How We Calculate Cost-Adjusted Salary
A raw salary number doesn’t tell you how far that money actually goes. Cost-adjusted salary answers "what would this salary be worth if prices here were the same as the national average?"
Regional Price Parities (RPP)
The Bureau of Economic Analysis publishes a Regional Price Parity for every state — an index where 100 = the national average price level. A state with an RPP of 90 is about 10% cheaper than average; a state with an RPP of 110 is about 10% more expensive.
The formula
cost_adjusted_salary = annual_median / (RPP / 100)
Example: a $70,000 median salary in a state with RPP 90 becomes a cost-adjusted $77,778 — that salary buys about as much there as $77,778 would at the national average price level.
Scope and limits
- RPP is currently published at the state level only in our import — metro-area cost-adjusted salary isn’t shown, because BEA’s metro-level RPP hasn’t been imported yet, and we’d rather show nothing than a number that looks metro-specific but isn’t.
- If the BLS wage data and the BEA cost-of-living data are from reference years more than two years apart, we don’t show a cost-adjusted figure at all — combining stale cost-of-living data with a current wage would be misleading.
- RPP covers overall price level (housing, goods, utilities, services) — a single number, not a personal budget.