The Wages of High Wages
Tom Lee and Ezra Klein commiserate over the high price of beer in DC:
While restaurants are dropping food prices, beverage prices are still going up. Surprisingly enough, Atlanta — not LA or NYC — has the most expensive dinner entrees. As for the most expensive drinks in America, that’s a non-shocker: “New York offers more highly priced drinks, with Washington DC a close second. A domestic beer costs $3.22 on average in Oklahoma City, $4.13 in Washington DC, and $4.15 in New York.
It’s common for friends of mine to go visit Philadelphia and then come back outraged by how expensive everything is in DC. This is, however, largely a case of the wages of high wages. Mean annual earnings in the DC metro area are $57,080 a year, way above the national average of $42,270. Philly, by contrast, is close to average at $46,410 while Oklahoma City is well below average at $36,880. The ones who really seem to be losing out on this deal are the New Yorkers, whose beer costs slightly more than DC’s despite somewhat lower wages. What I’d really like to see is the full dataset from Intellaprice, then you could make a “price of beer vs average wages” scatterplot.
43 Responses to “The Wages of High Wages”
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October 21st, 2009 at 4:10 pm
Even though the difference between New York and Oklahoma City is less than a dollar per beer, people are outraged at how expensive New York is. This seems to suggest that a higher alcohol tax on the order of fifty cents per beer (marked up to a dollar or so in bars) would indeed be effective in reducing drinking while not actually imposing a large financial burden on people. If having twenty rather than ten beers in bars per month really gives that much more pleasure to some people among the working poor and lower middle class, then they lose only ten dollars a month. And if the outrage outweighs the pleasure, then people drink less and are healthier and more productive and less costly to society.
October 21st, 2009 at 4:11 pm
And then we could work that with the availability of single people thing to construct a model to determine the probabilities that residents of certain cities are able to people people to get drunk enough to sleep with them, and if so, whether they will be able to afford to buy breakfast the next morning.
October 21st, 2009 at 4:13 pm
No, the ones who really seem to be losing are the relatively massive DC population making less than the mean wage. Those on the wrong side of the (decreasing but still notable) apartheid in our city get screwed with their pants on.
How does any liberal choose mean wages over median wages? The income curve is always shifted left!
October 21st, 2009 at 4:13 pm
Wouldn’t high rents be the more likely explanation for high prices? I assume the average bar maid in Oklahoma makes most of her money in tips, just the average bar main in NYC or DC. While, I’d imagine the rent on a prime location restaurant space in Oklahoma City is far less than NYC or DC.
Wouldn’t commercial rent/beer price be what you’re looking for?
October 21st, 2009 at 4:13 pm
J.W. Hammer @2: …the probabilities that residents of certain cities are able to people people to get drunk enough to sleep with them…
You clearly have been reading too much of Matt’s blog.
October 21st, 2009 at 4:14 pm
Or, rather, “Yglesias much?”
October 21st, 2009 at 4:16 pm
I lived in Czechoslovakia (back when it existed) and would sometimes meet meet gaggles of Scandinavians who would come down for the weekend just to partake of the cheap alcohol. I now live in Baltimore, and now run into DC’ers partaking of our relatively cheaper nightlife. The trick is to live in Baltimore but MARC yourself to a DC-wage job.
October 21st, 2009 at 4:18 pm
Yes, because in a city like Washington, the “mean” is really going to be the most accurate measurement of average incme. Indeed, given our third-world level of income distribution, the national “mean” is all but worthless.
October 21st, 2009 at 4:19 pm
@5&6:
Besides the typo, I think you can reasonably conclude that I read entirely too much of this blog by noting that I remembered a post from a year ago.
October 21st, 2009 at 4:20 pm
If having twenty rather than ten beers in bars per month really gives that much more pleasure to some people among the working poor and lower middle class, then they lose only ten dollars a month.
Before anyone accuses me of classist elitism, my comment was intended as a rebuttal to the arguments in previous threads about how regressive taxes like a soda tax or an alcohol tax screw the little guy and are easy for trust-fund Manhattanites like Yglesias to support. Presumably, many upper middle class and rich people also get a lot of pleasure out of drinking more rather than less beer.
October 21st, 2009 at 4:20 pm
Yes, east coast beer prices are indeed high. Come out to St. Louis, Matt. We’re the home of Anheuser-Busch (Inbev). Domestic beer is about $2.75-3.25. More at a sports game or a fancy bar, natch. But I think you’ll find the prices reasonable at places you would like to visit.
October 21st, 2009 at 4:23 pm
I agree. It would also explain the DC-NY enigma. NY may have lower wages than DC, but it has higher rents.
October 21st, 2009 at 4:25 pm
I think soullite @8 is right, in this context. What matters is the proportion of people below some threshold of beer price sensitivity. If you’re making 120k a year, you probably don’t give a rat’s ass whether your Rolling Rock costs three dollars or six dollars; if you’re making 20k, then you probably do, and the fact that the city you live in has lots of people making 120k doesn’t affect your price sensitivity.
October 21st, 2009 at 4:28 pm
#3,8 are correct about the mean being unrepresentative. Almost nobody who sells or ships beer makes the mean income (the people who brew or bottle it don’t either, but big cities import their beer so the brewers and bottlers aren’t in the city’s income distribution at all).
October 21st, 2009 at 4:31 pm
The real shocker: that’s $4/pint for American beer.
October 21st, 2009 at 4:32 pm
This post is fucking stupid. Absolutely no reasoning is provided as to why high incomes explain high beer prices in D.C. Why aren’t food prices similarly correlated. Who cares about the average wage when that’s likely highly distorted by astronomical salaries in the top few percent?
October 21st, 2009 at 4:32 pm
The trick is to live in Baltimore but MARC yourself to a DC-wage job.
Having temporarily done that commute on the Marc, it is not a fun one (even if you, as I did, live within walking distance of the MARC station in B-more and work within walking distance of Union Station). If you have to work late, woe to you. On the other hand, at least at the end of your long commute, you’re in Baltimore rather than a suburb (which could be a feature or bug depending on how you look at it – I quite like Charm City personally).
October 21st, 2009 at 4:35 pm
Ian,
Don’t use the term “American beer” as a synonym for shit like Budweiser. Plenty of good beer gets made in America. What I hate is the fucking term “domestic.” I was at a bar and they advertised a dollar off domestics. So I ordered a beer from a microbrew down the street. They told me I didn’t get a dollar off because it wasn’t domestic. I said what the fuck do you mean it isn’t domestic, they brew it right down the fucking street. They said, sorry that’s an import. I said, what the fuck do you mean it’s imported, it’s from down the fucking street. Fuck them.
October 21st, 2009 at 4:43 pm
It’s common for friends of mine to go visit Philadelphia and then come back outraged by how awesome everything is compared to DC.
Fixed that for you. Carry on…
October 21st, 2009 at 4:56 pm
Back in the 90s you could get a pitcher of domestic beer in Baltimore for a dollar.
That’s right, “Your Personal Pitcher!”
October 21st, 2009 at 5:03 pm
See, I thought it was the poor in Washington, who are just as poor as the poor anywhere else in this country, and seem to exist in considerable numbers.
October 21st, 2009 at 5:07 pm
Because DC has lousy food.
October 21st, 2009 at 5:09 pm
Without knowing more about the beer-pricing study’s methodology, I am skeptical. If, for example, they compared the cheapest beer at each of a number of restaurants, that excludes restaurants with no disproportionately cheapest option. If they took an average across all offered beers, that penalizes bars with a wider selection of premium domestics.
What I’m trying to say is, other cities have $.50 PBR nights because only in DC and Brooklyn is PBR a “status beer” (and thus can be sold for the same price as major-brand domestics) as opposed to the thing you drink when you really don’t want to spend any money.
Also, I completely agree with all the median vs mean income critiques.
October 21st, 2009 at 5:20 pm
Three decades ago (yipe!) when I drove a beer truck, Rolling Rock was a cheap, blue-collar beer. Also came in shitty packaging that didn’t stand up well during delivery. Anyone know when and how it became trendy?
October 21st, 2009 at 5:22 pm
Go back to the original link – the survey doesn’t cover all restaurants, only “casual dining.” New York has lots of expensive restaurants, but they’re not casual chains. However in Atlanta’s recently built suburbs you have a choice between indigenous Southern slop and chain restaurant bland.
October 21st, 2009 at 6:11 pm
I just pray that my new Obamacare premiums don’t cut into my beer budget.
Beer: Expensive but worth every penny.
October 21st, 2009 at 6:50 pm
Oh, how I yearn for the days of $.40 7 oz. bottles of Old Vienna beer in trashy Upstate NY bars. We called then “O.V. splits.”
October 21st, 2009 at 7:30 pm
Opie – Yes, the poor are losing out. But just to keep things in perspective (and think about how generalized these statistics are), the average price of a beer in DC cited looks an awful lot like the average price of a beer in fancier parts of NW. The massive numbers of fancier places in fancier neighborhoods (whether in NY or DC) tend to drive that average up. So if you’re living in lower-income neighborhoods in Anacostia or Queens, then your local neighborhood “casual dining” place probably has cheaper beer, perhaps a little more commensurate with local incomes.
On the other hand, if you live in a poor neighborhood in DC, you probably don’t have so much in the way of “casual dining” choices, which strikes me as a bigger problem than the price of Bud bottles.
October 21st, 2009 at 8:12 pm
[...] has taken my offhanded complaint about DC beer prices and placed it within the context of social justice, noting that DC’s high wages account for its high beer prices (our average drink prices are [...]
October 21st, 2009 at 8:45 pm
The wage argument is idiotic. There is no median bar and fancy bars and dives alike all get the same beer from the same distributors. The difference in price comes from a combination in the cost of real estate and the nature of the bar, not the mean income. Before taxation beer costs the same everywhere in the US. It’s a commodity. I’m sure you can find bars that serve $3 domestic beer all the time in DC, it’s just they are in really bad neighborhoods. Here’s a blog devoted to sub-$4 beer in DC and most of the beer is premium beer. I think your whining friends want to hang around cool people in in-places. Guess what? You pay $5 a beer to do that in a powerful nation’s capital.
Re: food prices. My wild-arsed guess about why dinners cost more in Atlanta is they include more sides as part of the entree and the study isn’t accounting for it somehow. ‘Meat and two’ is one entree down South, not an entree and two sides like it is in the Union.
October 21st, 2009 at 9:12 pm
Who needs beer? I’m happy with a nice cold bottle of ‘bird.
October 21st, 2009 at 10:46 pm
Because the food in DC sucks.
October 21st, 2009 at 10:50 pm
I see Joe had beat me to it.
I moved to the DC area from Philly when Philly was in the worst of it’s downward spiral in the eighties, and I couldn’t believe how such a wealthy, image concious city could have such an utter wasteland for a resturant scene.
October 22nd, 2009 at 12:06 am
other cities have $.50 PBR nights because only in DC and Brooklyn is PBR a “status beer” (and thus can be sold for the same price as major-brand domestics) as opposed to the thing you drink when you really don’t want to spend any money.
FWIW, you can find PBR as a status beer in Boston, too. San Francisco, even, although it’s supposed to be ahead of most of the rest of the country, at least a few years ago.
Three decades ago (yipe!) when I drove a beer truck, Rolling Rock was a cheap, blue-collar beer. Also came in shitty packaging that didn’t stand up well during delivery. Anyone know when and how it became trendy?
I recall in the mid to late 90s (when I thought all beer was disgusting, along with wine and any non-sweet cocktail or liqueur (yes, I was a girly-drinker for my drinking youth)), my dad drank Rolling Rock, even as he wouldn’t touch most low-end domestic beer (aside from Budweiser, which I myself, who as we speak am sporting in my fridge a Leffe, two Magic Hats, and two Dogfishes, also find to be perfectly drinkable). Since my dad is usually five to ten years behind things like this, I’d wager that Rolling Rock rose out of the low end into the category of tasteful domestic beers some time around 1990.
October 22nd, 2009 at 2:25 am
After half a decade in Tokyo, any of these beer prices is dirt cheap. Wages are probably a lot better here for restaurant workers, ~$8/hr, no tips.
And #18, yeah, you’d think people would know the meaning of domestic.
October 22nd, 2009 at 4:16 am
I think Rolling Rock gets a piggyback effect from all the advertising Heineken does in it’s green bottle. Heineken positions itself upscale and looks a little like Rolling Rock.
October 22nd, 2009 at 7:17 am
Brief history of Rolling Rock
October 22nd, 2009 at 10:09 am
I know Rolling Rock was trendy with the college indie rock crowd by no later than 1986. That was the drink of choice at the rock clubs in New Haven I used to frequent. But no one claimed it was a great beer – it was simply cheap and didn’t have the corporate/frat boy stigma of a Budweiser or Miller. RR was the cheapest beer you could get in a bottle, any cheaper and you were getting Busch or Milwaukee’s best in a can.
October 22nd, 2009 at 11:14 am
My family is in the bar business. Joejoejoe at #30 is spot on regarding beer pricing. The price of a pint is almost completely tied to the bar owner’s rent.
Also, Rolling Rock has never been a trendy beer.
October 22nd, 2009 at 11:51 am
Somebody else’s beer was trendy back when I was in college in Ann Arbor, circa early to mid 70’s. Rolling Rock was favored as it was from exotic Latrobe County, or some such, and Coors was a regional beer prized by those bringing some back to school after a ski trip west. I was alone in prefering our own regional beer, Strohs, which I still think is as good as American style lagers get, even though they have long deserted Detroit. I would seek out restaurants that had Strohs’ Signature on tap. Yumm. Now I mainly drink my own brews or that of the local brewpub.
October 22nd, 2009 at 12:08 pm
What many people are missing is some insight from the industry. Beer prices at bars and restaurants are largely based on cost from the distributor + markup based on wages/rent/profit margin. The wholesale prices in DC are much higher than the surrounding areas, especially Baltimore. Couple that with higher rent and it explains the higher prices. Most bars/restaurants price at roughly the same profit margin on alcohol.
When I worked at a club in the mid 90’s we took a trip to Baltimore once, where the bars sell bottles of liquor to go. The bar’s to go price on many bottles was cheaper than our wholesale prices in DC.
October 22nd, 2009 at 1:32 pm
Yeah, food sucks in DC, but the beer sucks, too. Half the time Sierra Nevada is the best offer, sometimes you’re not even lucky enough to get that, and there’s, what, three, four places with a legitimately decent selection in the N.W., and probably not substantially more than that in N.E. or S.E., either. My general complaint about DC (viz., You want how much? for this &%#@, you should be paying me!) goes double for bar prices.
October 24th, 2009 at 1:34 pm
[...] Matthew Yglesias » The Wages of High WagesPhilly, by contrast, is close to average at $46410 while Oklahoma City is well below average at $36880. The ones who really seem to be losing out on this deal are the New Yorkers, whose beer costs slightly more than DC’s despite somewhat lower wages. … I now live in Baltimore, and now run into DC’ers partaking of our relatively cheaper nightlife. The trick is to live in Baltimore but MARC yourself to a DC-wage job. soullite Says: October 21st, 2009 at 4:18 pm … read more… [...]