Times Square in New York City.
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Companies such as Facebook, Microsoft and Stripe have given employees permission to work from home permanently, prompting some to consider moving to cities with lower costs of living.
However, relocation could come with a nasty surprise: a pay cut.
Over time, the amount someone can expect their salary to possibly decrease will be different, depending on the city they’re leaving — and the one they’re moving to.
Companies are looking to slash pay in line with local costs of living, but that isn’t always the best way to calculate a salary adjustment, according to Andrew Chamberlain, chief economist at jobs website Glassdoor. That’s because cost of living is driven predominantly by productivity and value creation, he said.
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Depending on your role, that may change quite a bit if you move to a different city. For example, a sales person leaving a big city may find that it’s more difficult to network in a new location that’s more rural, something that could have a tangible impact on deals closed.
“It’s not helpful to talk cost of living and pay — you should pay workers what they’re worth,” said Chamberlain.
For some workers, location is important and, even though you may be able to perform your role from home, your company may not see long-term value in your position being a remote one.
Leaving these cities could result in the biggest pay drop
To see how much of a decrease in pay workers who move could experience over time, Glassdoor developed a calculator that looks at salary reports for 25 of the most common job titles on the site today and analyzes what could happen to income if they leave one of the top metro areas in the U.S.
These are the cities with the highest potential pay cuts and average estimated drop, on average, across job titles, according to Glassdoor.
- San Jose: -24.6%
- San Francisco: -21.7%
- New York: -9.8%
- Seattle: -9.7%
- Los Angeles: -8.7%
Of course, people with certain roles leaving these cities can expect bigger pay cuts depending on the job. For example, software engineers, product managers and software developers leaving San Francisco can expect to see their base pay drop by an average of 24.8%, 23.1% and 21.3%, respectively, according to the report.
The same workers leaving New York would likely see smaller drops, between 9% and 13%, according to Glassdoor.
Everything is a negotiation
To be sure, some workers may have more bargaining power depending on their job and where they’re moving to, according to Chamberlain.
If they’re looking to move to another city where they could conceivably get a competing offer, they may have more leverage to negotiate a lesser pay cut or not see one at all. There are some cities where a move would be net-neutral to pay — such as going from New York to Seattle; Los Angeles; Washington, D.C.; or Boston, according to the report. For other cities, such as San Francisco, no net-neutral pay cities exist outside of nearby San Jose.
“Even if you’re working remotely, outside options matter,” said Chamberlain. In addition, individual creators such as graphic designers may be more productive working outside the office, and thus be able to make a compelling argument for not taking a pay cut to relocate, he said.
If you’re considering a move, pay may not be a reason to stay in a busy city. A lower cost of living could more than offset any decrease in salary, and having more room, being closer to family or nature or having a better quality of life are all selling points.
Still, it’s worth considering how relocating could impact your work and your salary over time, instead of thinking about only the immediate future.
While the pandemic isn’t going away anytime soon, it will eventually subside and workers may want to return to the office, at least in some capacity. Nearly one-third of workers would like a hybrid arrangement, where they have some time to work from home and go into an office, according to a September survey from FlexJobs, a job site dedicated to remote and flexible work.
If you’re working for a company in a city where there is an office, your competition is generally less than if you’re a remote worker, according to Chamberlain. As a remote worker, your competition is not tied to location and so you’re competing with an entire global workforce, which means you may have a harder time justifying a higher salary he said.
“A lot of people are ignoring the soft aspects of work,” said Chamberlain, such as accidental interactions within your community inside and outside the office.
“If I move to a new city and I’m remote, how does my productivity change?” said Chamberlain. “I think that is the conversation employers and employees should be having.”
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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.