Salaries in Public Education: the Impact of Geographic Cost-of-Living Differentials

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Abstract
Salaries in public education are the largest single expenditure of state and local governments. In the absence of absolute standards for evaluating policy, both politicians and interest groups are likely to turn to relative performance measures. These judgments often involve comparisons of expenditure levels among states. In this article we estimate cost-of-living differentials among states and show that the state rankings of salaries in public education change substantially when salaries are adjusted for differences in purchasing power. When interstate expenditure comparisons are employed in the setting of policy goals, it is important to be cognizant of the large variations among states in the cost of living.