Cost of Living Comparison Key Terms

Understand cost of living comparison key terms that will structure your compensation packages

By Michele Vrouvas

More than ever, today's thriving businesses are depending on cost of living comparisons to come up with salary figures that will attract the highest performers. Luring the top talent that will drive your company's profits and growth depends on your ability to offer worthwhile compensation packages. By acquainting yourself with cost of living comparison key terms you'll have a better understanding of the standard analyses on which these comparisons are based.

Relocation assessor

Cost of living comparisons depend upon relocation assessor calculations. For example, these calculations consider the cost of all the products and services an area resident depends on.
Try: At Economic Research Institute, you'll get insight into the most common costs of living on which a relocation assessor depends. Find out how cost of living is added to this mix and how a relocation assessor handles local wages as an economic indicator.

Consumer expenditures

Economists who perform cost of living comparisons refer to consumer expenditures as the infinite number of goods and services available to any individual.
Try: Go to Council for Community and Economic Research for a detailed explanation of the methodology by which consumer expenditures are calculated. Find out how economists assign prices to certain goods and services for the purposes of performing this analysis.

Consumer price index

Economists frequently base their cost of living comparisons upon a consumer price index, a measurement of the prices consumers pay for standard items; this is subject to frequent change.
Try: The Bureau of Labor Statistics contrasts the consumer price index with the cost of living index as effective economic indicators of consumer buying and consumption patterns.

Cost of living adjustment

Also known as COLA, the cost of living adjustment was enacted in 1973 as a system to reassess whether the social security benefits individuals are receiving remain sufficient to meet their needs.
Try: To understand how COLA remains vital to calculating social security benefits at any given time, read the Social Security Administration's discussion of how COLA is calculated and what is the most up-to-date cost of living adjustment rate.

Liveability

As a theory, liveability refers to the resources found in any given place that make that location desirable or not.
Try: Check out the suggested liveability scale at Economist Intelligence Unit. You'll also find out about the uses economists make of liveability analyses when they are comparing living costs.

Cost of living calculator

Economists use a cost of living calculator when they must adjust prices over two or more years.
Try: Go to American Institute for Economic Research to see the formula plugged into the cost of living calculator and the data used to keep the cost of living calculator current.