Cost of living is the cost of maintaining a certain standard of living. Changes in the cost of living over time can be operationalized in a cost-of-living index. Cost of living calculations are also used to compare the cost of maintaining a certain standard of living in different geographic areas. Differences in cost of living between locations can be measured in terms of purchasing power parity rates.
Cost of living is the cost of maintaining a certain standard of living. Changes in the cost of living over time can be operationalized in a cost-of-living index. Cost of living calculations can be used to compare the cost of maintaining a certain standard of living in different geographic areas. Differences in cost of living between locations can be measured in terms of purchasing power parity rates.
Employment contracts and pension benefits can be tied to a cost-of-living index, typically to the consumer price index (CPI). A COLA adjusts salaries based on changes in a cost-of-living index. Salaries are typically adjusted annually. They may also be tied to a cost-of-living index that varies by geographic location if the employee moves. In this later case, the expatriate employee will likely see only the discretionary income part of their salary indexed by a differential CPI between the new and old employment locations, leaving the non-discretionary part of the salary (e.g., mortgage payments, insurance, car payments) unmodified.
Annual escalation clauses in employment contracts can specify retroactive or future percentage increases in worker pay which are not tied to any index. These negotiated increases in pay are colloquially referred to as cost-of-living adjustments or cost-of-living increases because of their similarity to increases tied to externally determined indexes. Cost-of-living allowance is equal to the nominal interest minus the real interest rate.
When cost-of-living adjustments, negotiated wage settlements and budgetary increases exceed CPI, media reports frequently compare the two without consideration of the pertinent tax code. However, CPI is based on the retail pricing of a basket of goods and services. Most purchases of that same basket require the use of after-tax dollars—dollars that were often subject to the highest marginal tax rate. Consequently, the COLA will necessarily have to exceed the CPI inflation rate to maintain purchasing power.[1]
The widely recognized problem known as bracket creep can also occur in countries where the marginal tax brackets themselves are not indexed — COLA increases simply place more dollars into higher tax rate brackets. Only under a flat tax system would a percentage gain on gross income translate into a comparable inflation-offsetting gain at the after-tax level.
Some salaries and pensions in the United States with a COLA include:
Social security benefits in the United States receive cost-of-living adjustments (COLAs) to match increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). They can also receive funds from public charities for specific issues. The COLAs are made at most annually and are calculated based on the value of the CPI-W in the third quarter of the year (averaging the values from July, August, and September). COLAs can only increase benefits, so in deflationary years when the CPI-W drops there is no COLA.[3]
Worldwide survey
The Economist Intelligence Unit produces a semi-annual (twice yearly) worldwide cost of living survey that compares more than 400 individual prices across 160 products and services. They include food, drink, clothing, household supplies and personal care items, home rents, transport, utility bills, private schools, domestic help and recreational costs.
The survey itself is an internet tool designed to calculate cost-of-living allowances and build compensation packages for corporate executives maintaining a western lifestyle. The survey incorporates easy-to-understand comparative cost of living indices between cities. The survey allows city-to-city comparisons, but for the purpose of this report all cities are compared to a base city of New York City, which has an index set at 100. The survey has been carried out for more than 30 years.
The most recent survey was published in March 2017. Singapore remains the most expensive city in the world for the fourth year running, in a rare occurrence where the entire top five most expensive cities were unchanged from the year prior.[4]Sydney and Melbourne have both cemented their positions as top-ten staples, with Sydney becoming the fifth most expensive, and Melbourne becoming the sixth. Asia is home to more than five most expensive cities in the top twenty but also home to eight cheapest cities of the cheapest ten.
Stipends or extra pay provided to employees who are being temporarily relocated may also be called cost-of-living adjustments or cost-of-living allowances. Such adjustments are intended to offset changes in welfare due to geographic differences in the cost of living. Such adjustments might more accurately be described as a per diem allowance or tied to a specific item, as with housing allowances. Employees who are being permanently relocated are less likely to receive such allowances, but may receive a base salary adjustment to reflect local market conditions.
A non-taxable cost-of-living allowance is frequently given to members of the U.S. military stationed at overseas bases if the area to which a service member is assigned has a higher cost of living than the average area in the United States. For example, service members stationed in Japan receive a cost of living allowance of between $300 and $700 per month (depending on pay grade, years of service, and number of dependents), in addition to their base pay.
Cost Off Living a global living cost comparison site
July 11, 2023
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This article has multiple issues Please help improve it or discuss these issues on the talk page Learn how and when to remove these template messages The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject You may improve this article discuss the issue on the talk page or create a new article as appropriate December 2022 Learn how and when to remove this template message This article needs additional citations for verification Please help improve this article by adding citations to reliable sources Unsourced material may be challenged and removed Find sources Cost of living news newspapers books scholar JSTOR March 2023 Learn how and when to remove this template message Learn how and when to remove this template message For other uses see The Cost of Living disambiguation Cost of living is the cost of maintaining a certain standard of living Changes in the cost of living over time can be operationalized in a cost of living index Cost of living calculations are also used to compare the cost of maintaining a certain standard of living in different geographic areas Differences in cost of living between locations can be measured in terms of purchasing power parity rates 2012 Aysen protests due to the high cost of living in Patagonia Contents 1 Definition 2 Cost of living adjustment COLA 3 Consumer Price Index CPI 4 Social security benefits 4 1 United States 5 Worldwide survey 6 Other uses 7 See also 8 References 9 External linksDefinition EditThis section does not cite any sources Please help improve this section by adding citations to reliable sources Unsourced material may be challenged and removed October 2022 Learn how and when to remove this template message Cost of living is the cost of maintaining a certain standard of living Changes in the cost of living over time can be operationalized in a cost of living index Cost of living calculations can be used to compare the cost of maintaining a certain standard of living in different geographic areas Differences in cost of living between locations can be measured in terms of purchasing power parity rates Cost of living adjustment COLA EditThis section does not cite any sources Please help improve this section by adding citations to reliable sources Unsourced material may be challenged and removed October 2022 Learn how and when to remove this template message Employment contracts and pension benefits can be tied to a cost of living index typically to the consumer price index CPI A COLA adjusts salaries based on changes in a cost of living index Salaries are typically adjusted annually They may also be tied to a cost of living index that varies by geographic location if the employee moves In this later case the expatriate employee will likely see only the discretionary income part of their salary indexed by a differential CPI between the new and old employment locations leaving the non discretionary part of the salary e g mortgage payments insurance car payments unmodified Annual escalation clauses in employment contracts can specify retroactive or future percentage increases in worker pay which are not tied to any index These negotiated increases in pay are colloquially referred to as cost of living adjustments or cost of living increases because of their similarity to increases tied to externally determined indexes Cost of living allowance is equal to the nominal interest minus the real interest rate Consumer Price Index CPI Edit M2 change from a year ago Consumer price index When cost of living adjustments negotiated wage settlements and budgetary increases exceed CPI media reports frequently compare the two without consideration of the pertinent tax code However CPI is based on the retail pricing of a basket of goods and services Most purchases of that same basket require the use of after tax dollars dollars that were often subject to the highest marginal tax rate Consequently the COLA will necessarily have to exceed the CPI inflation rate to maintain purchasing power 1 The widely recognized problem known as bracket creep can also occur in countries where the marginal tax brackets themselves are not indexed COLA increases simply place more dollars into higher tax rate brackets Only under a flat tax system would a percentage gain on gross income translate into a comparable inflation offsetting gain at the after tax level Some salaries and pensions in the United States with a COLA include Social Security Civil Service Retirement System CSRS 2 Federal Employees Retirement System FERS 2 Pensions in Canada with a COLA include Canadian Auto Workers union CAW Local 200 Ontario Social security benefits EditUnited States Edit Social security benefits in the United States receive cost of living adjustments COLAs to match increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers CPI W They can also receive funds from public charities for specific issues The COLAs are made at most annually and are calculated based on the value of the CPI W in the third quarter of the year averaging the values from July August and September COLAs can only increase benefits so in deflationary years when the CPI W drops there is no COLA 3 Worldwide survey EditThe Economist Intelligence Unit produces a semi annual twice yearly worldwide cost of living survey that compares more than 400 individual prices across 160 products and services They include food drink clothing household supplies and personal care items home rents transport utility bills private schools domestic help and recreational costs The survey itself is an internet tool designed to calculate cost of living allowances and build compensation packages for corporate executives maintaining a western lifestyle The survey incorporates easy to understand comparative cost of living indices between cities The survey allows city to city comparisons but for the purpose of this report all cities are compared to a base city of New York City which has an index set at 100 The survey has been carried out for more than 30 years The most recent survey was published in March 2017 Singapore remains the most expensive city in the world for the fourth year running in a rare occurrence where the entire top five most expensive cities were unchanged from the year prior 4 Sydney and Melbourne have both cemented their positions as top ten staples with Sydney becoming the fifth most expensive and Melbourne becoming the sixth Asia is home to more than five most expensive cities in the top twenty but also home to eight cheapest cities of the cheapest ten Other uses EditThis section does not cite any sources Please help improve this section by adding citations to reliable sources Unsourced material may be challenged and removed October 2022 Learn how and when to remove this template message Stipends or extra pay provided to employees who are being temporarily relocated may also be called cost of living adjustments or cost of living allowances Such adjustments are intended to offset changes in welfare due to geographic differences in the cost of living Such adjustments might more accurately be described as a per diem allowance or tied to a specific item as with housing allowances Employees who are being permanently relocated are less likely to receive such allowances but may receive a base salary adjustment to reflect local market conditions A non taxable cost of living allowance is frequently given to members of the U S military stationed at overseas bases if the area to which a service member is assigned has a higher cost of living than the average area in the United States For example service members stationed in Japan receive a cost of living allowance of between 300 and 700 per month depending on pay grade years of service and number of dependents in addition to their base pay See also EditLiving wage ACCRA Cost of Living Index Cost of living in Namibia Eardex com United Kingdom cost of living crisis United States Consumer Price Index Consumer Price Index Inflation Price index Cost of Living Allowance U S Military List of U S states by adjusted per capita personal incomeSpecific List of most expensive cities for expatriate employees Middle class squeeze Cost of raising a child Walk to work protestReferences Edit CPI Home U S Bureau of Labor Statistics www bls gov Retrieved 2019 09 30 a b Flanagan Tammy 2006 09 08 COLA Wars National Journal Group Archived from the original on 2008 10 05 Retrieved 2008 09 23 Cost of Living Adjustment COLA Information Social Security Social Security Administration Retrieved August 11 2021 Singapore Maintains Top Spot as World s Costliest City Bloomberg 2015 03 03 External links Edit Wikisource has the text of the 1922 Encyclopaedia Britannica article Cost of Living Economist Intelligence Unit worldwide cost of living survey results requires registration Cost of Living Calculator relative to time from American Institute for Economic Research AIER Expatistan a crowd sourced comparison site Cost Off Living a global living cost comparison site Retrieved from https en wikipedia org w index php title Cost of living amp oldid 1152341711, wikipedia, wiki, book, books, library,
