Calculating the cost of living index
So, how are these cost of living indexes created or calculated? - Most of these indexes and guides set a "base" cost of living. The base is normally represented as the number 100. The index then measures changes in the amount that consumers need to spend over time to reach the base level or standard of living. The calculation can differ depending on what is set as a “standard” for a region, which of course can be different depending on the location measured. Sufficient to say, cost of living indexes are best shown than explained.
See a sample of the worldwide cost of living survey by Mercer using the principles and methodologies of the cost of living index.
What is in the cost of living index basket?
The basket is to represent the spendable income of an employee.
Some companies adapt the basket to the nationality. For example the Mercer ORC Cost of Living Data.
How is the data collected?
Most of the cost of living data is collected by volunteers and local representative; it is a good way to make money by collecting information in supermarkets, at shops around town etc. Data gathering is one of the top priorities in putting the cost of living index together, so representatives have to make sure that they collect and tabulate the right data in a certain area.