Metropolitan Area --Real Value of $100

• 4th Lowest -- Urban Honolulu, HI -- $80.19
• Maui County $93.20
• Kauai and Hawaii Counties – $99.50

What is the Real Value of $100 in Metropolitan Areas?

by Scott Eastman and Aida Vazquez-Soto, Tax Foundation, August 28, 2019

In May, the U.S. Bureau of Economic Analysis released new data covering differences in purchasing power in different metropolitan and nonmetropolitan areas in 2017. In layman’s terms, the data compares how much $100 can buy in different regions of the country. This post focuses on comparing the purchasing power in different metropolitan areas around the country.

There are large differences in price level by region. In general, the regions where $100 buys the least are concentrated around large cities in the Northeast and California. Conversely, $100 stretches the most in the rural areas of the Midwest and the Southeast.

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Table 1 shows the 15 most expensive metropolitan areas in the United States, where the real value of $100 is the lowest. For example, San Francisco-Oakland-Hayward, California, is a high-price metropolitan area. There, $100 will buy you goods that would cost just $78.13 in a metropolitan area at the national average price level. In other words, residents of the San Jose-Sunnyvale-Santa Clara area, for the purposes of day-to-day living, are around 22 percent poorer than their incomes suggest.

15 Most Expensive Metropolitan Areas in 2017 Source: U.S. Bureau of Economic Analysis, Regional Price Parities. (Link: TABLE)

Metropolitan areas are characterized by a relatively high population density. In these areas, many residents seek to occupy a limited amount of available land, driving property prices up. This is a principal reason why metropolitan areas, particularly cities, are almost universally more expensive than rural areas.

However, some metropolitan areas are actually quite affordable. The 15 least expensive metropolitan areas in the United States, where the real value of $100 is the highest, are presented in the following table. LINK

The greatest disparity in price level is seen by comparing the most expensive metropolitan area (San Jose-Sunnyvale-Santa Clara, CA) to the least expensive metropolitan area (Beckley, WV). The real value of $100 in San Jose is $76.39, vs. the real value of $100 in Beckley at $132.80. This means real purchasing power in the Beckley area is 74 percent greater than in the San Jose-Sunnyvale-Santa Clara area.

Variance in price level has important ramifications for economic policy: some areas are effectively richer or poorer than their nominal incomes suggest. Many policies are based on income, such as progressive taxes and means-tested federal benefits. If real incomes vary from place to place due to purchasing power, this matters for those policies.

What is the real value of $100 in your state?

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PBN: Here's how far $100 goes in Honolulu