Expensive Here, Cheap There

Prices Rising Everywhere

Of course, there are seasonal, local and economic variables that factor in to the prices.

For example, the total rise in food costs over 2008 is expected to be 5% to 6% nationwide, according to the U.S. Department of Agriculture. That's the biggest increase since 1990, which means we're all, on average, paying more to eat than we were in 2007.

And on a microeconomic level, prices have a lot to do not only with personal income in specific areas, but with the health of the city's very specific economic woes or triumphs. For example, part of the reason why many cities in California report high food prices has to do with the fact that energy and fuel costs in the region are high.

In Boston, a pair of denim jeans for boys cost $40, on average, in the third quarter of 2008. Why were they nearly three times more expensive there than in Indianapolis? There were fewer markdowns at the first city's retailers, meaning the demand was higher and the economy was stronger. And while the median household income in Boston is $52,792, it's just $40,051 in Indianapolis.

Unfortunately, as the economy worsens, this disparity between cheap and expensive isn't going to go away.

It's really a matter of the chicken or the egg: Workers in cities that provide a service or product that is in high demand need bigger salaries because costs are higher, and costs are higher because salaries are bigger. That's a difficult--if not impossible--cycle to break.

"If wages are higher to adjust to higher costs, then as long as the city/region can still produce a good or service that is in great demand elsewhere (e.g. finance in New York or software in Silicon Valley), then differences can certainly persist," says Dr. Dean Baker, co-director of the Center for Economic and Policy Research.

And then again, it's all relative. For the 250,000 auto workers in Michigan fearful for their jobs, $40 may be a heck of a lot for a pair jeans. For others, that's chump change.

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