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The Cost of Living and Wages

Posted by Henric C. Jensen on June 30, 2007


It is often reported in the news that someone living in this or that country earns this or that much in US$ or UK£ – and it often turns out that the sum is pitiful small – but is it really? Doesn’t the value of money in this sense depend on what you have to pay for the daily necessities? Is it then fair to make the comparison to US$ and UK$£?

Isn’t that a kind of discrimination? I think so.

Think about it: 1 USD = 2.00811 GBP = 40.5000 INR – why not compare to actual living costs in the country instead? By comparing Cost of Living Indexes, instead of the numbers on money.

Let’s look at the examples above from the point of Cost of Living – in the US, UK and India – US was at 77.6, the UK at 85.3 and India at 64. Now this puts things into perspective, doesn’t it? The science here is sound – the numbers represent an average of the cities in each of the example countries that made it to the World Cost of Living Rankings 2006 – a list of 144 cities.

It can certainly be argued that wages in India are lower than those in the US and UK – but that should be compared to the cost of living, no to the value of money in the US and UK for an idea of what the real relation is.

“Food is extremely cheap unless you need certain foods which must be imported which will cost you triple of what it cost in America. Generally speaking if you owly buy India products then what cost $10.00 in America will cost approx. $1.00 here. Over the last 6 months the cost of living in Indian has increased about 15% because the $ on the exchange market is decreasing daily. One year ago the exchange rate was 46rps = $1.00 US but today it is 40rps per $1.00.Gasoline is around $4.50US per gallon. Local transportation (bus, train, air travel is cheap compared to America). Electricity is extremely cheap compared to American prices.” (From Yahoo Answers.)

What I am trying say here is that while the wages in India are low, so is the cost of living. It is not as low as it could be in comparison with the wages, but those are not comparable to those in the US or the UK. And to claim that is not right, because it gives the wrong image of India and any other country that is compared in this manner.

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