Blog | 5 min read
Learn how GRP compares affordability using the Cost of Living Index
October 15, 2021
Blog | 5 min read
October 15, 2021
Three times a year, the Greater Richmond Partnership participates in a national survey among more than 300 organizations to measure the cost of living in metropolitan statistical areas (MSAs) in the United States. Since 1968, communities have gathered data for the Cost of Living Index, a tool for city-to-city cost comparisons rooted in local-level data. Using a standard methodology with quality control by the Council for Community and Economic Research (C2ER), the organization responsible for facilitating the survey, the Index establishes an equivalent measure for a specific standard of living.
The Greater Richmond Partnership, along with other participating organizations, is given a two-week window to price out each item required for the survey. Most of the 61 items have at least seven to eight data points that are calculated into an MSA average for each item. We gather prices from across the MSA in Ashland, the West End, Midlothian, Chesterfield, Mechanicsville, Short Pump and more. We ensure each item is priced in numerous locations to find a true average of its cost for the entire MSA.
Instead of comparing the costs of all types of socioeconomic classes and ways of life, the Cost of Living Index focuses on one way of living. To ensure consistency and ability to compare across all communities, the index focuses on evaluating a particular standard of living, not the average. The question the Cost of Living Index seeks to answer is: How do urban areas compare in the cost of maintaining a standard of living appropriate for moderately affluent professional and managerial households?
The index is divided into six categories with different weights assigned to each one. The C2ER assigns the weights based on government survey data regarding professional household expenditure patterns. GRP gathers information through online searches and phone calls to local businesses. To learn more about the methodology and to see a breakdown of all items priced, refer to the public manual.
Prior to the COVID-19 pandemic, staff would drive to multiple grocery and retail stores to price items such as canned tuna, women’s dress pants, tennis balls and a medium cheese pizza from Domino’s. However, the C2ER has allowed all data to be sourced virtually since the outbreak. We collect prices from eight different grocery stores, conduct at least 90 phone calls and gather over 400 data points in total.
Each of the six categories in the survey consist of varying amounts of items. For example, the grocery category consists of items such as a six-pack of Heineken, a pound of margarine and 52 ounces of orange juice. Not all categories are as easy to source. To price certain items in the health care category, for example, one would call ten different pharmacies and ask for the cost of a specific brand and amount of insulin. One would also have to call ten different primary care offices and request to know the cost of a routine checkup for a 31-year-old existing patient without insurance and the list goes on. Each survey question requires attention to details, such as whether the patient wear contacts or not for pricing an optometrist visit. The C2ER ensures that each surveyor’s criteria is consistent to ensure comparable results.
Once the C2ER reviews all data and assigns the appropriate weights to each item, communities are scored. An index number is a percentage of a base number which acts as the standard for comparison. The average for all participating communities is an index score of 100 or 100%. With a benchmark of 100, the lower the overall score, the lower the cost of living is for the metro area. If a community receives a score of 95, that region’s cost of living is 95% of the average cost of living for the participating communities in that quarter, 5% below the national average. Richmond has always scored under 100.
The Greater Richmond Partnership uses the Cost of Living Index to market the region to companies looking to relocate. We use our score, among other selling points, to show that Richmond is a more cost-effective choice compared to larger cities, such as New York, Atlanta or Washington, D.C. Not only is the score appealing to company executives, it is also a provoking tool to use to encourage workforce relocation. The Cost of Living Index speaks not only to the cost of doing business in a region, but also its quality of life. The following is from the C2ER’s website, showing the breakdown of the versatility of the Index’s applications:
Use GRP’s cost of living calculator to see how moving to Richmond will compare to other MSAs around the nation.