Salary Spotlight: Where Adjusted Salaries Go the Furthest

When we hear people talk about the highest salaries in the country, we often associate them with huge cities and trendy places. We assume that in order to hit the big time money-wise, we have to move to New York or the Bay Area, for example. 

But it’s a bit more complicated than that. While you may be able to get a higher unadjusted salary in a large city (i.e., what’s printed on your pay stub), it’s often the case that adjusted salaries are higher in smaller towns (i.e., how far your money goes based on the cost of living). For example, someone who makes $50,000 may be barely scraping by in San Diego, whereas someone with the same salary in Toledo, Ohio, could be living quite comfortably.

There are many factors that go into choosing where to live and work. But because salary is one of the most important factors to job seekers, we wanted to know where salaries go the furthest. So we sat down with Indeed Chief Economist Jed Kolko to learn more about his research on adjusted salaries.

adjusted salaries

What are the key findings?

The first and most obvious finding is that the cost of living can vary wildly from place to place. According to Jed, “There are places where it costs half as much to live than others. So thinking about a salary as a fixed number is not enough — you have to consider how far that salary is going to stretch.” This is exactly what adjusted salary tells us — how much your salary will buy where you live taking local cost of living into account. For example, a salary of $70,000 is going to stretch much further in Brownsville-Harlingen, TX, than in Honolulu, HI.

Second, for the most part, places that have higher unadjusted salaries also having higher costs of living. Jed explains, “Huge differences in salaries from one place to another aren’t so big when you factor in that places with higher salaries are also usually more expensive to live in. Generally, once you take the cost of living into account, jobs tend to pay better in smaller markets.” You’ll notice smaller metro areas, like Fort Smith, AR-OK (population 280,500), in the table of highest adjusted salaries, and larger metro areas, like Miami (population 6.2 million) in the table of lowest adjusted cities.

Unfortunately, not all jobs exist in all places. Some occupations are quite clustered, such as finance in New York and tech in the Bay Area. Workers tend to be more productive when they are located in an area where their industry is clustered, which incentivizes companies in that industry to locate there and pay the higher salary that employees need. There are also industries that cluster because they need to be physically near something like a port, a natural resource or a national or state capital. A port crane operator may not have the option of living in Kentucky.

Finally, something called “compensating differentials” can make a difference. A compensating differential is the additional amount of income a worker would need in order to take an unpleasant or dangerous job. For example, oil fracking jobs, which often require workers to relocate to remote areas and work long…

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