Boston Business Journal
By G. Scott Thomas
October 12, 2015
The trend seems clear: Residents of Northern California earn the most impressive salaries in America.
Average annual pay is higher in San Jose ($75,770) and San Francisco-Oakland ($64,990) than in any other major metropolitan area. Both are far ahead of the national average of $47,230, according to the latest figures from the U.S. Bureau of Labor Statistics.
But raw numbers don’t tell the whole story.
Workers are saddled with an extra burden in Northern California, where the cost of living is especially steep. An employee in San Jose, for instance, would need to earn more than $68,000 to equal the purchasing power of a $50,000 salary in Cleveland or St. Louis. That’s a markup of 36 percent.
The Business Journals, a division of American City Business Journals, has adjusted the average salaries of all 106 major metros to reflect this reality. Modified figures are based on “regional price parities,” special cost-of-living multipliers developed by the U.S. Bureau of Economic Analysis.
San Jose remains No. 1 in the adjusted salary standings, but its lead is greatly diminished. Its average annual pay of $75,770 carries the reduced buying power of just $62,110 on a national scale.
San Francisco-Oakland plummets from second place on the raw list to ninth place after adjustment. Other expensive metros drop even farther: New York City from seventh place to 40th, San Diego from 14th to 81st, Los Angeles from 15th to 73rd, and Honolulu all the way from 32nd to 106th (and last) place.
Replacing them at the top of the adjusted standings are several markets blessed with lower costs of living. The new runner-up to San Jose is Durham, North Carolina, where the average annual pay of $55,840 packs the upgraded purchasing power of $58,780. Huntsville, Alabama, soars from 20th place before adjustment to third place afterward. And St. Louis shoots up from 46th place to 10th.
The general rule, it seems, is that smaller markets can offer better economic opportunities for millions of workers. Yet there are a few exceptions.
The cost of living is fairly manageable in most parts of Florida and Texas. An employee in Orlando, for example, needs to earn only $40,000 to equal the buying power of $50,000 in San Jose.
But Orlando has a limited number of high-paying jobs. Its average salary of $40,200 is $7,000 below the U.S. average. The number rises to $41,020 after adjustment, not enough to climb in the national rankings. Orlando is mired in 101st place — just five slots above last — in average pay adjusted for purchasing power.
The situation is similar in four other markets that are mired in the bottom 10 in both the raw and adjusted standings: Bradenton-Sarasota and Cape Coral-Fort Myers, Fla., and El Paso and McAllen-Edinburg, Texas.
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