The Real Cost of Living: Italy vs. USA

How to get Italian Citizenship

Please note: While the methodology and numbers presented below were developed and assembled by me, this post was generated using artificial intelligence and was created quickly to elaborate on and provide sources for an Instagram reel I published recently. 

Intro

Living abroad or traveling extensively brings its share of revelations, one of which is the stark differences in the cost of living between countries. “Italy is so affordable!” is a comment I’ve often heard from visitors, contrasting sharply with the local perspective of, “Yes, but your earnings in the USA are much higher.” This prompted me to dive into the numbers to provide a clearer picture of the cost of living in Italy compared to the USA, taking into account not just the price tags but what these costs truly mean for the people living in these countries.

Methodology

To ensure accuracy and fairness in this comparison, I’ve sourced the most recent data available, adjusting for inflation and other economic factors:

  • Household Disposable Income: Data was taken from the OECD (link), with the most recent year being 2021. This figure represents the amount available for spending or saving after taxes and other deductions, offering a solid base for comparing take-home pay between countries.
  • Cost of Goods: Information was sourced from a comprehensive survey (Numbeo – link) covering a 12-month period, culminating in 2023. This includes everyday items and services, from meals at restaurants to the cost of a gallon of gas.
  • Inflation and Adjustments: All figures were adjusted to 2023 numbers using respective country inflation rates to keep the comparison relevant and current (source Statista links for Italy and USA)
  • Calculating Hourly Rates: The annual income was divided by 2,080 (the number of work hours in a year, assuming a 40-hour workweek) to determine the hourly rate for each country. For the US, healthcare expenses were subtracted using 2022 numbers from Statista (link) adjusted for inflation to 2023 to account for out-of-pocket healthcare costs.

Assumptions

Several assumptions were made for simplicity and clarity in this analysis:

  • The term “American” refers to individuals from the USA, used for convenience since we don’t have a noun to describe people from the USA. 
  • Median take-home pay is considered as the household disposable income, following the OECD definition.
  • A standard 40-hour workweek is assumed for both countries to calculate hourly income.

Insights and Comparisons

The comparison revealed that, dollar for dollar, Italy is approximately 20% cheaper than the USA when considering food, rent, transportation, and other categories. However, this does not paint the full picture. When we factor in earnings, the scenario shifts.

Income Disparity

Annual Median Take Home Pay (USD):

  • Italy: $25,625.42 ($2,135.45 monthly)
  • USA: $49,870.88 ($4,155.91 monthly)

Cost of Living vs. Earnings

Comparing how many hours it takes for an individual in each country to afford similar items showcases the real impact of these economic differences:

A Meal at an Inexpensive Restaurant:

  • Italy: $16.06 (1.3 hours of work)
  • USA: $20.00 (0.83 hours of work)

A Cappuccino:

  • Italy: $1.69 (0.14 hours)
  • USA: $5.07 (0.21 hours)

A Domestic Beer at a Bar/Restaurant:

  • Italy: $5.35 (0.43 hours)
  • USA: $6.00 (0.25 hours)

A Gallon of Gas:

  • Italy: $7.47 (0.61 hours)
  • USA: $3.65 (0.15 hours)

Rent (1 BR, City Center):

  • Italy: $841.53 (68.3 hours)
  • USA: $1,769.63 (73.81 hours)

The Numbers at a Glance

Now that you have the examples above, below is a summary of some additional items, along with the required hours to purchase those items for people in each country.

table showing examples of cost in working hours of various goods in Italy vs US

To summarize, below percentage difference in cost per category. As shown, in most cases, Italians need to work more for the same purchasing ability.

graph of percentage difference in working hours required to buy things in Italy vs the US

The data illustrates not only the cost differences but, more critically, the disparities in work hours required to afford basic living expenses, with Italians needing to work approximately 56%, or about one and a half times more for the same level of consumption.

Beyond the Numbers

While Italy might boast lower prices in certain areas and benefits such as healthcare, which is provided at no direct cost to the consumer, there are intangible aspects to consider, such as quality of life and life expectancy, where Italians enjoy advantages.

Conclusion

This analysis underscores the importance of context when discussing the cost of living across countries. It’s crucial to consider not just the price of goods and services but also the relative income and what that income can afford. As visitors or expatriates, it’s respectful to be mindful of these differences and the local perspective when commenting on the affordability of a country like Italy. While it may appear cheaper to a visitor from the USA, the reality for locals is nuanced and deserves understanding and respect.

Disclaimer: This analysis is for entertainment and informational purposes only and has not been peer-reviewed. The methodologies, data, and conclusions presented are based on available information and certain assumptions detailed in the methodology section. Readers are encouraged to consult authoritative sources such as the OECD for the most current data and comprehensive analyses. This blog post is intended to stimulate thought and discussion rather than serve as a definitive comparative analysis.

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