http://www.theindependentbd.com/printversion/details/239679

Bangladesh: High cost of living and high Gini co-efficient

The cost-of-living adjustment is a useful benchmark to make wages or

benefits remain consistent with the cost of living M S Siddiqui

The cost of living is often used to compare how expensive it is to live in one country versus another. The cost of living is the amount of money needed to sustain a certain standard of living by affording basic expenses such as housing, food, taxes, and healthcare. The cost of living is how much you pay for the everyday requirements. It is a useful measurement that allows to compare expenses between countries and over time. The cost of living is tied to wages. It can be a significant factor in personal wealth accumulation because a salary can provide a higher standard of living in a country where daily expenses such as rent, food and entertainment are less. In contrast, a wages can seem insufficient Bangladesh, the most expensive country in South Asia.

Paying for necessities like housing, power, water, groceries, clothing, and gas for your vehicle can really add to calculate the cost of living. In some economies, the cost of living is very expensive, making it a struggle for many hardworking individuals and families to make a living. If expenses are higher in a country, salary levels must be higher so that people can afford to live in that country.

The cost-of-living increase is a measurement of how the cost of living changes over time, also known as inflation. If the cost of living decreases, that is known as deflation. The best measurement of the cost-of-living increase is The Consumer Price Index (CPI). The estimated the cost-of-living increase over any period. CPI measures the changes in the cost of goods and services consumed by the average household. Bangladesh Bureau of Statistics (BBS) provides data for Bangladesh from 2011 to 2020. The average value for Bangladesh during that period was 217.67 index points with a minimum of 164.63 index points in July 2011 and a maximum of 276.16 index points in January 2020.

The study of BBS taken bench mark of CPI (2010 = 100) in Bangladesh was 170.16 as of 2018. As statistics shows, over the past 32 years this indicator reached a maximum value of 170.16 in 2018 and a minimum value of 24.28 in 1986. The inflation rate seems around 5% in Bangladesh.

Every year many surveys are done to find out which is the most expensive country in the world. The survey of 2020 This year a survey done by New York (NY) based CEOWORLD magazine evaluated the data of living costs such as accommodation, clothing, taxi fares, utility, internet, the price of groceries, expenses of transport and eating out etc.

They have taken secondary data from dozens of studies, consumer price index, Numbeo Cost of Living Index, numerous national and international media reports. These data are then compiled into an index, using the expensive city of NY as a benchmark. NY was given an index score of 100. Therefore, a country with a score higher than 100 is more expensive than NY, while below signals that it is cheaper. The CEOWORLD magazine focuses on the range of living costs such as accommodation, clothing, utility, internet, the price of groceries in those countries. They also include the expenses of transport and eating out. Their rankings are based on five major points like the cost of living, rent, groceries, eating out and purchasing power. They have collected data from a range of different studies, consumer price indexes, cost of living data and international media sources. The range of living costs that were focused on included bills, transport, clothing and accommodation.

Purchasing power is the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. The study has compared the CPI of surveyed country with Purchasing Power Parity (PPP). PPP is a term that measures prices in different areas using a specific good or goods to contrast the absolute purchasing power between different currencies. Traditionally, the purchasing power of money depended heavily upon the local value of gold and silver or US Dollar, but was also made subject to the availability and demand of certain goods on the market.

They then take into account how much of a person's budget would be consumed by the item in a year. For example, one litre of milk might not cost much compared to one dress. But over a year, food would cost more than clothing. So the price for each item is weighted to account for its importance to a typical family's budget.

In the study of the current year, Switzerland came out in number one position, with a 122.4 on the cost of living index. It racked up large numbers in the cost of restaurants and groceries categories. Second on the list of the world’s most expensive countries to live in was Norway, followed by Iceland, Japan, Denmark, Bahamas, Luxembourg, Israel, Singapore and South Korea. Five of the countries in the top twenty were in Asia while one was in North America, one in Africa, two in the Caribbean and two in Oceania. The United States of America ranked at number 20. Switzerland has some reasons of become expensive in the world. They did not join the EU to gain numerous benefits and unique perks, however, the Franc’s independence has created a unique economic situation that puts Switzerland at the top of the list.

Bangladesh as the most expensive country to live in South Asia and Pakistan the most affordable one in the world. In South Asia, Bangladesh ranked 110th, followed by Sri Lanka at 112 and, surprisingly, India, the biggest economy in South Asia, turned up as the third most affordable country to live in with its rank of 130. Afghanistan came 131th and Pakistan 132th. Pakistan is the cheapest of the 132 countries according to a study mainly because of the very cheap level of rent required to live in the country. It has been revealed that food, meanwhile, is cheapest in Afghanistan, followed by Pakistan and Uzbekistan. The lowest prices for restaurants in the world can be found in Tunisia, followed by Algeria and Pakistan.

The cost-of-living adjustment is a useful bench mark to make wages or benefits remain consistent with the cost of living. The government uses it for retirees and recipients of Social Security benefits. Tourists and visitors use to take into consideration of cost of living index. Although just looking at the cost of living doesn't tell, how easy it is to live in a country. Many factors, such as pollution or crime, security and lack of health care system.

Other applications include government workers' benefits, bargaining of trade union and corporate contracts for valued employees. It's used to ensure that income keeps up with inflation.

Entrepreneurs also decide about relocation of industries particularly some of the low technology and labor intensive industries such as RMG etc.

With these output of study, Bangladesh as the most expensive country to live in South Asia but surprisingly the minimum wages offered are not sufficient to live in relatively expensive country in South Asia. It has recently fixed the minimum wages of Tk8,000 per month (About US$100) for workers of RMG sector and the wages in informal sectors are around US$50 /month. Interestingly the wage of workers in Pakistan, Sri Lanka and India is higher than Bangladesh but those less expensive country than Bangladesh.

The cost of living and minimum wages confirm the GINI co-efficient index of 0.482 in 2016, reflecting the gap between poor and rich is high and life of poor people are very hard to survive. The gini co-efficient index is increasing gradually on year to year basis.

The writer is a legal economist.

E-mail: mssiddiqui2035@gmail.com