What is the difference between cost-of-living and geographic pay differentials?
Wage and salary differentials reflect the local demand for and supply of labor. Cost of living is dictated by the local demand for and supply of goods and services. ERI subscribers may also come across the term “buying power,” which is the inverse of cost of living. Cost of living is the cost of purchasing goods and services, as determined by the demand and supply of goods, services, and property. For example, if the cost of living is 10% higher in an area, the buying power is approximately 10% less in that area. This demand for and supply of goods and services are defined in terms of the data ERI surveys for Assessor Series® cost-of-living databases. This data is downloaded from existing sources and includes: rental rates, housing prices, income taxes, property taxes, gasoline prices, medical costs/services, major retail grocery and drug store prices, etc. Cost-of-living differentials, as reported by ERI, reflect cost models at different income levels (e.g., an auto of “x” value drive
