The real value of a starting salary is how much you can buy with it.
In the graph above, if you were living in Tennessee and were offered a 25% raise to move to New York, you could use this map to see that the hidden-cost of living in New York is about 28% higher.
When making decisions consider:
- All the costs and benefits that vary with the consequences of the decision (lest you commit the hidden-cost fallacy);
- But only costs and benefits that vary with the consequence of the decision (lest you commit the fixed- or sunk-cost fallacy).
I find this exhibit quite interesting. It’s interesting to come across this since I’ve been contemplating moving out of state for a job. Currently I live in New York and by the looks of it they are one of the states with the highest cost of living so it’d be pretty safe to move basically anywhere and get more for my money. The states that are the most valuable in terms of the relative value of $100.00 are located more centrally in the USA. Moving to a different state needs to be considered carefully especially when one is moving because they think their money is valued more elsewhere. When making a decision one needs to consider all of the costs and benefits. As read in Managerial Economics, one can make two mistakes when considering costs. Either one can consider costs that don’t necessarily affect the outcome of your decision which is known as the sunk cost fallacy or you can commit the hidden-cost fallacy which is when you ignore relevant costs. Both of these mistakes can skew a decision so it’s best to think of these under careful supervision.
ReplyDeleteI couldn't have found this map at a better time, I have been considering transferring my job out of state. I currently work from home in New York and have found out that I can transfer my job to a lower cost state with fewer hidden costs that NY. I was looking at states like Delaware, Maryland, and South Carolina where the relative value of $100 is more valuable than New York. Linked below is a website that I found interesting because I have also been considering the commonwealth of Puerto Rico. After looking at that chart, I noticed that it is mostly cheaper to live there even though it is an island that must import many of their goods.
ReplyDeletehttps://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=Puerto+Rico&country2=United+States