Lisa Katz| Crain’s Detroit Blog

Competition for engineers and software developers is fierce. These occupations are routinely among the top in-demand jobs in nearly every city in the U.S.

For example, in Southeast Michigan alone during the fourth quarter of 2015, employers posted more than 14,000 jobs for workers in these fields. Job seekers in these fields have the upper hand when it comes to where they want to work, and salary is often a determining factor.

While the overall salary number is important, many companies do not take the cost of living into consideration. A six-figure salary in an expensive city may actually be less competitive than a lower salary in a small town when adjusted for cost of living.

Researchers at Hired, a San Francisco bay-area company, released a short report in 2015measuring how software engineer salaries compare across the U.S. when adjusted for cost of living. According to Hired, a software engineer, or software developer, makes an average of $132,000 annually in San Francisco. The average salary of the same worker in Austin, Texas, is $110,000 — notably lower than San Francisco’s going rate. Analysts at Hired found that if the Austin worker relocates to San Francisco, that worker would need to make at least $195,000 to have the same quality of life in San Francisco as he would in Austin. San Francisco’s average of $132,000 does not seem as appealing when cost of living is a factor.

What about Detroit? How does Southeast Michigan stack up for competitive wages?

Hired did not include the Detroit area in its report. Luckily, researchers at WIN replicated the analysis and will release a report on the topic in the spring. WIN’s forthcoming report highlights not only software developers, a top job in the region, but other top jobs as well, including engineers (mechanical, civil, electrical), customer services representatives (customer support) and sales representatives. While the report is not yet final, the preliminary analysis is telling.

Taken at face value, without adjustment, median wages in Detroit, Ann Arbor and six other major cities vary substantially.

Median salary, unadjusted 2015

Ann ArborDetroitAustinPortlandNYCChicagoSan FranColumbus
Software Developer$75,962$83,990$95,082$91,744$106,285$88,676$113,758$88,117
Customer Support$32,926$31,179$29,615$34,675$37,560$36,305$42,660$30,533

Analysis: Workforce Intelligence Network

There are multiple ways to adjust wages for cost of living, so WIN researchers created a composite index of two of the more common ones, C2ER and Sperling, both of which place different emphasis on cost of housing, transportation, groceries and other items that contribute to overall cost of living. WIN used Ann Arbor as the base 100, as Ann Arbor is known as one of Michigan’s most expensive cities in which to live.

The graph below highlights how much money is needed in each city to purchase the equivalent of what $1 will buy in Ann Arbor. The two most expensive cities, New York and San Francisco, require 80 percent more money to purchase the equivalent of what $1 buys in Ann Arbor. In Detroit, a consumer only needs 79 cents to purchase what a $1 buys in Ann Arbor. Three cities in WIN’s analysis have a lower cost of living than Ann Arbor: Austin, Texas; Columbus, Ohio; and Detroit.

The table below shows the salary in each city that would allow a worker to live a similar lifestyle as the baseline salary in Ann Arbor.

Median salary, adjusted for cost of living 2015 (Ann Arbor = baseline)

Ann ArborDetroitAustinPortlandNYCChicagoSan FranColumbus
Software Developer$75,962$60,301$71,555$88,691$138,384$78,542$141,638$61,481
Customer Support$32,926$26,138$31,016$38,443$59,983$34,044$61,394$26,649

Data: EMSI, BLS, C2ER, Sperling
Analysis: Workforce Intelligence Network

Where can a worker get more for their money? It depends. In order to live a similar lifestyle as a software developer making $75,962 in Ann Arbor, a worker would need to make $52,963 more in San Francisco. On the other hand, a software developer in Detroit could make $60,301, or $21,629 less than a similar worker in Ann Arbor. This shows that location and cost of living definitely make a difference.

Detroit, Austin and Columbus are the top contenders for most “bang-for-your-buck” cities in which to work, according to WIN’s analysis. In these cities, workers make more than needed to live a similar lifestyle to comparable workers in Ann Arbor. Workers in NYC and San Francisco likely would live a little grander if they moved to Michigan, especially Detroit.

How do your company’s salaries measure up? Try PayScale’s tool using the cost of living index from C2ER or try your luck using Sperling’s model.

This blog post was prepared with research compiled by WIN’s Hector Acosta, research and policy analyst, and Colby Spencer Cesaro, senior director of research and strategy.

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