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What Are Cost of Living Adjusted Earnings?

Emsi’s Cost of Living data is provided by the Council for Community and Economic Research (C2ER). C2ER provides Cost of Living indexes for cities in the United States. Among other things, Emsi uses the indexes to provide cost of living adjusted earnings figures for industry and occupation earnings.

Industries

For industries, the Average Earnings Per Job metric is converted to COL-adjusted earnings by dividing the earnings figure for the industry by the index:

The COL adjusted earnings for Crop Production are $64,430 / 1.026 = $62,797. Note that the Cost of Living indexes are actually percentages: a Cost of Living index of 102.6 indicates that the cost of living for the region is 2.6% higher than (or 102.6% of) the national average. The indexes are thus treated like percentages when being used in equations like the above.

Occupations

Cost of Living Adjusted earnings are also available by occupation. As with industry earnings, the COL adjusted earnings are calculated by dividing stated earnings by the Cost of Living index for the region of study.

For instance, the COL-adjusted median hourly earnings for Chief Executives (Row 1 of above table) in the region of study is $85.58 / 1.026 = $83.41.

Even though the Cost of Living index for the region of study is not visible in charts such as the below, the same arithmetic applies:

$65,523 / 1.026 = $63,863.

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