel book - here fast-food places like McDonalds may be considered the “cheap” end of the dining-out choices, whereas in some less affluent countries the environment and the meal is more upscale - their equivalent of TGI Fridays’s or Outback, when the competition is hole-in-the-wall falafel or noodle bars)
If you’re specifically considering Japan, know that some food price indexes (such as this one from the BBC World Service) are based on the price of Western staples, rather than what a native would usually eat. Japanese groceries are expensive if you want to buy steak, potatoes, and milk, but considerably more reasonable if you buy fish, rice, and tea. (The index example I’ve provided seems somewhat adapted to the local culture, but I’ve seen worse ones that I just can’t find at the moment.)
I’m from the US and have traveled in Canada. Food prices were noticeably higher than what I would pay in the US. I did notice that home prices were a third or less of what an equivalent home would go for in my hometown, but that is probably more based on where in the country you are than any specific differences between the US and Canada - I could probably find equivalent US home prices in central West Virginia.
One specific example you might find interesting is that much computer software is much, much cheaper in Russia and some former Soviet nations than in other places. Games intended for sale there have registration keys that only work through a Russian IP address.
The reason being that wages are so low and piracy runs so rampant that the publishers would rather sell a $50US game for the equivalent of $12US in Russia than to just have it pirated. Of course, now you get people trying to sell cheap Russia CD keys to Western customers but that’s a different topic.
In countries where labor is inexpensive, prices will depend on what portion of the cost is labor. A trip to the barber shop will be very cheap, while the electric clippers used by the barber might be imported and cost more than they would in a richer country. Restaurants have a large labor component, so will often be cheaper.
A few decades ago, tariffs had a huge effect on the prices of many imported goods in Thailand, but by now I think tariffs have dropped all over the world.
As others have mentioned, Purchasing Power Parity is the economic principle you’re contemplating.
It’s worth noting that many of the “most expensive cities” lists you see are based on the cost of living for expat employees, and basically give you an idea of how much it would cost to replicate an American lifestyle in a foreign city. In other words, it assumes you will want your food/clothing/housing/entertainment to be exactly what you left behind, in which case of course you will pay a premium. But if you are willing to “go local” and accept a certain level of change, it may be significantly cheaper.
Yep^ lets take grocery shopping for example, do you have to have Coca Cola and Minute Maid juice which will be imported and usually more than twice as expensive as they are in the USA or are you willing to buy local brands which are much cheaper?
Lets take eating out at USA chains, they are usually dizzingly expensive and locals eat there because its exotic and they can finally try that junk food they have seen in all the commercials. For instance in Trinidad Burger King a BK Double Stacker costs close to $5 USD!
Recently when the first McDonald’s opened here the company made it out to be a fine dining experience and well dressed people were lined up by the hundreds to “dine” there.:smack:
I don’t think that’s quite the case. If it were, the majority of the world’s cities would be ungradable – American goods aren’t that ubiquitous that all brands have made it round the world.
I think it’s just saying “this is the cost of living a typical western style of life here”. Which is not that misleading – it’s what most of us would do.