Thursday, 6 August 2015

Losing my Australian filter: the cost of living...

When looking at the prices of anything in the USA, it's easy to think that things are cheaper than in Australia. And indeed they can be, especially blueberries and some fancy cheeses, but clothes and nonessential items can be a little harder to work out...

Last year I bought a pair of gumboots (rainboots over here), and I paid US$26 for them. Now, they're not plain gumboots, and I thought they might be solid enough to be Jimmy's winter boots, so long as he had woollen socks on, which sort of worked. Now, $26 is not cheap for children's shoes, not even in Australia, but I would buy them over there, without a second thought, because they would cost me about an hours work.

But what about in the USA? Well...

The median annual income for an individual in the USA is about US$30,000, this equates to roughly US$15/hour. That means Jimmy's gumboots cost nearly 2 hours work. But most of the population is not on US$30,000 and the minimum wage ranges from state to state. For arguments sake, let's call it US$7.25/hour (which is true of Kansas) and it's even less for workers who rely on tips.

Let that sink in...

Go on Australian readers. Take a minute. Think about it. Minimum wage is US$7.25/hour.

Cheaper gumboots, available online, might cost an hours work for most workers, or two hours for someone on minimum wage, plus tax. But sometimes there's no platform for product reviews, so there's no telling how good the gumboots are.

So, what does this translate for everything else? Well, regardless of how the Australian dollar compares to the US dollar, I find the best way to gauge how much something might cost in Australia is to double the figure. This mostly applies to clothes, sporting goods, some shoes, and beautiful things for the home - most of which we don't buy, because we're only here short term.

Coffee is an interesting item because depending on where you go (and how you take it), is very similar in price, if we're assuming $3.50 has the same value in Australia and the USA. But it doesn't. And most Americans like their coffee to be watery, often filter coffee that tends to sit around for hour or the made-to-order pour over - it's fancy little sister. Regular filter coffee can cost as little as $1 for a really big coffee. Fancy pour overs (and lattes) cost $3.50 or more, which is half an hours wage for most people. This can turn coffee into a luxury item - can you imagine paying AUS$7 for a latte?

There are some things that are cheaper here, or very similar in price. Some things can end up heavily discounted, such as clothes. Some places are amazing when it comes to sales. The other week I bought some new clothes for Jimmy, from the discounted section at one of these places. All the items were subject to a further 50% off the marked price, so I paid US$1 for socks that cost US$4 full price. A friend paid US$0.66 for socks for her son. Again, they were on sale, which is often the case with a lot of places - almost everything can be bought on sale if you know how to play the game.

Sometimes I wonder if this approach - doubling the price to get a feel for how much it might cost in Australia - might all be a waste of time because of the huge difference in wage conditions and workers rights, and so much more manufacturing occurs on US soil than in Australia, plus there is market size to consider too. And transportation costs... Have I left anything out? Basically, there are a lot of factors involved before a price is placed on an item, and the buying power of the average worker may not be a consideration.

What I am certain about is Jimmy's need for new gumboot. His new ones have arrived and his old ones have been given to a friend who will get some use out of them. Did I pay US$26 for the new little gumboots? Yes. Do I scold Jimmy when he doesn't look after them? Yes I do, because I understand the true local value of those boots.

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