Are You Willing to Decrease Your Standard of Living?

It's More Than Inflation Influencing Your Living Expenses

Since relocating to a new state, I can’t help but compare the cost of groceries, fuel and other items I’d consider standard living necessities.  I’m fascinated by how cost structures are built and what they give consumers access too or shield them from.  Why do groceries seem so much cheaper in one state?  Why do gas prices fluctuate as you drive across the country?

While it's my job to be curious about these nuances and how they impact specific industries, I’m finding more of my friends are pondering the price tags on everything from produce, to macaroni and cheese to their weekend trip to the coast too.  When everything seems to be more expensive than it was a year ago, it's easy to point the finger at policy and inflation.  But, in reality, some of these cost differences have always been there simply because geography demanded a different structure.

Measuring Cost of Living

The World Cup only amplified curiosity for Americans, taking our cost comparisons to an international scale.  Would we need to decrease our standard of living if we moved to Europe? We were wondering what a middle class income would afford a person in Massachusetts versus the booming state of Tennessee and if we were missing out on something.  Now, we are also wondering what the differences are between Chicago and Zurich. 

In the United States, we have a system for measuring just how fast prices are rising, inflation, and we can work it backwards to determine how much money a household needs to bring in to be able to afford those prices as they rise or fall.  We can even pinpoint the median range and safely say Washington and New Jersey are expensive states to live in, South Dakota and Kentucky are fairly inexpensive and Vermont and Illinois are right in the middle. 

When we compare the average living expenses of food, housing and transportation in U.S. states to European countries we get interesting cost comparisons.  If we are strictly talking about money in and money out, then a Texas resident would do just fine living in Finland where the median cost of living is similar, just over $2,500 a month.  And, if you live in New York or California you would experience similar standards of living in Denmark.  So, no, moving to Europe doesn’t necessarily mean our standard of living has to increase or decrease.  

Purchasing Power Across the Globe

It gets a bit more complicated when we work to determine what can be purchased with your average monthly income in your European counterpart country.  Yes, someone moving from North Carolina to Germany can find a place to live, food to eat and get around town and spend just the same amount of money as they did in the U.S.  But, it is more difficult to know what the housing looks like, what can be put in your grocery cart and what affordable transportation could be.

For example, papaya is always available in Texas at an affordable price because it can be grown in the region.  But, fitting papaya into the median Finnish grocery budget might be tricky.  The fruit has to travel farther in temperature controlled vessels or, it has to travel faster by a less fuel efficient mode to get from where it is grown in the tropics to where it is wanted in Finland.  

When everything is more expensive, the papaya prices appear outrageous, but in reality, they have always been expensive in Finland.  A shopper in Finland springing for the imported fruit probably won’t feel gutted by the price in the checkout line.  But, if that same shopper has chosen several costly imported items, the grocery shopping experience could feel expensive.  We don’t have to travel across the country to see this.  The same scenario plays out on a state by state basis in the U.S.

Coastal states reap the benefits of cheaper seafood items.  Southern states enjoy fresher produce year round with minimal price fluctuation. Direct access tends to make an item affordable.  This is why states without pipelines pay higher fuel prices and tend to find the cost of goods exceeds national averages. Fish sold straight off the boat don’t incur the costs of processing, packaging and shipping.  Grocery stores sourcing produce locally save on transport fees and can offer consumers similar benefits.

When direct access to an item is also paired with abundance, then the cost of goods is more affordable still.  Geography matters.  The more plugged in an area is to supply chains, the more affordable goods tend to be.  And, the greater the variety of goods produced in a region, the lower the average cost of a whole basket of standard necessities becomes.  

Cost of living is a broad term that often fails to offer us itemized cost comparisons.  But we do know that affordability tends to be tied to accessibility. Moving across the world might not influence your standard of living, but it will likely change what you have access to.