Cost of Living

How It Works

Cost of living varies dramatically across the United States, driven primarily by housing costs but also influenced by food prices, state and local taxes, healthcare, and transportation. The BLS publishes Regional Price Parities (RPPs) that show price levels across metropolitan areas — Hawaii and the Northeast are typically 10-20% above the national average while the South and Midwest run 5-10% below. Food prices specifically vary by about 15-25% between the cheapest and most expensive regions, which the Cheeseburger Index tracks directly. The federal government uses cost-of-living data to set locality pay adjustments for federal employees — a GS-12 in San Francisco earns about 42% more than the same grade in rural Alabama. The poverty threshold, however, does not adjust for cost of living, meaning the same income qualifies as poverty everywhere despite massive regional price differences. Cost-of-living calculators typically weight housing at 30-35%, food at 10-15%, transportation at 15-20%, healthcare at 8-10%, and taxes at 10-15%.

Related Terms

• Regional Price Differences — Systematic variations in food prices across U.S. geographic regions, driven by proximity to production, local labor costs, transportation logistics, and competition among retailers.
• Consumer Price Index (CPI) — A measure of the average change in prices paid by urban consumers for a fixed basket of goods and services, published monthly by the Bureau of Labor Statistics.
• Food Expenditure Share — The percentage of household income or total spending devoted to food — lower-income Americans spend roughly 30-35% of income on food versus 8-10% for higher-income households.