Congratulations. You got a $50,000 job offer. Now your folks can use the basement again, after they fumigate it.
Wow, $50,000 for doing that cockamamie thing you learned in school? Where’s this? Indianapolis?
Hmm, $50,000 in the Indianapolis metro area. In the Chicago metro, an employer would have to pay you $56,750 because the cost of living there is 13.5 percent higher than in Indy. Of course, a firm could get away with paying you less. If you were going to work in the South Bend metro, where the cost of living is 3.4 percent lower, you might get $48,275. That, in South Bend, buys you what $50,000 buys in Indy.
You didn’t know I could translate the buying power of a dollar in one place into dollars elsewhere? Well, up until just recently it was a tricky thing. That’s because the only widely used figures came from the Cost of Living Index, which was an off-shoot of a voluntary association of local chambers of commerce. The index is still used by well-meaning people who believe that any number on the internet is better than no number at all.
Now, however, we have the professionals at the U.S. Bureau of Economic Analysis giving us estimates of consumer price levels for 381 metropolitan areas. These are consistent from time-to-time and place-to-place. It’s a big step forward.
Sure, I’ll fill you in on other places: To buy what $50,000 buys in Indy, would take more in these metro areas:
New York: $65,419
San Francisco: $64,926
Los Angeles: $62,611
Bloomington, Indiana: $50,788
While you’re being offered $50,000 in Indianapolis, some employers would tell you about the lower amount needed to live as well where prices are lower, as in these metro areas:
Terre Haute: $47,044
Fort Wayne: $48,571
Or you could go to any of the four metro areas that are dead even with the cost of living in Indianapolis: Columbus (Ohio), Kansas City, Champaign-Urbana (Illinois) or Pensacola (Florida).
Think, however, about the different life you can have in those places than in Indianapolis. There is more to life than can be captured by a price index. Family, friends, activities, the natural environment and a host of opportunities are not incorporated in simple lists of purchase prices.
It’s great to have a job. It’s fantastic to make $50,000 a year at that job. But what that money does not buy can be more important.
With whom will you be working? How high can you hold your head after the workday is over? What kind of future can you expect from that job? And never discount the importance of the self-respect and satisfaction you may get from doing something that benefits others in a meaningful way.
Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business. Send comments to firstname.lastname@example.org.