We quite often get questions about how salaries compare with living costs across America. So, we decided to look into it. The best states to work in, may not be what you expect.
We calculate the Net Income as the difference between the average tech salary and cost of living within each state. Divided by 12, this gives us a monthly figure to work with. Living cost figures come from the U.S. Bureau of Labor Statistics and include factors such as housing, transport, taxes, and childcare.
Here are the results:
- 7 states have tech salaries which are both 40+% above the cost of living, and above the national average tech salary
- 28 states have tech salaries between 30% - 40% above the cost of living
- 2 states are within 10% of the cost of living
The highest NET income states
Illinois, Utah, Missouri, Texas, Virginia, Kansas, and Michigan all pay above average tech salaries. The cost of living in these states are in the lower half of the country leaving you with over 40% of your salary to pocket after basic expenses.
South Dakota is actually ranked #1 in our list. However, given the dire economy in the state, demand for tech skills are quite low. If you do manage to get a job there however, the cost of living is so low that you will be able to save quite a bit of money.
This raises an important aspect about demand which we touch on later.
The lowest NET income states ...
Hawaii is the most expensive place to live with costs rising to 40% above the national average. The average tech salary there is only $82,355 which leaves you with only 8.3% disposable income.
Alaska is not far behind. The cost of living is the 8th highest in the country, sitting only 4% below New York. However, tech salaries are very low ($74,521) which leaves you with only $574/month of play money.
A closer look at the Silicon Valley
Living costs obviously vary even within a state. Californian living costs are on average 14.94% above the national figure. However places like San Francisco and San Jose push up to 38% and 29% respectively. Los Angeles itself is 23% above. Given most of the tech activity is in the San Jose - San Francisco area, this puts California up above New York cost of living.
Salaries in the Silicon Valley area are also much higher. Taking this into account, living in this area is much the same as New York, if not slightly worse in terms of monthly NET income.
The highest paying states
As we can see, the highest paying states, aren't necessarily the best places to be in terms of money left in your pocket.
Looking only at the average tech salaries, not taking into account any cost of living differences amongst the states, places like California and New York pay the highest. Places like Alaska, Idaho, Mississippi, and Wyoming pay the lowest. The overall spread is around ~30%. This isn't at all surprising, and conforms to our expectations.
Placing the national average salary for March 2015 (US$85,287) on the 0% line, we can clearly see the states where tech jobs are offering higher/lower salaries. California, Massachusetts, and New York salaries are 10%+ above the US average. Wyoming is almost 20% below, and Utah is spot on average.
As we saw earlier, it wouldn't be so bad earning less, if the cost of living was also less. Conversly, it just may be that whilst you get 12.3% more money in Massachusetts, the living costs are so high that you end up placed in the bottom 5.
A look at living costs
The U.S. Bureau of Labor Statistics produces an index of the cost of living. It includes factors such as housing, taxes, healthcare, food, childcare, and transportation. With an average value set at 100, if a state has a overall index value of 110, then it is 10% more expensive than the average American state.
For example, Massachusetts is 33.56% more expensive than the average US state, and New York is 27% more expensive. Wyoming is very cheap with living costs at 21.67% below the national average.
What about demand?
We mentioned it earlier and it's a key aspect yet to add into this analysis. It's great if you can get a good paying tech job in South Dakota, but how likely is that?
In our next article, we'll look into this and try to answer:
- How difficult is it to find a job in a state with lower living costs?
- Which states have higher demand for tech roles, and how do they figure into the above?
- What are the top states in terms of tech salaries, cost of living, and availability of jobs?