The problem with straight-across cost-of-living adjustments is that they're only relevant when you're talking about a more-or-less zero savings rate.
Assuming you can save 10% of your annual salary a year, you're better off living in higher cost-of-living areas, assuming all other things being equal. Then you are growing wealth (retirement funds, etc.) instead of just getting a more expensive lease for your car or apartment.
So what you really want to measure is something closer to "savings rate" or "disposable income" or something like that.
I'm open to thoughts on how to practically do this math. It's very relevant when considering job offers in other cities.
That's a good point. It's also worth pointing out that percentages may not matter as much as absolute numbers.
As a contrived example: it's worse to spend 50% of your income on rent than 30%. But if you earn 200k a year and spend 50% of your income on rent, you still have $100k left over. If you earn 100K and spend 30% on rent, you have 70k left over.
Bummer to lose that much to rent, but if you can keep other costs down, you may still accumulate more money by living in the Bay Area.
Definitely this. Saving 50% of a SF salary will beat saving 50% of a Toronto salary by a ridiculous margin. This was a huge part of why I decided to try to find a new job in SF instead of taking the first Toronto offer I had lined up after graduation.
I'd also like to see a comparison of the 90th and 10th percentiles of salaries to get a sense of the salary ceilings and floors in each region.
I think the biggest problem with COL is the fact that COL is a very personal matter.
Here in NYC, most college graduates (programmers or not) share an apartment with flatmates. If you're a programmer, as long as at least one person in the apartment has a non-minimum wage "office" job ($40-50k+), you can live quite comfortably and save a lot unless you decide to live in a penthouse. An average apartment in many areas of Brooklyn split among 2-3 employed people is very affordable.
Even if you want to live alone it's not so bad, but my point is that before someone can decide if NYC is too expensive for them or someone else they should ask more than just their salary.
The problem is that for the same city, same job, same gross income, people's savings rates can vary wildly. On one extreme you have the Google employee living out of his car in a parking lot. On the other extreme you have another Google employee who's living paycheck-to-paycheck because he spends just about all he makes. I don't know what the total distribution would look like for tech (or even tech in each city) so I'd be skeptical of any reports just using the mean or median. If it turns out it's all a nice bell curve (or some other nice distribution), then it could be helpful to see which cities have a tendency for saving and what you could expect your savings would be in total if you lived approximately like most others in the area. Otherwise you need to see the whole distribution for what's possible (I hear LA makes it hard to live out of your car), how it's done, and whether you think you could do it too.
>I'm open to thoughts on how to practically do this math. It's very relevant when considering job offers in other cities.
As another reply noted, it's really about the absolute numbers. The number you probably want is after tax take-home after deducting some amount for retirement and other savings and any significant debts and do the comparison based on that number. Yeah, so pretty much your disposable income.
Assuming you can save 10% of your annual salary a year, you're better off living in higher cost-of-living areas, assuming all other things being equal. Then you are growing wealth (retirement funds, etc.) instead of just getting a more expensive lease for your car or apartment.
So what you really want to measure is something closer to "savings rate" or "disposable income" or something like that.
I'm open to thoughts on how to practically do this math. It's very relevant when considering job offers in other cities.