Congratulations on Your New Job Offer – Now What?
With all the excitement that comes with a new job, it’s important to recognize that an offer is more than just a bottom-line salary. Finding the best bang for your buck that a city has to offer is a balancing act between your salary and the cost of living. Research shows some of the best cities for tech jobs can be far outside Silicon Valley.
At Paysa, we used internal data to look at the cities with the best tech job salaries, the highest and lowest cost of living, and what it means when these two factors meet. Continue reading to learn more.
The Highest Average Salary Doesn’t Mean the Biggest Profit
This graphic shows the top 10 cities that offer the highest average salaries for tech jobs. Many of these modern tech hubs are housed in big cities – a large percentage of which are in the San Francisco Bay Area. In cities where the average tech salary is highest, the cost of living also tends to be high, meaning a tech employee’s income may not stretch as far as it could in another city.
According to Business Insider, the cost of a one-bedroom apartment in San Francisco – where the average tech salary is $144,390 – is $3,600 a month. That equals roughly $43,200 a year or 30 percent of the average salary.
Additionally, as shown by Bankrate, “A standard rule for lenders is that your monthly housing payment (principal, interest, taxes, and insurance) should not take up more than 28 percent of your income before taxes. This debt-to-income ratio is called the ‘housing ratio’ or ‘front-end ratio.’”
A salary in a city where the cost of living is high means less expendable income. The same salary that has you living rich in one city may leave you living paycheck to paycheck in another.
A Low Cost of Living vs. a High Salary
Few of the top 10 highest paying cities appear on this graph of the top 10 cities for lowest cost of living.
Of all the cities, Pittsburgh has the lowest average cost of living ($41,757); however, it is still a thriving center for tech jobs. In 2014, Network World cited tech jobs in the city as growing, including companies like Google and the Carnegie Mellon University Entertainment Technology Center.
Which Cities Are Worth it?
The best-case scenario for a job offer is one that is in a city with a high average salary but a low cost of living. A look at the cost of living as a percentage of an average tech salary shows that San Francisco – with an average tech salary of $144,390 – leaves only 38.9 percent as disposable income. That leaves only around $56,168 annually for other expenses.
On the other hand, Seattle – which was listed as a city with the second highest average salary for tech jobs – offers mean yearly compensation of $139,299, leaving about 58.7 percent for other expenses. That comes to approximately $81,770 annually.
A $25,000 difference in expendable income can make a world of difference.
Cost vs. Salary = Potential New Home
Source: Paysa, MIT, Zillow
The red circles indicate when the percentage of an employee’s salary is overly consumed by the cost of living.
This interactive scatter plot allows for easy comparison between different cities when it comes to cost of living and annual salary. For instance, Cincinnati has an average cost of living that’s similar to Austin, but Austin’s average salary is much higher; this makes the cost of living just 48.38 percent of employees’ annual salary compared with Cincinnati’s, which is much higher at 71.74 percent.
San Francisco sits in the upper right-hand corner of the graph because it represents an extreme scenario between the cost of living and average salary. Not only is salary high in San Francisco, at $144,390, but the cost of living is high; it’s at nearly $90,000 a year, according to the chart.
This major city is a tech hub, and the higher cost of living can be attributed to its coastal location with many modern amenities that a big city might have to offer. The red point for San Francisco indicates that a large portion of one’s salary is consumed by cost of living expenses. In fact, more than half of an employee’s yearly salary, 61.1 percent, is spent on cost of living expenses in San Francisco.
Finding the Right Balance
When offered a job in a new city, there are many factors to consider outside of salary. However, these 10 cities have the best value when it comes to the cost of living versus salary.
Though Seattle didn’t make the list for the lowest cost of living cities, it ranks number one in the best value category. It does so well because only 41 percent of a salary is allotted to cost of living, meaning that 59 percent is left as expendable income. Atlanta comes in at number two with the same ratio of 41 percent of the salary being spent on cost of living and 59 percent freed up for expendable income.
Austin is third, but cost of living only consumed 7 percent more of a yearly salary than Seattle or Atlanta. In Austin, the cost of living expenses only consumed 48 percent of an average tech salary, leaving more than half, or 52 percent, as expendable income.
Carefully Consider the Value of Your Salary
Four out of the top 10 cities considered to be the worst value when it comes to the cost of living as a percentage of salary are in California. There may be plenty of jobs with high paying salaries in San Diego, but many people would find it impossible to thrive when as much as 75% of their salary is spent on cost of living expenses.
For instance, Los Angeles pays an average yearly salary of $100,108 but is not considered a ‘value’ city because 67 percent of that salary is taken up by cost of living expenses. Broken down, that means after cost of living, only $33,035, or 33 percent, is left over for any other expenses or to be used as expendable income.
Madison is the tenth best city when it comes to the cost of living versus average salary; however, the salary is not high enough to keep up with even a relatively low cost of living. With the cost of living averaging only $48,890.56 per year, it still takes up 66 percent of the average annual salary. This means that the average tech job salary in Madison is under $75,000 and only 34 percent of this salary would be allocated to other costs or savings.
Where Your Skills Will Pay the Bills
Each city offers a set of advantages and disadvantages when it comes to salary and the cost of living for tech jobs. However, many cities have specialties that are often more in demand, which can help when narrowing down a decision on a job offer.
For instance, in Seattle – which was ranked No. 1 as the best-valued city because the cost of living consumes only 41 percent a person’s salary – a knowledge of Distributed Systems is 4.56 times more in demand than the national average. As well, jobs related to Data Structures are in demand 3.82 times more than the national average, and Cloud Computing is in demand 3.59 times more.
Where we see the biggest demand is Biotechnology in Boston. The demand for this type of job is 5.29 that of the national average. Not only is Boston considered a value city, with cost of living taking up 52 percent of an annual salary, it’s also an ideal choice for those seeking a job in that particular field.
Where Can You Get a Job?
We’ve crunched the numbers and shown the best non-tech hubs to live in, but what jobs are available?
Seattle has five major companies that make up a majority of its 51,322 tech jobs. Amazon, Microsoft, Nordstrom, Oracle, and T-Mobile hired for tech positions in 2016 and accounted for nearly 52 percent of all the open tech jobs in Seattle.
In Boston, the top five tech businesses were Amazon, Solidus, UnitedHealth Group, Akamai Technologies, and Pfizer, but these companies only made up nearly 9 percent of the 40,774 tech jobs available in the city.
While Miami was a best valued city because only 54 percent of an employee’s salary is dedicated to cost of living – in 2016, there were only 6,051 tech jobs available. Furthermore, the top five companies, Royal Caribbean Cruises, Citrix, Magic Leap, Clark Construction, and Modernizing Medicine made up for more than 25 percent, or one-fourth, of all the available jobs.
More Than Just a Salary
Our research illustrates how every job offer is more than just a number. While it may be a negotiation of salary, it also represents a new way of living and negotiating expenses.
We work to empower the employee with knowledge about careers and salaries. We are on a mission to make sure employees can make educated decisions when it comes to their jobs and ultimately their careers. We work to assemble and connect massive data sets – for you.
At Paysa, we’ve used our research to show how you can take your salary into consideration in comparison to cost of living in modern tech hubs to find which city will best fit your tech career. Accepting a job offer is not only about the sticker price of a new salary, but also about finding the right balance that allows for a stable future in the right city.
We extensively analyzed our databases for cost of living expenses and salaries in cities for tech jobs. We used the MIT Living Wage Calculator to assist in the calculation of average cost of living. Finally, we utilized Zillow, an online realty site, to project how much it would cost to buy or rent a house in the cities listed.
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