I couldn't agree more. Also, I don't know how many times I've heard potential employers who are very interested in me, tell me "well the cost of living is so much less out here, we don't want to pay you jack $h!t!". As if I don't understand how compounding my raise percentage works over the course of my career, or they think my rent is going be drastically different... It's disturbing to think they can get away with it.
> As if I don't understand how compounding my raise percentage works over the course of my career
That only helps if your raise percentage exceeds inflation. Otherwise, you could actually find yourself worse off. e.g:
$100K earnings + 2%
$50K living + 3%
--------------------
$59,756K after living expenses after 30 years.
$70K earnings + 2%
$20K living + 3%
--------------------
$77,177 after living expenses after 30 years.
That's true, and you make good points. I guess another factor is raise percentage, in this industry, I've never heard of a 2% raise unless they're thinking of letting you go... (or you've got 15 yrs under you belt, by which point lets hope you're making enough already) But I bet that's different the farther out you go from cities.... I wonder if there is a correlation with getting crummier raises in the lower cost of living areas as well?
The 2% was made up for demonstration purposes, I'm not really sure how it plays out in the real world. It is a good question. Though consider this:
$70K + 5% [1]
$50K living + 3%
-----------
$2.5M saved after 30 years [2]
$70K for life
$20K living + 3%
-----------
$2.7M saved after 30 years
Even a decent rate may not be all it is cracked up to be.
[1] For the first 15 years, whereafter you suggest it could plateau (at around $140K, in this case, which doesn't seem unreasonable given the current market and historic income increases)
[2] Assumes all non-living expense allocated income is invested at 5%.
> * I guess another factor is raise percentage, in this industry, I've never heard of a 2% raise unless they're thinking of letting you go...*
Sounds like you have never worked for a large defense contractor. The "standard" raise given to ~70% of the engineers last year (my last review cycle working for that company) was 2.1%.
So I work in the same industry, and I'd suggest shopping around some companies if possible, or explore the "consulting" side of things (which can still be very technical), but much more lucrative... I'm sure you can get a good pay bump just from a company switch too.
Low balling potential hires due to cost of living isn't right and won't win you any hires... but.. It's disturbing to think that you'd pay the same, or close to the same for rent wherever you live.
For a bit of backstory, I had already decided to leave Memphis for reasons that had nothing to do with job or pay, and was literally in the market to go anywhere. Shortly after casting my resume to far broader nets than I ever had (I had interest from companies in London, Australia, Boulder, CO, Bay Area, etc.) we took a vacation to visit some friends in the Annapolis area and I fell in love with the place.
With that, I decided to refocus my job search and someone I'd known years prior hired me on for a security-clearance required position in the federal government at a job I'd never done (but which he thought I was qualified for). Because of the customer, my contacts, and the cost of livings increases, I was paid a salary well above the "2012 average base salary" for a Google engineer per the linked article. Before that, I had made something like $60k.
Except for some very specialized positions (SAP, EMC, etc.) in Memphis, I don't know of any engineers making much above $100,000 (though indeed $100,000 in Memphis is a very respectable salary.)
Since leaving, I've had a number of Memphis-based employers trying to buy me back into the area, but the discussion generally dies when we get into money as, at least from my anecdotal experience, wages just aren't that high around there, and the only large paying employers are those who have successfully commoditized the market (FedEx, International Paper, etc.) and aren't hiring 'rockstars'.
In summation, while I'm sure there are people making what I make or above in my field in Memphis, it is by no means as common as a six figure salary in the valley, or bay area, or in places where there are large IT-based firms that are competing for talent. Even if there were, I wouldn't really have been qualified at the time - at least mentally, having taken a job I didn't feel qualified for and making absolutely damn certain I performed well at it made for interesting times, but ultimately boosted my overall confidence a million-fold.
Edit: I would also be remiss to add that at least amongst my peers, colleagues and family, I was doing fairly well. A lot of that had to do with the TN cost of living.
Yeah, but that will only save you a set dollar value, for a limited time. lets keep it simple. say you start out at $70k/yr, and assume $800/month rent (9600/yr). And your friend Joe takes $100k/yr, with $1400/month rent (16.8k/yr). Assuming 5% raises/year (conservative, assume no big promotions) for the both of you, and both taxed a flat 28% (for simplicity). At the end of year 1, Joe has 55.2l, you have 40.8 left over.
In 5 years from now, your buddy Joe is making ~127.6k, you are making ~89.3k. Joe has gained 8.3k more than you GAINED, (which is greater than the difference you pay in rent) So now Joe clears ~75k/year (after tax and rent), and you are clearing ~54.7k. The gap is only going to get bigger from there as time goes on, that's only after 5 years. You've GOT to think of money in terms of percentages, not just hard dollar values, or it's going to bite you.
You're replacing a simple mental tool with a whole complex system. The problem with big complex systems like that is they're built on numerous assumptions. If you're decrying that someone might look at cost of living and base their whole life around it, sure, you have a point. If you're instead arguing that you will always come out ahead being where salary is higher despite higher cost of living, take note of your assumptions: real estate value changes rapidly, no two jobs are completely interchangeable, yearly raises are rare and getting rarer, people in our industry change jobs very frequently, and so on. You aren't necessarily going to "win" (whatever that means) simply by taking the highest paying job.
All very true, and make no mistake, there are a seemingly infinite number of variables one would need to take into account to make a decision on a job/industry/location to live. I was just trying to make the point that most people don't actually stop and do some simple math, even when faced with large, possibly life altering decisions. Yeah, you never know everything, but you have to at least use the information available to you to make the best decision from the information you have. Otherwise you never make up your mind and end up nowhere.
I guess I am really just trying to stress the fact that people all too often see money from a liner point of view, when in fact it can be advantageous to explore the exponential growth side of money as well. That's all I really want to get out there. It's a balance between basing decisions on the known present or the unknown future.
> Yeah, but that will only save you a set dollar value, for a limited time.
Rent typically goes up every year, so the amount you're saving versus renting increases annually, and at the end of the "limited time" you're not paying a mortgage at all.
Say I want to work for Google, want no more than 15 minutes commute, and want to live in a house of ~2400 sq.f (which I live in right now).
How much would it cost me per month (both net and gross, considering that I have to pay taxes prior to paying my rent)?
Up to 15 minutes covers an area of 400 square miles if you're driving from a commuter suburb to an office building and take the freeway most of the way. If either the source or the destination involves a 'proper' city with any kind of population density, that range shrinks considerably.
