Why $100,000 isn't $100,000 everywhere
A six-figure salary sounds the same in every state. It isn't. Here's how to turn a headline number into what it actually buys.
By statenumbers.com · · 4 min read
Imagine two people who both earn exactly $100,000 a year. One lives in California; the other in Arkansas. On paper they're equals. In practice, they're living very different lives — and the difference is measurable, not a matter of opinion.
The reason is that a dollar doesn't have the same value everywhere. Rent, groceries, utilities, and services all cost more in some places than others. Economists capture this with a price level: a single index number where 100 is the national average. A state at 110 is 10% more expensive than the country as a whole; a state at 87 is 13% cheaper.
Putting a number on it
To compare two salaries fairly, you convert each one to what it would be worth at national-average prices. The formula is simple enough to do on a calculator:
adjusted income = salary ÷ (price level ÷ 100)
Run the two examples through it, using the official 2024 price levels:
- California (price level 110.7): $100,000 ÷ 1.107 = $90,334
- Arkansas (price level 86.9): $100,000 ÷ 0.869 = $115,075
Same paycheck, but the Arkansas resident has the purchasing power of roughly $25,000 more. That gap is the whole story of the "cost of living," reduced to a single, reproducible figure.
Try it with your own number. The comparison tool does this math for any two states and any income, and shows every input so you can check it.
Where the price level comes from
The index used above isn't a guess or a proprietary product. It's the Regional Price Parity, published each year by the US Bureau of Economic Analysis — a government agency, using public methodology. That matters, because most cost-of-living comparison sites are built on a licensed index they can't show you. When a number is free and official, you can trace it, reproduce it, and trust it.
What the headline number misses
Purchasing power is the single best first cut, but two things sit underneath it:
- Housing is the biggest driver. The price gap between states is far wider for housing than for anything else. If you rent versus own, or live in a metro versus a small town, your personal cost of living can differ from the state average. See the rent rankings.
- Taxes are separate. A state's price level doesn't include income or sales tax. A state can be cheap to live in but tax income heavily, or expensive but levy no income tax at all. Weigh them together on the tax comparison.
The takeaway
Before you compare two job offers, two cities, or two retirement plans, convert the salaries to purchasing power. A raise that comes with a move to a pricier state can be a pay cut in disguise — and a smaller number somewhere cheaper can leave you better off. The math takes ten seconds and it's the difference between comparing numbers and comparing lives.