Cost of Living Can Significantly Distort Median Household Income

Median Household Income (MHI) data provided by the U.S. Census Department is crucial to understanding the economic conditions of counties across the country. However, to accurately compare counties with higher and lower than average costs of living, these data must be used in conjunction with a cost of living adjustor.

The Council for Community and Economic Research (C2ER) has created a County Cost of Living (CCOL) adjustment which can be used to standardize the Census MHI so that when comparing incomes from two regions, cost of living differentials are already factored in. For example, if someone is comparing MHI data from the Census for New York County, NY and Jackson County, KY, they would see that the MHIs are $63,188 and $26,462 respectively, which may lead them to incorrectly infer that a person in New York County could buy more with their higher salary than a person in Jackson County (see chart below). However, modifying the MHI based on the CCOL indicates that the MHI in New York County is actually much lower at $20,111 while Jackson County is higher at $30,451. Living differentials can drastically change the MHI in some regions while others remain constant. The CCOL adjustment puts these MHIs into perspective, allowing for a more accurate picture of living costs.

Based on C2ER's research, of the 3,114 counties in the U.S., 626 experienced a change of more than 10% (both positive and negative 10%) in Median Household Income (MHI) after adjusting for County Cost of Living (CCOL). These discrepancies have implications for individuals looking at the Census published MHI to make a determination in taking a job; government officials making tax and policy decisions; and general information on buying power of income.

* This chart compares the Median Household Income (MHI) data from the US Census website to the County Cost of Living adjusted MHI calculated by C2ER.

If you need additional information on the County Cost of Living (CCOL) or other COLI-related products, please contact Dean Frutiger at dfrutiger@crec.net or Erol Yildirim at ey@crec.net or by phone at 703-522-4980.

C2ER provides the adjusted median household income, along with the county level cost of living index, for all 3,114 U.S. counties in our online store for $425.

Purchase the COLI Adjusted Median Household Income data