How we set prices - a living wage
What if we took the true cost of living as a basis for establishing prices, rather than market rates?
Workers in the Simpson’s Gloves factory in Richmond, Victoria 1932 (Museums Victoria)
The cost of living is higher than we think
The average cost of living in Australia, for an individual each week, as of July 2024, is $1300.
My definition of an individual is an adult who is supporting or caring for another adult and/or children. I hope you’ll agree that a significant proportion of our lives are spent supporting others. Whether it be children, elderly parents, someone out of work for a bit, someone with a disability, or even an elderly neighbour without family.
The following costs are based on Australian national averages for an individual per week. References are listed under Total. Click to reveal detail.
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According to a quick survey of Google search results on, “average rent in Australia”, combined with my personal experience looking at rental listings these past few months, or paying an average mortgage before the interest rates rose, it costs $600 per week for an average two-three bedroom, one bathroom, one kitchen house in Australia. If you’re raising kids, or have dependants, this sort of house is the minimum standard for a couple or single parents or carers. The number of single parent families is growing, (partly due to the design of houses and financial stress) as is the number of people offering in home care to aged or disabled dependants. So, I am going to set the minimum cost for housing as $600 per person. For some people, they can get creative and save on this. Some people don’t have dependants, some people live in areas that don’t cost that much, good for all of them. At some point, our circumstances in life change, and we may find ourselves in the range of this average.
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Mobility is critical and I’m going to set a car as the minimum standard in Australia. The average cost of running a car each week is close to $400. This includes fuel which we all know has wildly increased in price, oil and filters, tyres, rego, insurance, repairs and repayments on a small loan to buy a modest second hand car.
If you own your car outright, good for you, long may it last, and may you always have the savings to buy another when that time comes. If you have the skills and time to keep a cheap car running for yourself, good for you again! May you get ahead and help others along. But for many people, the cost of a car sadly requires finance, because no one is saving money.
If you can get by on public transport, a bicycle or access a rental car while raising a family, or caring for an elder or someone with a disability, then you have room to save here too. If you can share a car in the family or household, great! But the average standard is a car, on finance, driving quite a distance.
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The estimated average cost of food per person seems to vary from institution to institution. The NSW government has it at $100 per week, while more journalistic reports have it at $185 per week. Like housing, I like to base my estimation on a sharing and caring society, where each individual cares for at least one other, whether that be kids, an elder, someone in need of help, or anything like that. So, I’m going to put food at $200 per person per week, which will hopefully afford that care, and give some buffer for stocking a kitchen with the means to prepare meals, repair a fridge, or plant a garden.
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Some people like to think we have a public health care system in Australia. We used to, but try and find a doctor today who doesn’t charge a fee on top of the public subsidy. Try and find a specialist, dentist, psychologist… there are so many things to our health that will happen, and will cost us a lot. You can either be bothered trying to find an honest private health insurance, or put some money away and hope for the best. $50 per week is very little, especially if you don’t have sick leave to use.
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Energy from gas and electricity is rapidly increasing in cost. Internet and a device to access it is also costly but essential these days. Waste disposal, water, local facilities and the other things that Rates pay for, that most landlords pass on to renters. It all adds up and I suspect $50 per week is an underestimate.
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References:
To afford $1300 per week, a person needs to make $1700 before tax, to be left with $1332 after tax. If a working week is 38 hours (less would be progressive) then they need $45 per hour. At $60 per hour they are taking home $1700 per week after tax, theoretically saving $400 each week towards an investment or misfortune. I think that’s an ethical rate, all things considered.
Can we meet the cost of living through market rates on labour? No.
The average earning for an individual in Australia is $1060 after tax. The National Minimum Wage is $799 for a 38 hour working week, after tax. That’s $21 per hour after tax. Some people get paid leave, others don’t. Some people can work 38 hours per week, some can’t. Some people can pay into a retirement fund, others can’t. At that rate you are not saving for a rainy day.
With the average weekly cost being $1300 and the average weekly income after tax being $1060, clearly most of us are not living to any sort of average standard, and a worrying number of us are well below.
A 4 hour working day, allowing for 8 hours rest and then 12 hours for “what we will” (recreation, study, personal improvement, political engagement, volunteering, a sense of freedom!). Wouldn’t that be nice!
Can I meet the cost of living through Peak Oil Company prices? Maybe.
Anyone who works with Peak Oil Company needs to earn enough to pay the cost of living, and save a little. So, I set labour costs at $60 per hour for a 38 hour week, and I’ll continue to try and find a way to reduce the 38 hour working week to 20.
Included in those hours is sourcing materials, cutting, sewing, presenting and sending. Not included is research, development or learning. Ideally, I should be able to invest in R&D through whatever dividends are found, after covering the cost of living.
Let’s look at the cost of production of a few Peak Oil Company products, where I make my income from the labour. Click to reveal the details.
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Materials $200
Labour $600
Machines and studio $150
Marketing and delivery $100
TOTAL $1050
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Materials $220
Labour $480
Machines and studio $120
Marketing and delivery $100
TOTAL $920
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Materials $120
Labour $90
Machines and studio $45
Marketing and delivery $60
TOTAL $405
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Materials $160
Labour $240
Machines and studio $60
Marketing and delivery $80
TOTAL $540
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Materials $140
Labour $180
Machines and studio $45
Marketing and delivery $60
TOTAL $425
As you can see, some products run at a loss to the business, some have a small profit, so the business doesn’t make much, but the worker makes enough.
Making a living through Peak Oil Company
With the current cost of living being $1300 per week, and the income primarily deriving from the labour behind each item sold, how many products must we make and sell each week to cover one person’s cost of living? Around 30 hours worth. That’s 3 anoraks per week, or any combination of other products. That leaves 8 hours of a 38 hour week for that worker to learn new skills, research and develop new designs, or invest in a readiness fund for misfortune.
Photo by @nordfolke featuring a prototype Peak Oil Company Waxed Canvas Anorak
Is Peak Oil Company making and selling that many items? No.
Primarily because I am not producing that many items. For the past few months I have been spending more time on research and development, trying to increase the range, setting up for market stores, trying to grow the Youtube and Instagram channels, to make ready for sustained sales. I have been holding back sales to increase stock, so I can exhibit more at local markets and perhaps in a shopfront at some stage. I’ve also been trying to find ways to reduce costs. Costs of living and cost of production. There isn’t much to be found. The past two weeks have been lost to a machine I’m trying to fix.
But if I can sustain production and sales equivalent to 30 hours per week, then yes, I can make a living from Peak Oil Company. It’s time to really find out.
Competing in a global market
Global economics has radically distorted our values on many things. We can buy new t shirts in Australia, from big chain retailers for $3. Likewise, tools, cars, new technologies, many foods.. so many things in our weekly cost of living are imported at prices radically departed from our own economic conditions. Very few of us stop to think how much it costs to produce and sell such things. New clothing is almost cheaper than our opportunity shops sell second hand! We can’t even get the material to make the shirt for the price we can buy it for. Someone’s not getting paid for that shirt!
I have visited some regions that produce for global distribution and sale. I have seen underwear factories with roof spans larger than the town I live in! I have seen robotic machines knitting t shirts continuously for 24 hours, 7 days a week. I know how much those robots cost to buy and run, and I know how much the materials cost. It doesn’t make sense. The scale is bewildering, as is the waste. I don’t think anyone actually knows what’s going on.
I also know that if those countries had the standard of living that we have in Australia, their cost of living would go up substantially, maybe even similar to ours. As it is now though, their average standard is much lower, as is their cost of living, so then are the wages for work that hasn’t been automated yet.
Clearly the standard of living in Australia is being eroded. We have many people well below the line, while a few are getting over it, perhaps by standing on those below. Our cost of living already exceeds our average income. People are going homeless, or living in caravans, or forgoing something essential. Work at the average wage doesn’t pay the costs. Work at the minimum wage barely pays half the costs.
Correspondingly though, I do hope that our cousins in other regions of the world are seeing their standards of living improve. One of the moral premises of early neo liberalism was to lift the “developing world” out of poverty, but they didn’t tell us it was by pushing the “developed world” into poverty.
I can’t see how t shirts for $3 could be doing anything to lift anyone out of poverty. The same applies up the scale of products. Who isn’t getting paid when a $200 jacket costs less than the materials? The truth is more likely the case that, we in Australia are relying on near slave labour, to access products that make our costs a little more bare-able, while at the same time condemning ourselves to eventual slavery too. We are undermining our capacity to produce things within our own economy, which gives people little option but to accept minimum wage and not live to the standard.
Thankfully there are signs of change. Mount Alexandra has made it possible for people to live on land in caravans (tiny houses), helping to relieve the pressure on housing and reduce that particular cost of living. With regards to Peak Oil Company, I am very thankful to be meeting people who share this perspective, and who are fortunate and willing enough to buy the products I make. When I meet them personally, there is nearly always a conversation like this. They see that by buying a product like this they are circulating their money into their own economy and helping to retain a path for others to follow. A path that gives the option to make a thing and sell it and cover your cost of living that way, rather than not covering your costs through minimum, or even average wage. It’s a more sustainable future.
