Interactive Guide to Economic Indicators
How is the cost of living measured?
Opinion: Why isn’t there an official “Cost of Living” index?
The OECD does not publish an official index called “Cost of Living” - because there’s no clear consensus on how it should be measured.
Here are the main reasons:
Consumption preferences vary between countries
A unified index must be based on a fixed basket of goods and services - but one country consumes pork, another fish, and another hardly consumes dairy. It's impossible to build a single index that fairly reflects everyone's preferences.
Wages differ not only in amount - but also in structure
Countries vary in wage levels, taxation, government benefits, healthcare, pensions, and more. Simply connecting "prices" to "wages" doesn’t necessarily reflect what people can actually afford in each country.
It’s difficult to determine what should be included in such an index
Should it measure only essential expenses? Should it include education, healthcare, and transportation? Should internal inequality be considered?
Each of these choices reflects a value judgment, not just an economic one - and that’s why there’s no single index all countries agree on.
The OECD prefers to break down the cost of living into separate components - such as prices, wages, and disposable income - and leave it to each country and the public to interpret the meaning themselves.
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