The Perceived Cost of Living

When someone says, “Everything is getting more expensive,” what does that actually mean? Rising prices are easy to observe, but quantifying their impact on daily life requires a deeper look at how income shapes our perception of affordability.

My first programming job at a medium size company paid me $37,000. I lived in Los Angeles, in an affordable neighborhood and this salary allowed me to make a modest living. I planned for my grocery trips. I knew what I was going to buy, and how much it cost before I left the house. I stuck to my budget and list no matter what. Every dollar mattered.

A few years later, I doubled my salary to $70,000. This was more money than I could ever imagine. Everything was suddenly affordable. I didn't need to look at grocery prices anymore. I could go to the store with my family and load whatever they needed into the cart, and I still had money to spare. I even put brie cheese in my cart. Even though the grocery prices had remained relatively the same during that time, doubling my salary made me feel like I had halved my bill. I was stress-free.

Today, the price of everything has skyrocketed. When we discuss finances or the stock market, my sister always jokes, "Have you seen the price of eggs today?" The US, California specifically, has become expensive in an unsustainable way. Affordability isn’t just about prices, it’s about how those prices relate to your income.

So I wanted to present cost in a way that the old me could understand. I want to talk about the Perceived Cost. Let’s reframe expenses using my original salary, adjusted for inflation:

• 37,000 ≈ 53,025 today
• 70,000 ≈ 94,445 today

Just this morning I checked the price of eggs at $7.42. What does this amount mean to you? Is it too much? Is it too little? A $7.42 carton of eggs feels expensive for someone earning 53k, but to my "doubled salary" self? It's akin to paying $4.17. A psychological shift captured by this formula:

Perceived Cost = (Original Salary / New Salary) x Item Price

What Eggs reveal about Income Inequality

Below, the same carton of eggs "costs" vastly different amounts depending on income:

For a minimum-wage worker, that same carton feels like $26.09 (see table below). This disparity explains why debates about inflation often feel disconnected. A “slight price increase” for some is a crisis for others.

Beyond Eggs

The perceived cost gap widens with larger expenses. Take rent, gas, and streaming services:

For low-income earners:

• Rent consumes 50% of a minimum-wage salary (vs. 13% for software engineers).
• A Netflix subscription costs the equivalent of $63.26—a luxury many skip to afford basics.
• A Big Mac becomes a rare splurge, not a quick meal.

Why Inflation Hurts Unequally

Recent inflation feels “manageable” to high earners but catastrophic for others. When I play YouTube with ads on my TV, some guests tell me, "Just pay for it, you won't ever see ads again." But consider:

• YouTube Premium ($13.99) is trivial for a six−figure earner but equals $50 in perceived cost for minimum wage.
• Losing government assistance after a small raise traps many in poverty. A $2/hour increase could disqualify someone from housing subsidies.

Prices don’t exist in a vacuum. They’re tied to income, and when wages stagnate, everything becomes more expensive, even if inflation is “low.” By framing costs as percentages of income, we see why "just cut back on lattes" advice rings hollow for millions.

The next time someone says, “Eggs aren’t that pricey,” ask: “Compared to what?”

Tables: The Data Behind the Pain

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