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Friday, 24 September 07:15 (GMT -05:00)

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Why are monthly earnings in USA higher and food prices lower than in Russia?

After the publication of the article “How much more expensive sugar is going to be in the short run and why?”, stating that the price on sugar in the US is lower than in Russia and Ukraine, Market Leader’s office got thousands of e-mails with the following questions:
• What are the food prices in the US?
• How much do Americans earn per month?
• How does the US succeed in paying one of the world’s biggest salaries while maintaining one of the world’s lowest food prices?
• What else is cheap and expensive in the US?

Of course, these questions are not highlighted by Russian mass media, experts of Masterforex-V Academy explain. Raise a question and the community will get more questions than answers. Yet, having answered them most Russians will understand why the US keeps flourishing while the rest of the world anticipates the collapse of the last superpower, without listening to politicians, political scientists and economists.

How much do Americans earn per month?

According to Rasul Zhalalov, our expert, who lives in New York, US citizens’ income varies depending on qualification, type of job and other factors. But if to compare them with the earnings of those who live in the ex-USSR countries, the United States would seem a heaven of better-off people.
• High income - top managers, successful attorneys, celebrities and physicians. They earn over $15-20K per month.
Middle class - teachers, bank clerks, civil servants, mid-scale businessmen and many others. They earn over $3-8K per month.
Lowe class - odd-job workers. They earn up to $2K per month.

Most Americans get extra income from depositing the money into bank accounts, investing in “blue chips”, bonds and securities as the federal authorities guarantee that all the deposits up to 250K will be paid pack if the bank goes bankrupt.
As a result, 80% of American families have 1-2 cars, bank deposits, not to mention 2-compartment fridges, plasma TVs, hi-tech PCs with unlimited internet access and other luxuries.

What are the food prices in the US? Why do American families spend on food just 10% of their income?

US stores offer an all-year-round choice of fruit and vegetables while in other countries the supply of these foodstuffs is seasonal: strawberry, sweet cherry, grapes, bananas, kiwi, melons etc. Moreover the difference of seasonal prices in US supermarkets is 1-3%.

American families spend on food only 10% of their budget as the food prices in the US are much lower relative to the income as compared with the situation in the ex-USSR states. $200-300 is enough for one person to have substantial meals (fruit, vegetables, meat, seafood, bakery and dairy products) if to exclude eating out.

The 2008-2010 crisis affected the food prices in such a way that they grew 10-20% in 2-3 years.
Market Leader’s offices around the world have provided us with the relevant information on food prices in their countries. The data have been combined into the following table:

Why the food prices in the US are lower than in Russia and Ukraine?

According to our expert Rasul Zhalalov, there are many reasons:
• Private ownership of land, thanks to which billions of dollars are invested in the US agriculture every year.
• Absence of corruption (the subsidies reach those whom they are intended for)
• Excellent infrastructure, modern machinery and equipment.

2. The US federal program of financing the agricultural industry, which consists of 3 parts:
• Direct subsidizing of American farmers for producing agricultural products
• Counter-cyclical payments (smoothing the price deviations)
• Federal lending program, allowing the farmers to not repay the credits if the market prices on crops and other products decline lower than the cost price (in that case the farmers repay with their products). Every year the US Congress allocates over $23B for the program (data for 2005).

3. American farmers get support not only from the federal government but from the local state authorities as well:
• $7B is spent every year on scientific research in the agricultural sector
• $3B is spent every year on the development of agricultural areas (irrigation etc.)
• $1.8B is spent every year on consulting

4. Only the paying foodstuffs are produced in the US. The rest of them are imported:
• Alcoholic beverages to the sum of $11B
• Fish and seafood ($9B)
• Fruit ($5.9B)
• Meat ($5B)

5. There are different products for the rich and the poor.

For example, chicken legs are relatively cheap while chicken breast is much more expensive.

What is expensive in the US?

The expensiveness of living in America is in the following:
Medical insurance: if a person doesn’t have a medical insurance then he/she has to acquire it for $250-1000 a month (depending on the insurance plan). Otherwise, if he/she gets into hospital and needs some kind of surgery, then he/she will have to pay $250-1000 a month to make up for it.
Rented dwelling: over 60-70% of the US population lives in rented properties. Rental payments vary from $500 to $3-5 thousand depending on what exactly you rent in where (state, city and its district).
Buying fixed property on credit: after buying a house the new owner has to pay $1000-3000 a month within the next 20-30 years.
Buying a new car on credit: after buying a new car the owner has to pay $300-500 a month within the next 4-6 years.
Car insurance costs $50-250 a month depending on what type of insurance is chosen and in what state you live in (the most expensive insurance is in New York)
Monthly household running costs, including phone, internet, cable TV, need $200-300 a month.
Credit cards: buy a thing with a credit card and pay $25-200 a month

More than half of the US citizens earn $2500-4000 a month. Now calculate how much they spend and how much they can save.

Getting a well-paid profession needs considerable extra expenses on education.

For example, a physician is one of the highest-paid professions in the US. But to become a physician one needs to spend considerable amount of money on education. Not everyone can afford:
• After finishing school one should graduate from community college and get an associate’s degree.
• Then it is necessary to enter a medical school and get a bachelor’s degree in 4 years. Those who earned the degree need to pass 3 medicine exams. Each of them lasts 8-9 hours. The volume is huge, including both theory and practice.
• Minimum 3 years of practice in a clinic (100 hours a week).
• Eventually they get a master’s degree - general practitioner.
• In order to obtain a particular narrow specialization, for example endocrinologist, extra 3-4 years of studying are needed.
So, in 10-12 years you can get a medical license if everything is right and the exams have been passed at the first try…

Education costs:
• 1 year of community college costs $30.000-50.000 depending on the state and type of the college. Public colleges are cheaper while private ones are more expensive.
• 1 year of Medical school costs $50.000-80.000. So 6 years of studying cost $260-350K. Not to mention other expenses, including books etc., which constitute $15-20K. To rent a flat a student needs to spend from $300 to $1.5-2K a month, living on his/her own. Besides, any student needs food, clothes and other things, which will cost $4-10K.

Most students get education at the expense of their parents.
Some of them make a contract that as soon as the student graduates and gets a job he/she starts paying back up to 70-80% of the money that the parents have spent on his/her education. Others lend the money with a bank, which is more expensive as there is a specific interest rate.

The same holds true for attorneys, teacher or top manager. Everything needs to be paid for. Yet for different professions the total sum may vary.

So now you can decide on your own whether the cost of living in the United States is cheap or expensive.


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