Data Analytics

Tech Salaries VS Cost of Living

After viewing the Best Tech Cities in the US – An Interactive Map, you may be wondering how these cities perform when they are compared to cost of living.

Many of the hottest tech salaries are in densely populated cities with skyrocketing costs of rent, transportation, utilities, and other living expenses that can diminish high incomes.

This map visualizes the areas of the US where tech salaries go the furthest. The results may shock you!

This map is colored according to the difference between Annual Mean and MIT’s Living Wage Calculator.

The results may surprise you, they may even provoke you, but please keep reading to learn how these numbers were calculated.

Cost of Living

When readers saw the map of tech salaries throughout the US, so many people wondered how it compared to the cost of living of that area. The big question became “How do you calculate cost of living?”

There are so many various expenses that go into calculating the cost of living. Housing expenses, transportation expenses, food, and medical expenses are only the tip of the iceberg.

On top of that, each of those expenses can fluctuate and it is very much dependent on where you are located. Housing in San Francisco is not equal to housing in Chattanooga, Tennessee, believe it or not.

The U.S. BLS publishes the Consumer Price Index (CPI) for each Metropolitan Statistical Area (MSA) but these are indices not dollar amounts.

Fortunately, Massachusetts Institute of Technology publishes the Living Wage Calculator which studies the likely expenditures a family would experience living in a specific geographic region. This number can be viewed in the map as the field titled Living Wage.

The Difference used to color the map is simply the Annual Mean for tech jobs minus the Living Wage.

Important Notes on Living Wage

The Living Wage uses the dollar amount required for a single adult with no dependents in 2021. It does not account for the cost of raising a child, nor does it include many other expenses you may encounter such as entertainment or eating out at restaurants. It does not even account for savings or investments for the individual, and is the annual income required before taxes.

As defined in the notes for MIT’s Living Wage Calculator:

The living wage is the minimum income standard that, if met, draws a very fine line between the financial independence of the working poor and the need to seek out public assistance or suffer consistent and severe housing and food insecurity.

With that said, the living wage is by far the most credible method of calculating a dollar amount for living expenses of an area. It is used by policy analysts and is much more robust than the federal poverty thresholds. Calculating the cost of living from the CPIs of common expenditures would simply be a fool’s errand when there are credible sources available.

The Biggest Take Home

Surprisingly, the biggest take home salary in the US for tech workers is in San Jose-Sunnyvale-Santa Clara, CA with a difference of $101,388.

It is followed by San Francisco-Oakland-Hayward, CA with a difference of $92,063.

These two areas have the highest required Living Wage in all of US at $52,252 and $47,587 respectively, however tech workers are also taking home more wages than any other area.

In third is Seattle-Tacoma-Bellevue, WA with a difference of $91,289. It is the 16th most expensive area with a Living Wage of $38,601.

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