Methodology - Cost of Living
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The Cost of Living Study provides a yearly estimate of the basic-needs cost of living in Minnesota, for individuals and families, by county, region, and statewide. The study examines monthly living costs in seven cost categories: food, housing, health care, transportation, child care, other necessities, and net taxes. Total costs are presented as yearly and hourly dollar amounts.
Rather than describing what families are spending as the Consumer Expenditure Survey does, the study estimates the cost of living. I might spend my money on one apple for my two children and split it in half if one apple is all I can afford. That's my spending. But what my family really need is two apples. That's my basic need.
And rather than looking at a percentage change in costs over time as the Consumer Price Index does, the study looks at dollar costs. We don't ask the cashier at the store how many percent higher the apple's price is today than the last time we shopped. We ask: How much does the apple cost?
The Cost of Living represents neither a poverty-level living nor a middle-class living but rather a living that meets basic needs for health and safety.
The estimates exclude savings, vacations, entertainment, eating out, tobacco, and alcohol, even though many Minnesotans might assume these elements, taken in moderation, can be part of a normal healthy life. To meet the mandate of a basic-needs living, we exclude these costs from our Cost of Living.
The full results of the study are calculated in an SQL database maintained by the state's Labor Market Information office. For ease of use, a core subset of results are presented through the Cost of Living online tool at the website of the Department of Employment and Economic Development. Download PDF of full Methodology.
The Cost of Living SQL database calculates results for 332,852 family compositions in 107 geographic regions of Minnesota for a total of 35,615,164 results. The regions are counties, Economic Development Regions, Planning Regions, and the state as a whole.
The large number of family and geographic options allows researchers to thoroughly examine the potential effects of family composition and geography on living costs, even though one family composition might actually be far more typical than another in Minnesota, or even though a given family composition might not actually be present in a certain county this year (though it could be next year).
Because some family compositions are more common than others and some might be outright hypothetical in a given year, we do not combine costs of different families into any kind of total or average. We instead take one family composition at a time and then compare by county or combine counties into weighted averages for larger regions.
The Cost of Living online tool offers a core subset of results for 24 family compositions in 107 geographic regions of Minnesota for a total of 2,568 results. As in the database, the regions are counties, Economic Development Regions, Planning Regions, and the state as a whole.
To make the online tool simple and easy to use, we define, in advance, age and gender characteristics triggered by the user's selections of partnership, work, and children.
- A single adult, whether with or without children, is working full-time.
- Two adults, with or without children, are both working full-time, or one full-time and one part-time, or one full-time and one not working.
- A single adult without children is male, either age 19-50 or age 51 plus.
- Two adults without children are one female and one male, age 19-50 or age 51 plus.
- A single adult with children is female, age 19-50.
- Two adults with children are one female and one male, both age 19-50.
- Child 1 and child 3 are male.
- Child 2 and child 4 are female.
- Child 1 is age 4-5.
- Child 2 is age 9-11.
- Child 3 is age 13.
- Child 4 is age 14-18.
A Typical Minnesota Family?
To set standards or to compare to other standardized wage data, it makes sense to ask which family composition would be most typical in Minnesota. Based on the American Community Survey (DP02, 5-Year Series, 2012) and the Current Employment Statistics (Total Private Sector, 2013), we find that a 3-person family, with 2 adults working a combined 60 hours per week (averaging 30 hours per worker) is the clear choice.
The average family size in Minnesota is 3.0 persons, the average household size is 2.5 persons. The majority of households-65 percent-are family households. Seventy-nine percent of family households have two parents, and the average weekly hours per worker per is 33.7.
Partnered, 1 full-time and 1 part-time worker, 1 child, provides a standard yearly cost and hourly wage need for a typical family, regardless of how the weekly work hours are distributed between the two adults.
For each family type for each county, we calculate monthly costs for these seven categories, then add the seven costs together for a monthly total, then multiply by 12 for a yearly total.
The hourly wage equals the yearly total divided as follows
- One full-time worker, 2,080 hours
- Two full-time workers, 4,160 hours
- One full-time and one part-time worker, 3,120 hours.
The county is the base level of measurement. For larger regions, such as Minnesota's thirteen Economic Development Regions (EDR), or six Planning Regions (PR), or the state as a whole, we calculate a population-weighted average of all the counties that make up the region.
First we take the population of each county within the larger region as a percentage of the combined population of the larger region. Then each county's population percentage becomes that county's contribution percentage to each of the seven cost categories. If a county has 2 percent of the state's population, then 2 percent of that county's food cost for a selected family type goes into the statewide food cost for that same family type, and so on.
Where does the data come from?
Data sources for the seven cost categories include
- Bureau of Labor Statistics, US Department of Labor
- Census Bureau, US Department of Commerce
- Center for Nutrition Policy and Promotion, US Department of Agriculture
- Agency for Healthcare Research and Quality, US Department of Health and Human Services
- US Department of Housing and Urban Development
- Internal Revenue Service, US Department of the Treasury
- Federal Highway Administration, US Department of Transportation
- Minnesota Department of Revenue
- Minnesota Office of the Revisor of Statutes
- Child Care Aware of Minnesota, Saint Paul, Minnesota
- Council for Community and Economic Research, Arlington, Virginia
- National Bureau of Economic Research, Cambridge, Massachusetts
For cost category details, download PDF of full Methodology.