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Tuesday, March 20, 2018

Economist Cost of Living Survey Slanted for the Wealthy

Minnesotans were astonished when the Economist magazine said Minneapolis was the third most expensive American city to live in, after New York and Los Angeles.

"How is this possible?" they wondered.

Housing is one of the biggest expenses in any budget. The median home price in Minneapolis is $244,000, whereas most every city in California's Bay Area has home values in the million dollar range (San Jose: $1,036,000, Sunnyvale: $1,819,000, San Francisco: $1,285,000), and places like San Diego are in the half million dollar range (San Diego: $608,200, Escondido: $479,200, Chula Vista: $514,000).

Average apartment rent in Minneapolis in $1,390 a month, while in San Jose it's $2,616.

Another large expense is fuel costs. According to Gas Buddy, the price of gas is about $2.45-2.50 around Minneapolis. It's between $3.05 and $3.89 in the Bay Area.

The web site Expatistan has a comparison function that shows the difference in the cost of living between any two cities. Using that, we see that San Jose is 21% more expensive than Minneapolis, while Houston is 11% cheaper than Minneapolis (in large part to lower transportation costs -- i.e., cheaper gas, and a large immigrant work force that is paid less than native Americans).

One of the most common things that make Minneapolis more expensive than other cities is entertainment, including alcohol and cigarettes. That is, completely unnecessary expenditures.

So what exactly does the Economist survey measure that other economic surveys ignore that makes a magazine targeted at the wealthy rank Minneapolis as more expensive than dozens of cities in California that are clearly more expensive for the average person to live in?
The survey is compiled using the prices of 160 products and services in each city, including, “food, drink, clothing, household supplies and personal care items, home rents, transport, utility bills, private schools, domestic help and recreational costs.”
The primary flaw in the Economist survey is that it omits house prices, because it's targeted at corporations who ship executives around the world. Those people don't buy houses.

Domestic help is expensive in Minneapolis, because it's mostly performed by Americans, rather than undocumented workers, as it is in California, Texas, Arizona, Florida, etc. I know people who provide maid service in Minnesota and they make significantly more than minimum wage. Because a decent wage is the only way to get average Americans to clean other people's toilets.

Private schools are of concern mostly for the wealthy or the rabid religious right. Public schools in Minnesota are generally good. Teachers are mostly paid a decent wage.

So, yeah, if you're a millionaire executive who needs an army of underpaid chauffeurs, maids, and cooks, send your kids to private schools where non-unionized teachers get paid peanuts, and buy lots of booze and tobacco, you don't want to live in Minneapolis. You want to live in a place where you can lord over those less fortunate than yourself. A place where you don't give a damn about what happens to the people who live there in five, ten or 20 years.

The cost of living has to be balanced with the quality of life. For example, US News' 2018 state rankings list Minnesota second in the nation for citizen outcomes. Minnesota consistently comes out on the high end of surveys that measure income and the health of average citizens.

Which is a far superior measure for society than how much millionaires can flaunt their wealth.

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