Steve Jackson recently posted a well-discussed (read the comments) essay on his blog Our Man in Hanoi wondering about the excesses of wealthy expats and Vietnamese in Vietnam, and where this wealth comes from. As he said, "I can understand poverty here. It’s the wealth I don’t get."
My own response agreed, but I have been more interested in the circumstances of the growing middle class in Viet Nam, since I essentially live under similar conditions here in Ho Chi Minh City.
@caligarn, @saigoninacup, and myself (@layered) recently carried out a short conversation about this topic on Twitter. @caligarn, author of the blog Mẹ Ơi, Việt Nam Ơi stated "But Vietnamese middle income families have a deeply different standard of living to American middle income families, for example." I disagreed with that, citing my own observations, such as the proliferation of home computers in my middle class Saigon neighborhood. @saigoninacup, author of the blog Saigon In A Cup, then pointed out that Vietnamese middle class families usually don't have cars and find it difficult to buy houses, which is true. @caligarn, via @tamkaizen, cited a good website tool to explore these issues: Numbeo, a database of the cost of living for international cities.
@tamkaizen stated that he would be broke in the U.S. with the salary he is making in Viet Nam, which is true if his salary is comparable to Vietnamese middle class salaries. What is important to note is local purchasing power, which means he may be living comfortably on his salary in Vietnam even if it wouldn't be sufficient in America. My own salary here in Viet Nam is lower than what I would make in America, but I sense that I can buy so much more with it here in Viet Nam (except for automobiles and land).
Using the Numbeo website, here are some conclusions about the relative standard of living between America and Viet Nam:
1. According to Numbeo, the median monthly disposable salary (after taxes) in Viet Nam is US$653, while in the United States it is US$2,909, or US$34,908 annually (reported by Wolfram/Alpha to be $33,190 in 2009). I think it is reasonable to assume that the median monthly disposable salary level represents the middle class in both countries. This means that the median salary in the U.S. is 4.45 times the median salary in Viet Nam.
2. Numbeo reports that the Consumer Price Index plus rent in Viet Nam is half of the U.S. index, meaning we can buy a similar basket of goods in Viet Nam for half the price of the same basket in the U.S. However, the World Bank International Comparison Program puts the Price Level Index for Viet Nam at 30 against the U.S. Index of 100. So if prices in the U.S. are three times that of the Viet Nam, but the salaries are 4.45 times higher, the Vietnamese cannot sustain the same standard of living as in America.
3. Because of this disparity between salaries and the price of the common basket of goods, Numbeo reports that local purchasing power in the U.S. is 123.7% higher than in Viet Nam. So I was wrong in disagreeing with @caligarn's contention that Vietnamese middle income families have a deeply different standard of living to American middle income families. They have to have a lower standard of living in order to live within the limits of their income.
4. However, my observation of several items in the Numbeo "basket of goods" leads me to think that the standard of living is more similar than the numbers indicate. I know you can rent a 140 square meter house (3 bedrooms) in a Ho Chi Minh City Vietnamese neighborhood away from inner city districts 1 and 3 for US600/month, while the Numbeo figure is US$1,169 outside the city center. This brings up an important point -- these cost-of-living calculators are targeted towards people who want to relocate to a foreign country and need to calculate their potential costs in order to negotiate salaries and benefits as expat employees. So the expectation is that such a person will want to live in accommodations similar to their home country and amongst other expats. Therefore the costs shown in Numbeo are probably gathered in expat neighborhoods. In Ho Chi Minh City, that includes Thảo Điên or An Phù in District 2, or Phú Mỹ Hưng in District 7. The Vietnamese middle class does not live in those neighborhoods. If you live in a Vietnamese neighborhood, you see a lower price structure for similar goods.
Another way to look at the standard of living issue is the poverty threshold or rate. The poverty rate in a country is "the minimum level of income deemed necessary to achieve an adequate standard of living in a given country" (Wikipedia). The adequacy is measured by a basket of basic goods necessary for life, including the obvious food and housing. There are undoubtedly differences in different countries as to what are considered basic necessities. But assuming the CIA uses some consistency, the World Fact Book lists the U.S. at 12% of the population below the poverty threshold in 2004 (probably has risen over the economic crisis), and 12.3% for Viet Nam in 2009. This implies that there is at least some similar starting point for comparing the cost of living between America and Viet Nam.
This is a remarkable achievement for Viet Nam considering the poverty level was 58.1% in 1990.
