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YOU DECIDE: Does the cost-of-living vary by where you live?

Media Contact: Dr. Mike Walden, 919.515.4671 or

By Dr. Mike Walden
North Carolina Cooperative Extension

Each month the federal government releases new cost-of-living numbers. Technically speaking, the numbers show the change in the cost-of-living, also known as the inflation rate. Recently, the inflation rate has been rather modest, rising between 1.5 and 2 percent annually.

Often, after the federal inflation numbers come out, I receive calls from reporters and others asking two simple questions. Number one, what’s the cost-of-living for North Carolina, and number two, how does our state’s inflation rate compare to the national rate?

Unfortunately, I have to disappoint these callers on both questions. There are no official cost-of-living and inflation rate numbers for states and for most localities, such as cities and counties. There is one exception. Each month, the federal government does publish information from which inflation rates can be derived for several large cities around the country, but none of these are in North Carolina.

There are, however, private sources of state and local cost-of-living information available in publications and web sites. But caution should be exercised in using these. All the measures don’t use the same “market basket” of products and services in calculating their cost-of-living. It’s also important to understand where the measures obtain price information and how broad a survey is used to gather the price information. So, user-beware!

One of the best cost-of-living indices I’ve discovered for comparing states is published by the University of Missouri ( It is published quarterly and uses an easy-to-compare index value based on the national cost-of-living being 100.

In the first quarter of this year, the University of Missouri index showed North Carolina with the 26th highest cost-of-living among the 50 states and the District of Columbia. In other words, our cost-of-living is almost smack dab in the middle for the country. The index showed North Carolina being 4.4 percent cheaper than the nation. Hawaii has the highest cost-of-living, and Mississippi has the lowest. In the southeast, North Carolina is less costly than Florida and Virginia but slightly more costly than South Carolina, Georgia and Tennessee.

The University of Missouri data can also be used to see trends over time in the rankings of states by their cost-of-living. In the last decade, North Carolina has moved from being the 22nd to the 26th most costly state. This suggests the inflation rate has been slightly lower in North Carolina than in other states.

The best — in my opinion — source for local cost-of-living numbers is from the American Chamber of Commerce Researchers Association, published by the Council for Community and Economic Research. Available are cost-of-living indices for counties, cities and metropolitan areas. However, there is a price charged for obtaining this information.

Still, there are some general rules of thumb that I and other researchers have discovered about local costs-of-living. Cities and counties with more population tend to have higher living costs. And localities near amenities such as oceans, rivers and lakes that people find attractive also have higher living costs.

There’s a logical reason for these findings. Land is one of the few raw materials in our economy that is fixed in supply. So, there are a fixed number of land sites at the beach, near a river or lake or in the center of a city.

This means that as the number of people who want to live on one of our state’s beautiful beaches, at our gorgeous lakes or in our active cities increases, demand — in economics lingo — rises, supply stays the same and land prices rise. The higher price impacts not only what people pay for housing (both homes and apartments), but it also affects what businesses pay for their buildings. This means the products and services sold by firms are also higher in price in these favorite locations.

Therefore, the highest costs-of-living in a state like North Carolina tend to be in the large cities (Raleigh, Charlotte, Winston-Salem, etc.) and in resort areas.

There are a couple of key implications of this discussion to keep in mind. First, when comparing what someone earns in one city or state versus another, recognize that some of the difference in income will be due to cost-of-living differences. On average, workers in New York City earn more than workers in Charlotte because the cost-of-living is much higher in the Big Apple than in the Queen City.

Also, households can control — to some degree — their cost-of-living by carefully selecting where they live. Recently, a friend of mine purposefully moved out of the city to a rural area in order to lower his living costs, particularly those related to housing. Since he works from his home, it really doesn’t matter where he lives. Of course, if his job was in the city, he would have needed to compare his savings in housing costs to his extra driving costs in order to determine if the move was worthwhile.

Just as the purchasing power of money changes over time, it can also change with geography. So the next time you decide to move, make sure you consider how this decision affects what you pay!

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Dr. Mike Walden is a William Neal Reynolds Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of N.C. State University’s College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The College of Agriculture and Life Sciences communications unit provides his You Decide column every two weeks. Previous columns are available at

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