Glossary

Cost of living index (COLI)

An index comparing the relative cost of a fixed basket of goods and services across different places.

Also called: COLI

A cost of living index (COLI) compares how expensive it is to buy a similar basket of goods and services, housing, groceries, transportation, healthcare, utilities, across different geographic areas at a given point in time. It is a cross-sectional comparison between places, which is what distinguishes it from the consumer price index: the CPI tracks how prices change over time within one area, while a COLI compares price levels between areas at the same time.

Index values are typically normalized so a reference area, a national average or a specific baseline city, equals 100, and other areas are scored relative to it; a value of 120 means that basket costs roughly 20% more there than in the reference area. Different publishers weight the basket differently and price different specific items, so COLI figures from different sources are not always directly comparable to one another even when describing the same two places.

Employers use cost of living indices to set relocation and remote-work pay adjustments, and analysts pair them with median household income to judge real purchasing power rather than nominal income, and with rent burden and housing affordability index readings to interpret whether a given income level or rent share represents genuine hardship in that specific market. A related but distinct concept is purchasing power parity, which performs a similar comparison at the level of entire national economies rather than specific cities or metro areas.

Last reviewed September 22, 2026

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Related terms

Median household income The income level at which half of households earn more and half earn less, in a given year and place. Consumer price index (CPI) A measure of the average change in prices paid by consumers for a fixed basket of goods and services. Purchasing power parity (PPP) A theory that exchange rates should adjust so identical goods cost the same amount across countries once converted to a common currency. Rent burden The share of a renter household's income spent on rent, commonly flagged as burdened above 30 percent. Housing affordability index An index measuring whether a typical household can afford a typical home in a given housing market.