Cost of Living: Cost of Living Index
The indicator is positive.
At 95.4, Erie’s Composite Cost of Living Index for 2014 is not quite 5% below the average for 218 urban areas from around the country. That means a dollar goes 4.6% farther in Erie than in the "average" place. Compared to Erie's eight peers that participated in the COLI for 2014, Erie finished in the middle with four having higher costs and four having lower, and just below the benchmark average of 95.8.
Housing is a key component of COL differences across space, and Erie does very well in that category with a housing index number of 83.6, more than 16% below the urban average cost and lower than all but two of Erie's eight peers.
Costs of miscellaneous goods & services in Erie are the highest among the benchmark regions while utilities and transportation costs are the lowest among all benchmark regions, with only Cedar Rapids, IA having slightly lower transportation costs. The miscellaneous goods & services component is based on the price of a major appliance repair, a small cheese pizza, annual veterinary services, and several other items.
Note that it is not appropriate to compare C2ER Cost of Living Index values through time, because each year's index is based on a different set of urban areas.
The Cost of Living Index (COLI), compiled by C2ER, the Council for Community and Economic Research, measures the cost of living in Erie compared to approximately 300 other urban areas of the United States. It is a measure of geographic (place to place) cost differences, not a measure of inflation through time. An index value of 100 represents the average cost across those 300-some urban areas, so a value of 95 would indicate a local cost of living that is 5% below the average (i.e., 5% cheaper).
Why is this important?
While income and wages vary significantly from place to place, the cost of living also varies significantly across space. So, for example, an offer of a 50% higher income to work in Manhattan sounds like quite an incentive to move, until you realize that the overall cost of living in Manhattan is more than double the cost of living in Erie (actually 2.3 times as much in 2014), and housing costs are more than five times Erie’s. As a result, a 50% higher income in Manhattan would translate to a lower COLI-adjusted “real” income than in Erie.
In general, a lower cost of living in a place is preferred since it means that a resident’s income goes farther, allowing a higher standard of living. Typically, places with higher income levels also tend to have higher costs of living, but the costs tend to be less than proportionately higher. That means that places with higher nominal incomes also tend to have higher COLI-adjusted “real” incomes too.
The basket of goods and services that is priced for the COLI is based on household purchasing patterns used by the U.S. Bureau of Labor Statistics for the national Consumer Price Index. However, it is adjusted to represent the purchasing patterns of a “midmanagement” household (approximately the top 20% of income), as well as to insure that items are comparable across places. Information about the basket that is priced is available from C2ER here. The individual urban areas participate voluntarily in the COLI program, gathering data using C2ER’s detailed specifications. C2ER also pays to have the data gathered in selected major urban areas to ensure their inclusion in the database.
The Nitty-Gritty Details
This indicator includes the overall (composite) Cost of Living Index, as well as separate indexes for its six subcategories: Grocery items, Housing, Utilities, Transportation, Health Care, and Miscellaneous goods and services. Information about the individual items in each category, as well as their weights in the market basket, is available from C2ER here.
Included are whichever of the standard 16 peer areas participate in the COLI that quarter. There are no data for the U.S. overall, although an index value of 100 reflects the average for all the urban areas that participate in that quarter.
Quarterly (Three quarters of new data each year, plus one annual average release instead of the fourth quarter data.)
C2ER, the Council for Community and Economic Research.
Founded in 1961, the Council for Community and Economic Research (C2ER) is a membership organization that promotes excellence in community and economic research by working to improve data availability, enhance data quality, and foster learning about regional economic analytic methods. C2ER accomplishes this mission by:
* Conducting training, advocacy, and research
* Delivering innovative products and services for researchers
* Developing professional networks
C2ER's 500+ members span a broad range of specialty skills and collectively touch all aspects of community and economic development in the U.S. and Canada. They include research professionals from: Chambers of Commerce, Economic Development Organizations, Government Agencies, Universities, Utility Companies, Workforce Development Boards, Community Development Organization
Other Related Data
Latest Erie Data from the Economic Research Institute of Erie, at the Black School of Business at Penn State Behrend