Are salaries higher where the cost-of-living is higher?
Video Transcript: COL=Higher Wages?
If you’re thinking that your compensation target should be tied to the cost of living in the city you’re moving to, you could be setting yourself up for disappointment.
Hi, I’m John Borrowman. I’ve recruited exclusively in business valuation and litigation support for over two decades. That gives me a perspective you won’t find anywhere else.
When I talk to people about the potential of a job change, compensation targets are inevitably part of the conversation. But, when I hear someone tell me “it depends on the cost-of-living,” I want to say “wait a minute,” the two aren’t connected; at least not in the way you probably think.
Here’s the reality. Employers pay the wages necessary to attract and retain employees in their market. Now, this may mean that an offer in a higher cost-of-living city would be higher than an offer that you might get where you are. But, it doesn’t mean that if the COL in the new city is 20% higher than in your city, wages will necessarily be 20% higher.
Let me give you a simple example. According to the website PayScale the median salary for an entry-level financial analyst in Atlanta is $55,000. The median salary for the same job in Manhattan is $70,000. So the pay rate is 27% higher in Manhattan than Atlanta. But, at the same time, the cost-of-living is 127% higher in Manhattan than in Atlanta.
On top of that there’s the issue of compensation philosophy at one company versus another. Are you moving from a firm that pays market rate to a firm where they pay premium? Or, do they pay under market and have a higher percentage of total comp built into variable pay? There are a lot more pieces to the compensation puzzle than you’re going to find in cost-of-living calculator.
Everybody has questions, every now and then. Am I in the right place? Am I being paid fairly? When you have those questions, I can help you find answers. Give me a call.