Pinning Down the Real Price of That Move
You’ve snared that big promotion and you are on your way to the big city. How do you determine whether your pay raise will buy a better standard of living?
Often with great difficulty, experts say.
The main problem is that consumer prices are hard to pin down: There often are wide variations within a city, especially on big-ticket items such as homes, health care and cars.
“Costs are going to depend on what the family life style is. That’s why we use as our (hypothetical) base, a family of four making $55,000” with a house and two cars, said Wallace McDonough, an executive vice president at the consulting firm Runzheimer International.
One of Few Surveys
Runzheimer, which has gathered cost of living data since 1933, has one of the few surveys that takes into account after-tax income and life style (in its case, an essentially suburban family life style), along with the cost of goods and services. As such, it is widely regarded as providing the best cost of living analysis for corporate relocations.
The trouble for many transferred workers, however, is that Runzheimer publishes the cost of living for only 10 cities. Consequently, workers must depend on their own judgment or a variety of less comprehensive studies to determine what impact a move will have on their personal finances.
The most extensive source of basic price information is the U.S. Department of Labor, which publishes the consumer price index.
Comparisons Lacking
The department’s statistics indicate the rate of inflation for goods and service within individual cities, but they do not show how the cities stack up against each other in living costs.
A 234-page study by the American Chamber of Commerce Researchers Assn. suffers from different kinds of shortcomings.
While consumers can make cost of living comparisons among the more than 250 cities listed in the report, even the association admits readers cannot make fully accurate comparisons “because of the small number of items (59) priced.”
By comparison, Runzheimer takes into account more than 150 items.
COMPARING THE COST OF LIVING
The following table is based on a family of four residing in “Standard City, U.S.A.” in a 2,400-square-foot home and incurring all normal home ownership and maintenance costs while having an annual income of $55,000. They also own two cars: a late model driven 14,000 miles per year and a 4-year-old model driven 6,000 miles yearly. Other expenses include taxes, typical purchases for a family of four and investments. The index figures are the percentage variations from city to city. For example, the same family residing in Standard City would, in a move to New York City, require an income of $74,239, or 135% of their original income.
Total 1989 1984 1984 Location Value Index Value Index New York City $74,239 135.0 55,430 120.5 Boston 68,278 124.1 51,566 112.1 Los Angeles 66,249 120.5 51,612 112.2 Honolulu 62,452 113.5 55,063 119.7 Tampa 55,317 100.6 44,620 97.0 Pittsburgh 55,274 100.5 47,012 102.2 Standard City 55,000 100.0 46,000 100.0 St. Louis 54,539 99.2 45,770 99.5 Albuquerque 51,915 94.4 43,562 94.7 Nashville 50,502 91.8 42,826 93.1 Houston 49,694 90.4 46,506 101.1
Source: Runzheimer International
