www.CostaRicaTicas.com

Brother LionKing--That USA figure is skewed mightily by the many who secured gazillion dollar bonuses while leading their businesses, whole countries (Iceland, Estonia) and the rest of us into bankruptcy. I'd also like to know how they differentiate between income and compensation, 2 very different things.

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"A man accustomed to hear only the echo of his own sentiments, soon bars all the common avenues of delight, and has no part in the general gratification of mankind"--Dr. Johnson
"Amen, brother"-ED

We can quibble about the measurement methods which may shift the rankings a bit (as Bilko himself conceded, there are other factors involved), however his basic point remains perfectly valid whatever those exact numbers might be. The US has a vastly higher per capita income than either of those other countries and, even more significantly, a vastly more even distribution of income. Jazz's complaints about overpaid CEO's may be perfectly valid but income inequality is still far worse in these developing countries. And, while CR is poor, the Dom. Rep. is significantly poorer still. It is only natural and logical to conclude that must be a huge factor driving desperately poor Domicanas to offer P4P services at even lower rates than their sisters in CR.

Now, if you really want to discuss relative income levels, measurement methods, and the relative distribution of that income, well then that is really a different issue. It might have helped if Bilko or LionKing had cited their source along with their numbers. Typically, the simplest way to measure per capita income is to take national GDP (or GNP, which is slightly different but I won't get into that here) and to divide that by the number of people in that country. As LK and Jazz pointed out this simple way of measuring can be misleading. There are several reasons for that, but I'll just discuss 2 of them.

The first problem wasn't mentioned by LK or Jazz but does bear some relevance to our discussion. Simple GDP per capita ignores what is known as Purchasing Power Parity (or PPP) by economists. What this means is that things don't cost the same in every country. For example, Luxembourg by any measure has the highest GDP per capita of any country in the world. Unfortunately for them, it is also an expensive place to live. Just try buying a Big Mac in some of these high GDP per capita countries for the same as what it costs in the US BigMac Index. If you factor PPP in it usually flattens the field considerably. The problem with measuring GDP per capita at PPP is the same as measuring inflation such as the CPI in a country. It all depends on what you use as your market basket. No one lives on Big Macs alone. The Dom. Rep. has a GDP roughly 1/6th that of the US or 2/3rds that of CR. Does that mean everything will cost 1/6th or 2/3rds what it costs in those other countries? Obviously not. The cost of gasoline and anything else that needs to be imported are obvious examples where local costs are not only not proportionally less but might even wind up costing even more than it is in the far wealthier US. Bottom line for us is that while P4P may be less in the Dom Rep than either CR or the US, that doesn't mean it will be a direct relationship. In fact, I think it would be very interesting to come up with a relative cost index of P4P similar to that Big Mac Index and rank various countries on that basis (average cost of 1hr of P4P divided by average GDP per capita). I think the results might surprise some people.

The second problem with those average GDP per capita measures is the one that LK and Jazz were referring to. It ignores the problem of uneven distribution of income. One way of reducing this issue is to use the MEDIAN rather than the MEAN (or average) income. With the mean, a few CEO's making $50M or more can really skew the results. In contrast it would take 1000's of people making $10K to even begin to offset those fat cat's effect on the overall average. With the median, you look at the level of income where exactly half the population makes more and the other half makes less. It doesn't matter at all if those in the top half are making $50K or $50M.

The problem here is that the median numbers that we need are a little harder to come by. The census usually looks at median HOUSEHOLD income or the median individual income for WORKERS OVER 18. So lacking comparable median figures it is hard to judge the accuracy of LK's $37,500 average figure. What I was able to find was 2004 mean and median figures for household income. According to Wiki: "Overall, the mean household income in the United States, according to the US Census Bureau 2004 Economic Survey, was $60,528, or $17,210 (39.73%) higher than the median household income."

Of course, 2004 is 4 years old and pre-dates the recent market collapse, however, despite what it might seem, real GDP (inflation adjusted) is still higher than it was in 2004 and income inequality, while it may be a bit worse recently, is not a new phenomenon (source). It actually had been increasing steadily since the Reagan Revolution and so-called "Trickle Down Economics" of the early 80's and if anything has leveled off over the last few years.

What does this mean for our discussion? Well, 2 things. First, that there are a lot of really high income households that are inflating the average considerably. And, secondly, the median household income of $33,318 (which is pretty close to that original $37,500 figure) is most likely still significantly more than the average in either CR or the DR (where income inequality is even worse than the US)

One last piece of interesting statistics. Relative income inequality among different countries. Income inequality is commonly measured by something called the Gini Coefficient which is based on a scale of 0 to 1 with 0 representing complete equality of income and 1 meaning that 1 guy has all the money. On that measure, the US ranks pretty poorly among industrial countries but is still much better than most developing countries like CR and the Dom. Rep. Again, according to wiki and based on Gini (for the countries where that figure is available), the top (most income equal) country on their list is Denmark at .247. The US comes out 73rd on that list at .408 behind countries like Bangladesh and Ghana. And Costa Rica is 100th at .498 and the Dom. Rep. is 108th at .516. The fact that so many 3rd world countries ranked better than the US even surprised me, however it should be pointed out that the footnotes to that table did say that differences in how statistics were collected in different countries limits the comparability of the results. Still, I found it fairly interesting and hope some of you did too.
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BTW, Jazz, income and compensation are essentially the same thing. If you don't believe me then just ask Tom Daschle now whether his use of a car was income or compensation. What most people usually discuss seperately and which ARE really different things is SALARY and TOTAL COMPENSATION. CEO salaries can be truly obscene but where most of them really make their "compensation" is on such things as bonuses, stock options, use of the company jet for expense paid vacations, etc.. All of that TOGETHER makes up TOTAL COMPENSATION and TAXABLE INCOME (assuming they don't find some write-off, tax loophole or way to defer it).

I'm constrained to disagree with Prother Prolijo on the difference between income and compensation, using 2 personal examples:
(1) The value of the health insurance premiums that the Postal Service pays on my behalf is certainly compensation but nowhere included as income--"in-lieu-of-income" is not the same thing; (2) The portion of my pension that my employer pays into my TSP (pension) account is compensation but not includable as income ( when I start withdrawing from that fund, the withdrawals will be taxable income, but I will only be withdrawing and thus taxed on the earnings, not principal). The portion that I pay in is income--non-taxable income but income nevertheless.
In Daschle's case those "car-and-driver useages" should have been included as income, which is why he got snagged and the country denied the use of a very able man; in my case, it's not "excluded income", it's "other compensation" and totals (both items combined ) 15% of my taxable income--a generous fraction, you'll agree.
FINAL NOTE: I can't imagine any other hobby board having this kind of high-level non-topic discussion. Hooray for us!

_________________
"A man accustomed to hear only the echo of his own sentiments, soon bars all the common avenues of delight, and has no part in the general gratification of mankind"--Dr. Johnson
"Amen, brother"-ED

JB,
I think you're splitting hairs. All the things you mentioned are income of sorts, the only real difference is their tax treatment.

1) That compensation in-lieu-of-income is really in-lieu-of-TAXABLE-income. Its true that employer paid health insurance premiums are not even included in gross income, however to the extent you collect any benefits (which, lets face it, is the real value of that insurance) it IS considered income. From the IRS website: "Under § 105(a), amounts received by an employee through accident or health insurance for personal injuries or sickness must be included in gross income to the extent such amounts (1) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (2) are paid by the employer." Besides, we were talking about highly compensated CEO's. Even if you don't count it as income, I seriously doubt that a $1000/mo health insurance premium really means that much to someone making $50 million per year.

2) Its also true that the portion of your pension that your employer pays into your pension account is compensation but not includable as taxable income. For that matter, the portion that YOU pay into your pension account is compensation but not includable as taxable income either. BOTH are DEFERRED income. To the extent you never take the money out of your pension account it is never taxable. HOWEVER, whatever is left over is taxable for your heirs (subject to inheritance tax laws). And, again, lets face it, the real value of your pension to you is only what you actually take out, whether it is earnings or principal, either of which will be taxable for you (subject to the tax rates at that time). BTW, TSP's are subject to the same problems as 401K's, which are now known as 301K's. I wouldn't want to bet that you won't have to hit principal at some point given the way the economy and the investment markets are heading.

3) The BIG items beyond base salary that really bump up CEO compensation (e.g. stock options, bonuses, etc.) are all considered income. That is why I said income and compensations were essentially the same thing. Some of the big tickets items are deferred income, some is tax exempt income and some of it is income that is offset but tax credits and other loopholes that the wealthy donors have had congress write into the tax code, but it is all still income.

The US stat probably doesn't reflect anything after 2007 tax returns. And yes, Projilo, I don't think these figures are representative but I couldn't find median income rankings.

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"The only normal people are those you don't know very well." Joe Ancis

...And thus the only compensation I get that under no circumstances could be considered income is psychic compensation--fortunately, I get big buckets of that.
Are we having fun yet?

_________________
"A man accustomed to hear only the echo of his own sentiments, soon bars all the common avenues of delight, and has no part in the general gratification of mankind"--Dr. Johnson
"Amen, brother"-ED

Thats true and psychic compensation is non-taxable as well . Unfortunately, psychic compensation doesn't help pay for the chicas

Splitting hairs, am I? Well consider these 2 scenarios from my life and then let's examine the "Bright Line" between income and compensation:
(1) My union Local sent me to San Francisco to attend a newsletter editor's conference. The time off work was taken care of by the local, and was thus income. However the plane ticket, hotel and per-diem were not to my knowledge reported anywhere as income. As I'd wanted to see SF anyway and had time before and after this conference, I was doubly compensated.
(2) My Plant was victimized by that domestic terror attack known as the "Anthrax Attack". While our plant was gutted and rebuilt we all were sent to other facilities to work. We were paid for both the travel time and mileage. The travel time was income; the mileage was not. The kicker for me was I lived 1/2 way between my home facility and the place sent to AND I had a cheap-to-run vehicle so I made money on the deal. Some with luxo-barges or living south of the home plant actually lost money. Oh well.
The IRS has blurred this "Bright Line' but it still exists in some cases. The line is much more clearly etched when considering FICA taxation.
Back to you, Chet.

_________________
"A man accustomed to hear only the echo of his own sentiments, soon bars all the common avenues of delight, and has no part in the general gratification of mankind"--Dr. Johnson
"Amen, brother"-ED

JMAC, I'm with you. I'm in the 98%. Cali, Dr. Love's? 52,000 pesos for VIP ladies, and 38,000 for the others. That's in the $20 to $30 price range for an hour with a smokin', unspoiled Colombiana, and her cell number. She'll come to your hotel that night for 100,000 pesos ($50) and stay till 5 in the morning. Unspoiled is the key word.

Flights to Colombia are about 25 minutes further than CR and $200-250 more. But at a bill per pop, that gets eaten up pretty quick. And last I checked, it was a tad difficult to find unspoiled Colombianas in SJ.

_________________
"Don't never trust a woman, till she's dead and deep....One day she'll say she loves you, next day she'll throw you on the street."

"...and if men didn't have this unquenchable desire to have sex with women, then they wouldn't have anything to do with women at all. I certainly wouldn't..."

JM,I'm sorry to disagree with you BUT you CAN gat an unspoiled Colombiana here in CR.You just have to meet her at the airport,before she gets into SJ and talks to a spoiled Colombiana. Seriously,the one thing that CR has over ALL the other monger destinations is the diversity of chicas. We may not have the Asians, (not my favorite anyways) or Brazilians,but we have lots of other ethnicities. Where else can you experience so many different kinds of chicas on a daily basis? The other thing that stands out in CR is the cameraderie between like-minded guys. For all it's perceived faults,the Del Rey is still a one of a kind phenomenon that enhances the experience.

I enjoyed the detailed discussions here about GDP, cost of living, etc. in CR/DR; however when making comparisons there needs to be attention paid to the tax burdens in various nations.

A number of sources indicate that the actual tax rate for the average American is 40-45%. When you include fed, state, local income taxes, social security taxes, extortionary property taxes in urban areas, sales taxes, etc., I do not believe this number to be excessive.

There are additionally many hidden taxes that are not described as taxes, but really are. For example, when utilities and hospitals are allowed to factor their bad debts into their rate structure and pass those "non-service to you" costs to you in your bill. Ouch!

I know that we are a lot better off than many folks in the rest of the world, but when we think we are making $70,000, and in fact actually have maybe half that to spend on ourselves, it paints a very different picture of American "wealth" that the Government likes to talk about.

I don't know a thing about the CR tax structure, and if any CRTers that know something about the CR tax burden would comment on it, I think it would be of interest.

Tom Swift

AND, I'm sorry to disagree with you VB, BUT the Colombianas that come here are not so much spoiled as it is ruined BEFORE they get here . Almost all of them come here via an organized crime ring that pays for their 'boobs', gives them the money to get here, money for their families till thay start sending their 'hard earned' money back home, and money to live on here for the first few days And all that comes with a price-45-60 % interest. And guys wonder why they are so business like-many never get it all paid back .

Do not get me wrong! I am not necessarily defending them; just trying to explain why many are the way they are. OH, and most that come here are the ones that can not make it in Colombia because of the competition.

They are told that they will be the hottest, most popular chicas here and will get rich; then they get here and have to start paying the loan back and "WHAM", they are doing good to end up with as much as they could have made in Colombiana.

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Old and retired but still bang, and bang, and bang!!!

BB...I guess you missed my humor about catching them at the airport before they are spoiled in SJ. My next comment started "seriously......"

Hey amigo, yep I did catch it!! My first sentence was also an attempt at being humorous and after it seriousness; guess I failed at the humor bit

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Old and retired but still bang, and bang, and bang!!!

Tom Swift,
All you said about taxes and other "hidden costs" of living in the US may very well be true, HOWEVER if you look at how Americans live compared to many of these other countries, particularly ones like CR and the Dom. Rep. you can't help but acknowledge that the average American lives MUCH better, at least from a material standpoint, than the average tica or dominicana. Now whether that more "luxurious" lifestyle translates into a happier life is a whole other question.