Using Cost of Living Comparisons

Fully understand the pitfalls of cost of living comparisons

A domestic or international cost of living comparison is a valuable tool for employees and employers during the hiring process. Cost of living comparisons allow you to compare salaries and living expenses in two or more cities.

Using cost of living comparisons is generally quite simple. Normally, you just need to enter a salary amount and the cities that you are comparing. Still, there are a few pitfalls you will want to watch out for, including:

1. All cost of living calculators do not use the same data to make their comparisons;

2. Most cost of living comparisons include a legal disclaimer;

3. And making an international cost of living comparison requires an international cost of living calculator.

 

Learn about the differences between cost of living comparisons

Not all cost of living comparisons are the same. Some include expenses such as health care and recreation. Others only include basic expenses such as housing and utilities. Some are seasonally adjusted; others are not. In order to accurately compare cost of living, you should know exactly what is included in the raw data.
Try: Check out InflationData.com for a detailed description of the differences between several cost of living calculators. The site also defines terms such as the cost of living index. PayScale has the answers to several frequently asked questions about cost of living comparisons.

Read the legal disclaimer for cost of living comparisons

Cost of living international and domestic comparisons often come with legal disclaimers. The disclaimers usually explain that the information in the cost of living calculator is provided "as is" and the provider will not be held liable for any errors or monetary losses.
Try: For a good example of legal disclaimers for a cost of living comparison, take a look at the disclaimers provided on CityRating.com or Fast Forward.

Reference an international cost of living comparison

If you want to know the worldwide cost of living, you will need to find an international cost of living index that allows you to compare costs between countries. An international cost of living calculator takes into account additional factors such as currency exchange rates. Because a cost of living international comparison is difficult to come by, you may have to pay for the information.
Try: Economic Research Institute allows you calculate the cost of living differential between more than 3,000 cities in the world. Economist Intelligence Unit comes up with its data by comparing the costs of expenses as small as cinema tickets in different cities of the world.

 

• If your company often uses cost of living comparisons to determine employee wages and to price merchandise, you should consider purchasing a subscription to a service that provides a domestic or international cost of living calculator.

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