Basics · 5 min read
Cost of Living Index Explained: What Above or Below 100 Means
What a 'cost of living index' really measures — and how to use it when you're weighing a move or a job offer.
By Muhammad Tahir · Updated October 2026
The short answer
A cost of living index compares a place's prices to the U.S. average, which is set at 100. An index above 100 means the place is more expensive than average; below 100 means it is cheaper. A city at 110 costs about 10% more to live in than the typical American metro, and one at 92 costs about 8% less.
Almost every relocation decision runs into the same phrase: cost of living. It sounds precise, but most people have only a fuzzy sense of what it means. Here is the plain version.
It's a price level, not a price tag
A cost-of-living index measures how expensive a place is compared to the national average, which is set at 100. A metro at 110 is about 10% more expensive than the typical American metro; one at 92 is about 8% cheaper. It bundles housing, groceries, transportation, utilities, and services into a single number.
On CityLedger, that number is the U.S. Bureau of Economic Analysis's Regional Price Parities — the government's official measure of local price levels. We don't invent an index; we use the public one and show our work.
Why two cities at the same index can feel different
The headline index is an average, and averages hide things. Two metros can both sit at 103 while feeling nothing alike: one might have cheap housing and expensive everything-else, the other the reverse. Housing is usually the widest-swinging component — which is why a city can look 'average' overall yet have rents that shock a newcomer.
When a number matters to your decision, look past the composite to the pieces. A metro that's pricey mostly because of housing is a very different proposition if you already own a home or plan to rent a room.
The mistake almost everyone makes
The classic error is comparing salaries without comparing prices. A $90,000 offer in a city at 120 leaves you with less real spending power than $80,000 in a city at 95. The dollar figure went up; what it buys went down. The fix is to adjust income for the local price level — what we call cost-adjusted income.
How to use it
Treat the index as a first filter, not a verdict. Use it to rule places in or out, then dig into the specifics that matter to you — rent for your size of household, the job market in your field, the commute you'd actually have. The index tells you the weather; you still have to pack for your own trip.
Frequently asked questions
- What does it mean for a city to have a cost of living index above or below 100?
- 100 is the U.S. national average. A city above 100 is more expensive than average — at 115, prices run about 15% higher. A city below 100 is cheaper — at 90, prices run about 10% lower. The index covers housing, goods, and services together, so it tells you how far the same paycheck goes in that place.
- What does cost of living mean?
- Cost of living is the amount of money it takes to cover everyday expenses — housing, food, transportation, utilities, health care, and other services — in a particular place. Because those prices vary a lot between cities, the same salary can buy a very different standard of living depending on where you live.
- What is included in a cost of living index?
- CityLedger uses the Bureau of Economic Analysis's Regional Price Parities, which combine the prices of goods (food, clothing, fuel and other everyday purchases), rents, and other services such as utilities, medical care, and transportation into one number for each metro area. Housing is usually the biggest source of difference between places.
- How do I compare the cost of living between two cities?
- Divide one city's index by the other's. If City A is 120 and City B is 96, City A is 25% more expensive (120 ÷ 96 = 1.25), so a $60,000 salary in City B buys about as much as $75,000 in City A. CityLedger's city comparison pages and salary calculator do this math for every U.S. metro.