List of Metro Areas By Cost Effectiveness (Adjusted Income)

How cost-effective is your city? More precisely, how well does your hometown rank in median income when incomes are adjusted for the local cost of living? This combination of qualities can be thought of as the “cost-effectiveness” of a city, as measured by adjusting income for cost of living. A number of news sources produce “best cities” lists, and Kiplinger Magazine’s list enables a simple calculation of cost-effectiveness, since it publishes both median income and a cost-of-living index for each city [1]. The ranking of the 50 largest cities in the US by cost-effectiveness (median income / cost of living) is provided below:

Metro Area Cost of Living Index [2]
Median Household Income Adjusted Income [3]
1. Atlanta-Sandy Springs-Marietta, GA 0.94 57307 60965
2. Indianapolis-Carmel, IN 0.88 52607 59781
3. St. Louis, MO-IL 0.87 51713 59440
4. Washington-Arlington-Alexandria, DC-VA-MD-WV 1.38 81163 58814
5. Dallas-Fort Worth-Arlington, TX 0.92 53748 58422
6. Austin-Round Rock, TX 0.94 54827 58327
7. Houston-Sugar Land-Baytown, TX 0.89 51685 58073
8. Cincinnati-Middletown, OH-KY-IN 0.9 51926 57696
9. Denver-Aurora, CO 1.01 58039 57464
10. Nashville-Davidson–Murfreesboro–Franklin, TN 0.88 49979 56794
11. Kansas City, MO-KS 0.95 53564 56383
12. Charlotte-Gastonia-Concord, NC-SC 0.92 51702 56198
13. Salt Lake City, UT 0.98 55064 56188
14. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 1.03 57831 56147
15. Minneapolis-St. Paul-Bloomington, MN-WI 1.14 63866 56023
16. Columbus, OH 0.94 51687 54986
17. Hartford-West Hartford-East Hartford, CT 1.19 64989 54613
18. Jacksonville, FL 0.94 51269 54541
19. Las Vegas-Paradise, NV 1 54299 54299
20. Seattle-Tacoma-Bellevue, WA 1.14 61740 54158
21. Richmond, VA 1.05 56277 53597
22. Detroit-Warren-Livonia, MI 1 53593 53593
23. Phoenix-Mesa-Scottsdale, AZ 1 52857 52857
24. San Francisco-Oakland-Fremont, CA 1.37 72059 52598
25. San Jose-Sunnyvale-Santa Clara, CA 1.58 82664 52319
26. Chicago-Naperville-Joliet, IL-IN-WI 1.13 58946 52165
27. Birmingham-Hoover, AL 0.9 46667 51852
28. Boston-Cambridge-Quincy, MA-NH 1.29 66870 51837
29. Louisville-Jefferson County, KY-IN 0.89 46095 51792
30. Memphis, TN-MS-AR 0.86 44495 51738
31. Baltimore-Towson, MD 1.21 62524 51673
32. Sacramento–Arden-Arcade–Roseville, CA 1.15 58480 50852
33. Orlando-Kissimmee, FL 0.98 49789 50805
34. Milwaukee-Waukesha-West Allis, WI 1.02 51669 50656
35. New York-Northern New Jersey-Long Island, NY-NJ-PA 1.21 60964 50383
36. Rochester, NY 0.99 49508 50008
37. San Antonio, TX 0.93 46203 49681
38. Virginia Beach-Norfolk-Newport News, VA-NC 1.1 54442 49493
39. Oklahoma City, OK 0.89 43652 49047
40. Pittsburgh, PA 0.92 44814 48711
41. Buffalo-Niagara Falls, NY 0.93 44747 48115
42. Cleveland-Elyria-Mentor, OH 0.99 47600 48081
43. Providence-New Bedford-Fall River, RI-MA 1.16 54064 46607
44. San Diego-Carlsbad-San Marcos, CA 1.32 60970 46189
45. Portland-Vancouver-Beaverton, OR-WA 1.17 53935 46098
46. Tampa-St. Petersburg-Clearwater, FL 0.99 45243 45700
47. Riverside-San Bernardino-Ontario, CA 1.23 54991 44708
48. New Orleans-Metairie-Kenner, LA 1.06 45802 43209
49. Los Angeles-Long Beach-Santa Ana, CA 1.42 56680 39915
50. Miami-Fort Lauderdale-Pompano Beach, FL 1.2 47527 39606

Atlanta tops the list, followed by Indianapolis, St. Louis, Washington D.C., and Dallas. Rounding out the top 10 are Austin, Houston, Cincinnati, Denver, and Nashville. What city holds the unfortunate designation of being least cost-effective? Miami/Ft. Lauderdale is dead last, with Los Angeles, New Orleans, Orange County (California), and Tampa/St. Petersburg all in the bottom 5.

It clearly pays to live in Atlanta or the other top cities, as higher incomes and lower costs translate into a higher quality of life or simply greater net savings. The cities at the bottom of the list generally suffer from high real estate prices and rental costs coupled with lower median incomes.

[1] Here’s the full spreadsheet of data from Kiplinger.com including 300+ metro areas.

http://www.kiplinger.com/tools/bestcities_sort/index.php?sortby=hhi&sortorder=DESC

[2] The Cost of Living Index in Kiplinger.com’s original list is set so that the average cost of living in the US is 100. Here I have divided the Kiplinger index by 100 so that it can be more easily used in the Adjusted Income calculation.

[3] The Adjusted Income, or cost-effectiveness, is calculated by simply dividing a city’s median income by its cost of living (when the cost of living is a ratio centered around 1 as discussed above).

7 thoughts on “List of Metro Areas By Cost Effectiveness (Adjusted Income)

  1. Actually truecostblog does not deserve a medal for this post, I’ll be fair and unbiased because truecostblog does have useful information and thought provoking posts.

    “Cost of living” is not based on a particular index, and the accra cost of living index is well known to be flawed, the index assumes that you buy standard food (not store brand) but not luxury food, it assumes that you pay for a land line and subscribe to a magazine.

    The accra cost of living index reflects a 1980s middle class family lifestyle. If you are single, have no mortgage or life with your parents, have no kids, use solar energy, or live in a parent’s house, have a cell phone only, retired, or have certain healthplans, the index does not apply to you.Buy store brand, shop at costco or walmart, buy in bulk, or pay for a premium food.

    Sorry, index doesn’t apply.

    The accra cost of living index also suffers from what is known as the aggregation bias according to the federal reserve bank of dallas.

    I’ll dare anybody to prove me wrong, not out of arrogance though, to be fair many sunbelt cities such as san diego and miami have high housing costs and low wages because many people don’t care or you don’t have to pay a lot of people to live there. But when comparing to many other metros, the cost effectiveness index doesn’t make any sense.

    1. FactChecker, thanks for stopping by and commenting. Cost of living indexes represent averages, and by definition many individuals will have lifestyles which put them above and below the average for any given city. It’s possible to live cheaply in nyc (I’ve done it), and to blow your budget in a small town as well. I think the idea of dividing median income by cost of living to get an idea of how cost-effective a city is a powerful one – but I’d be happy to adjust using better data if they are available!

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