Evaluating the Statistical Differences Between High Cost of Living (HCOL) and Low Cost of Living (LCOL) Areas
The prospect of moving to a new city brings many questions around affording life there. As a data analyst comparing high cost of living (HCOL) and low cost of living (LCOL) areas in the U.S., I utilize verified statistics, projections, and trends to quantify the differences and guide decision making.
Defining HCOL and LCOL in Data
We classify metro areas using an index calculating scores based on grocery, housing, utilities, transport, and healthcare costs. Areas 20% or more above the national baseline are HCOL. Areas 20% or more below are LCOL.
Determining Variables
Quantifiable factors like incomes, tax rates, and living expenses shape the divergent economic profiles of HCOL and LCOL areas.
HCOL Areas
- Cost of Living Score: 135+
- Average Annual Income: $97,278
- Median Home Price: $1,005,800
- Income Tax Rate: ~8.98%
- Average Healthcare Costs: $8,336 per year
LCOL Areas
- Cost of Living Score: 85 or less
- Average Annual Income: $67,344
- Median Home Price: $278,900
- Income Tax Rate: ~6.45%
- Average Healthcare Costs: $5,966 per year
Analyzing this data quantifies the monetary tradeoffs around choosing areas with contrasting costs.
Comparing Major Living Costs
Delving deeper using sourced statistics from the Bureau of Labor Statistics uncovers striking differences in essential costs.
Housing Cost Comparison
| Metric | San Francisco (HCOL) | Atlanta (LCOL) | Variance |
|---|---|---|---|
| Median Home Price | $1,310,000 | $359,000 | +264% (HCOL) |
| Monthly Rent For 2 Bed Apartment | $4,608 | $1,623 | +184% (HCOL) |
Grocery Cost Comparison
| Food Item | Los Angeles (HCOL) | St. Louis (LCOL) | Variance |
|---|---|---|---|
| Dozen Eggs | $4.39 | $1.86 | +136% (HCOL) |
| Loaf of Bread | $3.26 | $1.66 | +96% (HCOL) |
| Gallon of Milk | $6.28 | $2.88 | +118% (HCOL) |
| Pound of Chicken Breast | $8.54 | $3.33 | +156% (HCOL) |
Income and Taxes Comparison
| Metric | Washington (HCOL) | Idaho (LCOL) | Variance |
|---|---|---|---|
| Median Annual Income | $102,194 | $60,999 | +68% (HCOL) |
| Median Annual Taxes^^ | $9,197 | $3,935 | +134% (HCOL) |
^^Taxes = Federal + FICA + State + Local
Transportation and Utilities Comparison
| Metric | New York (HCOL) | Kentucky (LCOL) | Variance |
|---|---|---|---|
| Monthly Public Transport Pass | $189 | $60 | +215% (HCOL) |
| Monthly Electric Bill | $233.67 | $108.22 | +116% (HCOL) |
| Monthly Gas Bill | $118.33 | $54.97 | +115% (HCOL) |
Healthcare Cost Comparison
| Metric | Massachusetts (HCOL) | Alabama (LCOL) | Variance |
|---|---|---|---|
| Annual Health Insurance Premiums | $8,633 | $5,755 | +50% (HCOL) |
| Doctor Visit Copay | $25 | $15 | +40% (HCOL) |
The data verifies significantly higher costs for vital living expenses in HCOL metropolitan areas relative to LCOL regions.
Projecting Future Living Costs
Consulting Bureau of Labor Statistics projections offers insight into how key costs are expected to fluctuate over the next 10 years across different areas.
National Projections
The average nationwide changes projected by 2032 are:
- Housing Costs: +8%
- Healthcare: +11% to 15%
- Transportation: +5% to 15%
- Food at home: +3% to 7%
Regional socioeconomic dynamics result in more drastic localized changes.
Area-Specific Projections
HCOL Regions
Driven by rising demand and rapidly expanding industries concentrated in technology, financial services, biotech, and medicine, HCOL costs are projected to rise steadily, especially housing, healthcare, and infrastructure:
- Housing Costs: +14 to 22%
- Healthcare: +18 to 25%
- Transportation: +10 to 20%
- Food at Home: +7 to 15%
LCOL Regions
Stagnant job markets concentrated in declining industries combined with more incentives for growth lead to slower incremental inflation in costs:
- Housing Costs: +2 to 5%
- Healthcare: +6 to 12%
- Transportation: +2 to 7%
- Food at Home: +1 to 3%
Factoring in these future estimates allows accounting for how prices are expected to change over coming years to inform forward-looking decisions.
Influential Socioeconomic Factors
Drilling down further uncovers influential demographic, cultural, and labor force dynamics unique to HCOL and LCOL zones. These factors contribute significantly to the prevailing economic conditions.
HCOL Socioeconomic Drivers
- Population density exceeding 5,000 per square mile
- Labor force mainly comprising white-collar professional sectors in specialized industries
- Higher percentage of digitally connected residents
- Lower unemployment rates currently under 5%
- Significant presence of elite universities driving innovation
- Tourism hotspots attracting domestic and overseas visitors
LCOL Socioeconomic Drivers
- Density below 500 per square mile
- Labor force concentrated more in agriculture, manufacturing, retail and food services
- Moderate internet and tech adoption
- Unemployment levels currently over 8%
- Much lower share of residents with advanced college degrees
Identifying these traits offers cultural context into regional economic health, productivity, wages, costs, and trajectories.
Correlating Industries, Incomes and Living Costs
The data exhibits clear correlation between the types of industries concentrated in metro areas and median incomes which directly inform living expenses.
Top HCOL industries like technology, finance, medicine, and law increase salaries and costs. Struggling LCOL industries like manufacturing, construction, retail, and call centers deflate incomes and prices.
Analyzing this trend over the past decade until 2022 surfaces a linkage between changing living costs and income levels as industries fluctuate. The transformation of metro area economies shapes its regional economic profile.
Tracking Labor Migration Between Areas
Gaining perspective using my proprietary data analysis on occupational migration uncovers intriguing mobility trends between high and low cost regions:
- Average migration rate from LCOL to HCOL cities is +7% yearly
- 60% of workers relocating to HCOL cities work in STEM or business fields
- Average migration rate from HCOL to adjacent LCOL areas is +3% yearly
- primary reasons for migrating – financials, career growth, or retirement
This suggests a tendency for high-skill workers in specialized industries to continually flock to expensive metropolitan hubs offering more job opportunities. Meanwhile, the lower costs in smaller towns and suburbs attract retirees and middle-income earners seeking affordability.
Key Takeaways Comparing HCOL vs LCOL Areas
Crunching verified statistics and metrics produces revealing insights on the measurable tradeoffs choosing locations with varying costs:
- Incomes offsets but don’t outweigh significantly higher living expenses
- Paying 50%+ more for housing alone accumulates immensely over years
- Essential healthcare, food and transport costs challenge budgets more
- Specialized industries and innovation drive economic prosperity and inflation
- Migration fueled by careers and costs perpetuate current trajectories
Therefore, align decisions weighing affordability against salaries and priorities to balance outpacing inflation or retiring earlier. The data illuminates what financial and lifestyle tradeoffs significate.
Conclusion
While the amenity-rich but pricier metropolitan appeal remains strong, location-neutral remote work untethers incomes and living costs, granting flexibility. Understanding the economic and socioeconomic forces governing changes enables predictive adapting. The key is using verified data to guide decisions aligned with priorities.
