Cities where you can (and can't) stretch your salary
- When considering the top 104 metro areas of at least 500,000 people in the U.S., salaries go furthest for workers living in Birmingham, AL, according to an analysis by Indeed. Jackson, MS, and Fresno, CA, round out the top three cities with the most bang for the buck.
- Salaries are hardest to stretch in Honolulu, HI. That's followed by Tucson, AZ, and South Florida, which for this study includes the metro areas of Miami, Fort Lauderdale and West Palm Beach.
- Indeed drew conclusions based on an analysis of all of its job postings with listed salaries from August 2016 to July 2017. Local cost-of-living data comes from the U.S. Bureau of Economic Analysis regional price parities for 2015, which reflect differences in the price of housing, physical goods and services.
The U.S. metro areas where residents earn the highest salaries tend to be, unsurprisingly, the largest cities. But when factoring in the high cost of living in those regions, dollars don't stretch as far and the hefty numbers on paychecks seem less impressive. The cost-of-living factor therefore puts notoriously high-salaried metro areas like New York and Washington, DC, low on the affordability scale. Honolulu — number one on the unaffordable list — is an outlier because its residents' salaries comparatively aren't that high to begin with. The trouble lies in Hawaii's land configuration: physical goods are much more expensive because they have to be shipped to the remote island chain, thus driving up the cost of living.
Housing significantly influences an area's cost of living, considering that the expense eats up about one-third of most Americans' incomes. Prices tend to be the highest where housing stock is constrained by reasons such as regulations or a lack of available land. San Francisco and New York, for instance, appear to have exhausted many expansion options due to the lack of available land mass. Regulations in Washington, DC, cap building heights and thus, vertical expansion. Property tax regulations in California make it more attractive for homeowners to keep their properties instead of selling them. Both physical and regulatory constraints create growth and density dilemmas that contribute to rising housing costs, especially when compared with average salary gains.
Transportation makes up another significant portion of the average worker's spending, at about 14% of total income, according to the Bureau of Labor Statistics. That fell slightly last year due to lower gas prices, but it remains the second highest household expense behind housing. Community planners combat that cost by boosting transit options and neighborhood walkability. In fact, residents are increasingly requesting more walkable and transit-focused neighborhoods. Not only does that lower transportation costs for residents, but it also has been shown to boost housing values. Planners find that the desire for walkable communities continues to spread outside the confines of big cities.
Large metro areas with high costs of living do tend to have an advantage in the number and variety of available jobs, whereas smaller communities often have fewer jobs overall and also could be tied to one primary regional type of job. The Indeed analysis says that the largest adjusted salaries are found outside of the largest metropolitan areas in the U.S. But the reality is that no silver bullet exists for affordability, and the "affordable" areas might not be practical locations for everyone based on individual living preferences. Considering more factors than just gross salary, though, can be beneficial in uncovering viable city options outside of the obvious choices.
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