The Bureau of Economic Analysis of the US Department of Commerce lately released the value of prices for 2013. The publication aims to present the phenomenon that has been enveloping the imbalance of dollar value from state to state. The Tax Foundation then translated the findings in such a way that the value of $100 in each state may be determined.
The US states where $100 has the greatest value in terms of purchasing power include Mississippi, Arkansas, South Dakota, Alabama and West Virginia. At the other end of the spectrum, where $100 has the least worth include the District of Columbia, Hawaii, New York, New Jersey and California.
In general, the numbers yielded in the investigation present [pdf] that the discrepancies in the prices of goods and services per region is significantly large. If the data below is to be compared, the experts can say that the purchasing power in Mississippi is 36 percent greater than in the District of Columbia. Putting this data on a larger scale, it can be said that if an individual living in Mississippi earns a net income of $50,000 and is about to move to the District of Columbia, he/ she should earn $68,000 in order to save the same amount of money when he was still a resident of Mississippi just to survive the cost of living in the high-income, high-cost part of the country. In Louisiana, the researchers found that the relative value of $100 increased by 24 percent compared to last year.
The implication that these information has is that the prices of goods and services vary from state to state. For example, the same candy bar in Ohio or Missouri is cheaper than its retail price in California or New York. With this, individuals living in low-price states are subjected to a daily situation where they can buy the same product for a cheaper cost compared to those living in high-price areas.
According to experts, the main driving force for this is the difference in the incomes of each state. Those with greater nominal incomes have larger price levels. For example, if one is to buy a land in a high-price state, where income opportunities are greater, he/ she may expect that the land price will shoot up. To balance this out, higher-price states offer bigger incomes to its citizens while lower-price states offer lower amounts. According to labor economists, this is what they call a compensating differential, which refers to the setting of a higher pay to make up for the low purchasing power.
Although other factors should be considered, the relationship created by the data is vital. With the information made available to the public, their perceptions of genuine rich or poor status may be altered given that they can adjust their incomes for price level.
