Some economic conversion factors... for later

2017 January 26
by Daniel Lakeland

I googled up cost of living in Mumbai India, just because I wanted to make a point. Here's a simple index:

Mumbai:

1 Bedroom City Center apartment: 36,000Rs/mo = $530/mo

Utilities for that apartment: 2960 Rs/mo = $43/mo

90 meals at inexpensive restaurant = 21,600Rs/mo = $316/mo

Total cost of basic subsistence ~ $900/mo.

Los Angeles:

1 Bedroom apartment: $1500/mo

Utilities for that apartment: $250/mo

90 meals at inexpensive restaurant = $900/mo

Total cost of basic subsistence ~ $2650/mo

Basic requirements for life (food and shelter) cost 3x as much in Los Angeles as Mumbai

EDIT: Also we should take into account income tax. In the US an individual making $2650 / mo after taxes ($31800/yr) needs to be getting a salary of close to $37650 which is the upper border of the 15% tax bracket, and puts their marginal tax rate for additional earnings at 25% (the next bracket). And that's ignoring state taxes. Let's just call it something like $40k

In India, I don't know much about the tax system, but from wikipedia we can approximate things as needing to make 727k Rs/yr and if I'm reading the clearly broken wikipedia table right that'd be taxed around 13%. So you'd need to make something like 865k Rs = $13,000/yr

40/13 = 3.08 so the main point still holds, it's 3x more expensive to subsist in LA.

4 Responses leave one →
  1. Rex Schrader permalink
    January 26, 2017

    Mumbai Average income = XX?
    Long Angeles Average income = YY?

    • Daniel Lakeland
      February 10, 2017

      In Mumbai there are lots of destitute people and lots of people with outsourced tech jobs or whatever. So the average per capita income isn't all that helpful, after all you're not hiring homeless people. What's needed is average income for someone capable of doing the kind of work being outsourced to India.

      Didn't find lots of data, but something like 50,000 rupees seems the order of magnitude so $750/mo or so. Several people seemed to think $2000/mo for a good outsourced US job in Mumbai.

      https://forums.digitalpoint.com/threads/i-am-interested-to-know-the-average-salary-in-india.1184578/

      GDP/capita in the US is something like $56k and it's higher in California, esp. LA. So let's just say $65k or so. That's $5400/mo

      So again, something between 3 and 7 times less expensive to hire someone in India, probably depends a lot on the type of job and the location in India.

      • Daniel Lakeland
        February 10, 2017

        Another thing to consider is that the exchange rate is the relevant factor to use for the employer, as it determines how much they'll be paying out in dollars. But, the purchasing power parity is the relevant factor for the quality of living. If you ARE making $2k/mo in India, this is something like 2.2x the subsistence level I calculated. . For the LA person similarly about 2.0x the subsistence level. You then have to start figuring out taxes and blablabla, but there's at least a little suggestion here that you might be able to buy more with your $2000 in Mumbai than you'd buy with your $5400 in LA. But, the numbers here have easily 10 or 20% errors, so the 3x cheaper thing definitely holds as a general conversion factor, but it could be 2x or 4x even once you do a detailed calculation including taxation and blablabla.

  2. Daniel Lakeland
    February 10, 2017

    Wikipedia quotes the Census ACS survey with LA having $55,870 median household income, and $62,289 median family income.

    https://en.wikipedia.org/wiki/List_of_California_locations_by_income

    All of it is skewed by the fact that there are lots of immigrants in LA who earn not that much doing things like lawn-care, and restaurant cooking, which is honestly pretty hard to outsource to India, but less hard to roboticize.

    If you confine yourself to people whose job is transportable to India, it's actually the upper middle class jobs, things that involve sitting behind desks and using computers and talking on phones.

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