By Joe Light
Last week, Real Time Economics took a look at a Labor Department report that compared occupational pay across 77 metro areas. Many readers rightly pointed out that that Labor Department doesn’t adjust pay for cost of living.
So though New Yorkers earned $1.14 for every dollar that an average U.S. worker earned, that $1.14 probably bought less in that metro than it would in, say, Mobile, Ala., where workers earned 10% less than the national average.
The Labor Department doesn’t produce or endorse cost of living comparisons, but we went to the Council for Community and Economic Research, which produces a commonly used cost of living index, to see how the figures matched up.
The metro areas that the council uses don’t align perfectly with what the Labor Department used. The Labor Department combines San Francisco, San Jose, and Oakland into one, giant metropolitan area, for example, and concluded that workers there earn 20% more than the average American. The larger metro area also includes some lower-wage surrounding areas that can bring down the average.
The CCER, understandably, provides different cost of living adjustments for each city, and found that residents pay 62% extra in San Francisco, 44% extra in Oakland, and 52.4% more in San Jose. Suffice it to say that the premium workers earn in that metro doesn’t seem to make up for the premium they pay to live there.
Or for another big-city example — earners in the New York-Newark-Bridgeport metro made 14% more money than the U.S. average, but the cost of living there varies drastically as you move through that metro, and even within New York City. Manhattanites’ cost of living is more than double the national average. Queens’ cost is 58.5% higher, and Brooklyn’s is 81.3% higher.
So this is more of a rough, back-of-the-envelope calculation, and we tried to stick with metros that were either broken up the same way or those where the CCER didn’t find much variation between the metro’s components. In general, the wage discrepancies that the Labor Department found matched up very nicely with cost of living differences.
In Brownsville, Texas, for example, where workers earned 20% less than the national average, the cost of living is about 16% lower. Corpus Christi, Texas, whose workers earned 10% less, is about 9.5% cheaper than the U.S. average.
Putting aside the giant metros, there were a few cities where the pay differences and cost of living differences didn’t line up.
Where are workers getting a good deal? St. Louis breadwinners take home about the same pay as the U.S. average, according to the Labor Department, but their cost of living is more than 9% cheaper, according to the CCER.
Another locale where earners have an advantage: Houston, Texas. The Labor Department says workers there earn about 99% of the U.S. average, but they get about a 7% cost of living discount. Si
milarly, in Dallas, they get a 7% discount and earn 98 cents on the dollar.
And one of the worst-paid cities relative to its cost is Honolulu, Hawaii, where workers only made 5% more than the mean but shell out nearly 68% extra. Maybe that’s just the price you pay for 70-degree winters.
In Florida, living in Miami costs 7% extra and Ft. Lauderdale costs an additional 14%, according to the CCER. Meanwhile, pay in that combined metro area is only 97% of the U.S. average. In Orlando, living is only 2% cheaper, but pay is 9% below average.
If you want to compare city costs with the CCER data, check out BankRate. Note that we used the cost of living adjustments from mid-2010 to stay comparable with the Labor Department data, but this calculator should be updated to the first quarter.