What is the difference between cost of living and geographic pay differentials?
Wage and salary differentials reflect the local demand for and supply of labor. Cost of living is dictated by the local demand for and supply of goods and services. This demand for and supply of goods and services are defined in terms of the data ERI surveys for Assessor Series® cost-of-living databases. This data is downloaded from existing sources, and include: rental rates, housing prices, income taxes, property taxes, gasoline prices, medical costs/services, major retail grocery and drug store prices, etc. Cost-of-living differentials, as reported by ERI, reflect cost models at different income levels (e.g., an auto of “x” value driven “x” miles/kilometers, home rental with no mortgage income tax deductions, home ownership with income tax mortgage deductions, etc…). Local wages and salaries do not indicate the local cost of living. Cost of living indicates the comparable local buying power for any given salary. Most compensation professionals agree that when a company is hiring f
