Cost of Living
BeginnerThe cost of living is the amount of money needed to pay for a basic standard of living in a particular place and time, including housing, food, transport, healthcare and other everyday necessities.
The cost of living varies widely between countries, cities and even neighbourhoods. Rent for a small flat in a large capital city might be three times higher than in a smaller town in the same country, even if wages are not three times higher.
It also changes over time. When prices for essentials such as food, energy and rent rise faster than wages, people talk about a cost-of-living crisis, because the same income covers less.
Comparing salaries without considering the cost of living can be misleading. A job paying 60,000 in a city where rent is 2,000 a month may leave less spare money than a job paying 45,000 where rent is 900.
Governments and employers use cost-of-living measures to adjust pensions, benefits and wages. Many countries link some payments to a price index, such as the Consumer Price Index, so they rise with living costs. Employers sometimes add allowances for staff who work in expensive locations.
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