Cost of living: To build an affordable world-class city

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By Zimo Zhou

April 28, 2015

When people think about living in a new city, cost of living is often a top concern. Some even think a world-class city must have a world-class cost to go with it. In Boston, many people say that it is already expensive to live here so it is already a world-class city of cost. But some argue world-class can also mean affordable.

According to the data provided by Living Wage Calculator made by Amy Glasmeier, professor of economic geography and regional planning at MIT, the living wage for an adult to live in the city of Boston was $12.65 per hour in 2014.

“The living wage calculator was developed to demonstrate what the absolute minimum requirements are for somebody to live in a place,” said Glasmeier. Focusing on the spatial interactions of economic actors and structures, Glasmeier first built the calculator in 2004 and updated the calculator periodically with the newest data. Sources of data come from the U.S. Department of Agriculture, the National Association of Child Care Resource and Referral Agencies, the U.S. Census Bureau, the U.S. Department of Labor, and the U.S Department of Housing and Urban Development.

A living wage can only meet a person’s basic living needs. By the word “basic,” Glasmeier means the condition that “somebody would be capable of renting a very low-cost apartment and buying the very essentials they need. It does not provide money for vacations, or for entertainment, or for a luxurious food budget.”

The calculator also provides the wage of families in different sizes. Typically, in Boston, a family of two adults and one child needs each adult to earn $21 as the living hourly wage to feed the family; the adult of a single-parent family has to make $25.96 per hour to meet their basic living needs.

“I do think Boston is extremely expensive for low-income families and one of the more difficult cities for them in the U.S. Home ownership is not always the solution since we have seen people get into unsustainable mortgages,” said Deborah Connolly Youngblood, vice president of research and innovation of Crittenton Women’s Union. Youngblood has years of experience on economic independence for families and low-income women.

The table below shows the basic living expenses that single adults and families in Boston typically spend per month.

monthly expenses copy

While college students are among the major residents of Boston, they are not included as part of the calculator. The cost of living in Boston area affects both full-time residents and students, but students also have to add the cost associated with tuition or whatever other educational expenses they might incur, according to Glasmeier.

Taking Boston College and Emerson College as examples, the chart below shows the estimated expenses of students living off-campus. Housing or rent takes the biggest percentage of all costs.

Zoe Wu, a senior marketing student at Emerson College, said that her rent for a year is $13,800. Currently she is living in the Beacon Hill area close to Downtown Boston with two roommates. Her annual expenses for food and transportation are about $4,000 and $3,000. She also has to pay about $400 each semester for her textbooks and supplies. The cost of tuition at Emerson College this year is $1,145 per credit. “The tuition still keeps rising. It’s going to be more and more expensive to be a student,” said Wu. “But living off-campus is much cheaper than it is in the school dorm.”

Though the calculator does not account for college students, it compares the minimum wage to a living wage. The living wage is always higher than the minimum wage.

Both the federal government and state government have set minimum wage to keep a certain level of incomes for workers. But many argue reason why the minimum is not proper to measure a city’s cost level because often a minimum wage cannot meet people’s basic living needs.

Several other U.S. big cities have living wage levels similar to Boston. For example, the hourly living wage in 2014 for an adult in Washington, D.C. was $13.68, the city of San Francisco was $12.83, New York City was $12.75 (same for all New York City counties), and the city of Los Angeles was $11.37. These well-known cities are listed as having the highest living wages. Other cities like Denver, Colorado and Houston, Texas are much cheaper, with living wages as $9.27 and $9.24 per hour for one adult.

In the 2015 Forbes magazine ranking, Boston was listed as the third most overpriced city in the U.S., with Cambridge listed as the fifth. It is worth noting that New York City is ranked after Boston, and San Francisco is listed at six and Los Angeles at 23. The costs of groceries, utilities, and transportation in Boston are much higher than the U.S. average.

The line chart above shows how the Consumer Price Index (the index) of medical care, rent of primary residence, food at home, transportation, and household energy in the Boston-Brockton-Nashua area increased in past decades. As a measure of cost of living, the index shows price changes of consumer goods and services purchased by households. All the living expenses have increased since the 1980s. From 1984 to 2014, the cost of medical care has dramatically increased 384.1 percent. Over the same period, rents rose by 157.6 percent, the cost of eating at home increased by 126.4 percent, transportation increased by 100.3 percent, and household heating and energy rose by 121.5 percent. Although the average index of all urban consumers on all items has also increased by 117.9 percent over the past decades, some living expenses in Boston such medical care and housing are still much more expensive than many other cities in the country.

Although no one likes to see continuously rising prices, people cannot deny that the economic level of Boston has also been climbing along with costs. “If you have more expenses, it is usually pretty correlated with more highly paid people. And then it is going to aggregate up into a factor of GDP, which is much bigger than a place that is simply less expensive and the economy is less dynamic,” said Glasmeier.

However, looking at the continuous rising prices, people may wonder whether there really can be affordable world-class cities around the world or at least a possibility of making them more affordable.

The reason for high living expenses is different for each expensive city. Some might be caused by the limited natural sources in the country, like Singapore. In the 2014 Worldwide Cost of Living by The Economist Intelligence Unit, Singapore is ranked as the world’s most expensive city. Because of the limited natural resources and huge reliance on energy and water imported from other countries, utility costs are extremely high as are transportation and clothing costs.

Worldwide Cost of Living

For some cities, the reason of high cost is more historical, such as London. “Part of the reasons why it is so expensive,”Glasmeier said, “is because it’s not been building housing,” and housing is a big part of daily living expenses. “When you have a tight housing supply as more people are coming, what happens is it bids up rent, and the less wages rise relative to the cost of rent, you’re gonna buy the fall, and it ends up with a more unaffordable city to live in.”

Boston faces a similar problem. People living in Beantown are complaining about rising rents every year, especially low-income residents who need more affordable housing. But the Boston Redevelopment Authority is planning to build more housing by requiring many of their on-construction projects to include affordable housing.

“One would hope that this supply of that housing will add into the system a flexibility that would allow the rentals to either not rise as fast, or stay the same, and in some unusual circumstances the prices to fall,” said Glasmeier.

About Zimo Zhou 4 Articles

Zimo Zhou is a second year graduate student in journalism at Emerson College. She is originally from Beijing, China, the city she was born and has lived for 20 years. Zimo has a great interest in multimedia journalism. Her career goal is to do multimedia reports in online journalism.