Cost of living and Employee Benefits

Cost of Living Cost of living – includes housing, food, transportation, and other everyday expenses Rural communities often have a lower cost of living than urban communities. Index form – rates communities on a scale of 100.0 and gives an average cost community a rating of 100.0. A lower index means a lower cost of living. A higher index means a higher cost of living. https://www.missourieconomy.org/indicators/cos t_of_living/

Congratulations! Sara just graduated from college with a teaching degree and received two job offers. Which is the best deal?

Which is the better deal? Job Offer 1 $35,000 in Reno, NV Job Offer 2 $40,000 in Anchorage, AK

Cost of Living Cost of Living Equation Salary in city 1 x Cost of Living Index of City 2 Cost of Living Index of City 1 = Equivalent Salary in city 2 Round dollar amounts to two decimal places

Sara’s Job Offers Job Offer 1 – Reno, NV Job Offer 2 – Anchorage, AK $35,000 salary 105.1 cost of living index Job Offer 2 – Anchorage, AK $40,000 salary 123.1 cost of living index

Cost of Living Cost of Living Index of City 2 Salary in city 1 x = Equivalent Salary in city 2

Sara’s Cost of Living Equations $35,000 in Reno x 123.1 105.1 = Equivalent Salary in Anchorage Option 1 or Option 2 $40,000 in Anchorage x 105.1 123.1 = Equivalent Salary in Reno

Sara’s Cost of Living Equations $35,000.00 x 1.1712654 = $40,994.29 = Equivalent salary in Anchorage Option 1 or Option 2 $40,000 x .8537774 = $34,151.35 = Equivalent salary in Reno

Sara’s Job Outcome Option 1 Job Offer 1 $35,000 in Reno, NV $40,994.29 in Anchorage A person earning $35,000.00 in Reno must earn $40,994.29 in Anchorage to have the same spending power. Option 2 $35,000 in Reno NV A person earning $40,000 in Anchorage must earn $34,151.35 in Reno to have the same spending power.

Conclusion The salary offer in Reno is better by $994.29 ($40,994.29 - $40,000.00).

Joe’s Offers Job Offer 1- Denver, CO Job Offer 2 - Seattle, WA $24,000 salary 102.9 cost of living index Job Offer 2 - Seattle, WA $32,000 salary 148.2 cost of living index

Cost of Living Equation Salary in city 1 x Cost of Living Index of City 2 Cost of Living Index of City 1 = Equivalent Salary in city 2

Joe’s Cost of Living Equations $24,000 in Denver x 148.2 102.9 = Equivalent salary in Seattle Option 1 or Option 2 $32,000 in Seattle x 102.9 148.2 = Equivalent salary in Denver

Joe’s Cost of Living Equations Option 1 or Option 2 $24,000.00 x 1.4402332 = $34,565.60 = Equivalent salary in Seattle $32,000 x .6943319 = $22,218.62 = Equivalent salary in Denver

Joe’s Job Outcome Job Offer 2 Job Offer 1 $34,565.60 in Seattle, WA $24,000 in Denver, CO A person earning $24,000.00 in Denver must earn $34,565.60 in Seattle to have the same spending power. Or A person earning $32,000 in Seattle must earn $22,218.62in Denver to have the same spending power. Therefore, the salary offer in Denver is better by $2,565.60 ($34,565.60 - $32,000.00).

What about benefits? Benefits- Additional compensations offered beyond wages earned

Dollar amount received before taxes Base Salary Dollar amount received before taxes Location and environment Commute time Affordable housing Low crime rate Good schools Desired climate Fringe Benefits Paid sick time Holidays and vacation Health and life insurance Workman’s compensation Retirement contributions Comparing Job Offers Additional perks Relocation allowances Company car Repayment of education loans Stock options Advancement and work incentives Performance raises Bonuses Profit Sharing Employer provided services Gym membership Flexible hours Merchandise discounts Child care

Benefits Benefits and employer provided services can make a difference: For example, if a $35,000.00 job had 100% of medical insurance coverage valuing $400.00 per month, a person would not have to budget for $4,800.00 in medical insurance per year. increase the value of his or her salary to $39,800.00. Benefits and services should be included within the salary before calculating the cost of living.

Sara with benefits Job Offer 1 – Reno, NV Job Offer 2 – Anchorage, AK $35,000 salary + $4,800 benefits = $39,800 105.1 cost of living index Job Offer 2 – Anchorage, AK $40,000 salary + $5,200 benefits = $45,200 123.1 cost of living index

Sara With Benefits Cost of Living Index of City 2 Salary in city 1 x = Equivalent Salary in city 2

Sara with benefits Option 1 or Option 2 $39,800 in Reno x 123.1 105.1 = Equivalent salary in Anchorage $45,200 in Anchorage x 105.1 123.1 = Equivalent salary in Reno

Sara with benefits Option 1 or Option 2 $39,800.00 x 1.1712654 = $46,616.36 = Equivalent salary in Anchorage $45,200 x .8537774 = $38,590.74 = Equivalent salary in Reno

Sara with benefits With the benefits package included, the job offer in Reno is higher. A person earning $39,800.00 in Reno must earn $46,566.00 in Anchorage to have the same spending power. Or A person earning $45,200 in Anchorage must earn $38,590.74 in Reno to have the same spending power.

Joe with benefits Job offer 1 - Denver, CO Job offer 2 - Seattle, WA $24,000 salary + $4,500 benefits =$28,500 102.9 cost of living index Job offer 2 - Seattle, WA $32,000 salary +$6,000 benefits = $38,000 148.2 cost of living index

Cost of Living Cost of Living Index of City 2 Salary in city 1 x = Equivalent Salary in city 2

Joe with benefits Option 1 or Option 2 $28,500 in Denver x 148.2 102.9 = Equivalent salary in Seattle $38,000 in Seattle x 102.9 148.2 = Equivalent salary in Denver

Joe with benefits Option 1 or Option 2 $28,500 x 1.4402332 = $41,046.65 = Equivalent salary in Seattle $38,000 x .6943319 = $26,384.61 = Equivalent salary in Denver

Joe with benefits With the benefits package included, the job offer in Denver is higher. A person earning $28,500.00 in Denver must earn $41,046.65 in Seattle to have the same spending power. Or A person earning $38,000 in Seattle must earn $26,384.61 in Denver to have the same spending power.