Cost of Living Across the States Compared

Economists at the Federal Reserve Bank of St. Louis used 2015 data to determine the cost of living in each state and ranked the states according to the cost of living. The survey is unique because it uses a new set of data from the Bureau of Economic Analysis to make the comparisons. It’s no surprise that Hawaii is the most expensive state to live in, while Mississippi was the lowest.

Recently, the Bureau of Economic Analysis released the Regional Price Parities (RPPs), a dataset that allows economists to directly compare the cost of living at the state level. RPPs measure the differences in the price levels of goods and services across states and metropolitan areas for a given year. RPPs are expressed as a percentage of the overall national price level for each year, so RPPs higher than 100 represent state prices higher than the national average and vice versa.

RPPs are important because they help compare the purchasing power behind a person’s income in different areas of the country. For example, an income of $47,520 in Hawaii has the equivalent purchasing power of an income of $34,480 in Mississippi because both of these incomes divided by the state’s RPP equal $40,000.