COST OF LIVING

Jessica Cox – General Financial Literacy

LEARNING OBJECTIVE:

Compare income to the cost of living in

various geographical areas and the impact it
has on purchasing power.
VOCABULARY:

Cost of Living
WHAT IS COST OF LIVING?

 Cost of living is the amount of money needed to

sustain a certain level of living, including basic
expenses such as housing, food, taxes and health
care.
WHAT IS COST OF LIVING?

Cost of living is often used to compare how

expensive it is to live in one city versus another
locale.
WHAT IS COST OF LIVING?

Cost of living is tied to wages, as salary levels are

measured against expenses required to maintain a
basic standard of living throughout specific
geographic regions.
BREAKING DOWN COST OF LIVING

Cost of living can be a significant factor in personal

wealth accumulation, because a smaller salary can
go further in a city where it doesn't cost a lot to
get by, while a large salary can seem insufficient in
an expensive city.
BREAKING DOWN COST OF LIVING

According to Mercer's 2015 Cost of Living Survey,

U.S. cities with a high cost of living as of 2015
included Honolulu, Los Angeles, Washington and
San Francisco.
COST OF LIVING INDEX

A cost of living index compares the cost of living in

a major city as compared to a corresponding
metropolitan area.
The index incorporates the expense of various
components that comprise basic human needs,
creating an aggregate measure to which new
entrants into the workforce may refer.
COST OF LIVING INDEX

As college graduates weigh employment

alternatives and currently employed job seekers
consider relocation, the index provides an
informative snapshot of rental, transportation and
grocery costs.
COST OF LIVING INDEX
In 2016, using New York City as a benchmark for
other U.S. cities, San Francisco maintains the
highest cost of living in the Americas. Rental costs
in San Francisco are about 3% higher than in New
York, and food prices sit 22% above corresponding
levels found in New York. By contrast, the citizens
of Reno, Nevada enjoy a cost of living
approximately 43% below that of New York
residents when analyzing basic expenses on an
aggregate basis.
COST OF LIVING AND WAGES

For a family with two adults and two children, the

average cost of living in the United States hovered
around $65,000 per year in 2015. The figure
excludes discretionary spending on nonessential
goods and services, such as leisure, entertainment
and luxury items.
COST OF LIVING AND WAGES

The debate over raising the U.S. federal

minimum wage is deeply rooted in the
disparity between the lowest wage
allowed by law and the earnings needed
to maintain an adequate cost of living.
SHOULD WE RAISE
MINIMUM WAGE?
COST OF LIVING AND WAGES

 Proponents of a minimum wage hike cite increased worker

productivity levels since 1968 as inequitably correlated to
the minimum hourly rate of pay in 2012. As the minimum
wage once tracked the increase in productivity, the
divergence between earnings and worker efficiency have
reached historically disproportionate levels. By contrast,
opponents of a minimum wage increase contend that a raise
could spur higher consumer prices as employers offset
rising labor costs.