The Cities Where A Paycheck Stretches The Furthest 2017


We often conflate high salaries with prosperity, but that can be deceptive. Someone who lives in New York or San Francisco might make more money than a counterpart in the same profession in Houston or Dallas-Fort Worth, but when the cost of living is factored in, their Southern colleagues may actually come out ahead.

At the Center for Opportunity Urbanism, we developed a Standard of Living Index to get a better sense of where workers are getting the most for their paychecks. We began with the Bureau of Economic Analysis regional price parities for the 107 metropolitan statistical areas with more than 500,000 residents, added the costs for purchasing the average house and weighted the index based on the national distribution of renting and owning (63 percent owning, 37 percent renting). Housing plays a disproportionate role in the difference in costs between the most and least expensive metro areas, as we will detail later.

The picture that emerges is one of a very varied set of regional economies, all seeking to boost pay and the standard of living faster than costs. Some do this well, while others are getting left behind.

The Top 10

As the world capital of technological innovation, the San Jose metropolitan area, which includes much of Silicon Valley, has by far the highest average salary -- $116,000 -- among the 107 largest metropolitan areas. That‘s more than twice the national average, and $31,000 more than the metro area with the second-highest average pay, Bridgeport-Stamford, Conn.

The cost of living in the San Jose area is also impressively high, nearly 60% above the national average, driven by outrageous real estate prices. Factoring that in, the average paycheck there is worth $67,485– much lower than nominal pay, but still high enough to rank first in the nation.

Three other tech-oriented metro areas rank in the top 10: Boston (seventh) and Seattle (ninth), where high salaries compensate for prohibitive costs, and Durham, N.C., in third place, where costs are slightly above average. In all three, the cost of living adjusted pay varies from around 10% to 18% above the national average.

Houston retains its second-place rank from last year, with a cost of living 9% above the national average, but with pay that’s nearly 20% above. The nominal average pay there of $64,000 pencils out to $58,400 when adjusted for cost of living.

Fourth place Atlanta has a cost of living 2% above the national average but with pay 14% above. The rest of the top 10 is rounded out by Detroit (eighth), Hartford (ninth) and Dallas-Ft. Worth (10th), which are not on the minds of most venture capitalists, but offer relatively higher salaries and reasonable costs that benefit residents.

The metro area where a paycheck buys the least: Honolulu, where the high costs of all the necessities shipped in from the mainland, not to mention high housing costs, erodes the value of the average $50,200 wage to $32,500.

California’s Conundrum

One thing that screams out to anyone looking at the numbers: the preponderance of California metro areas that inhabit the bottom rungs of the survey.

California’s recovery has been driven largely by the Bay Area, which includes San Francisco and San Jose.

Yet the rest of state, whose growth rate has now slowed to the national average after several years playing above par, is not keeping up as well. The clear culprit: housing costs so high that San Francisco's wages are not nearly high enough to cover the costs. San Francisco, ranks 19th, second best among California metropolitan areas. It shares prohibitive costs that are almost as high as San Jose -- some 50% above average -- but with pay nearly $16,000 lower, barely 6% above the national average.

A remarkable five of the bottom 10 metro areas on our rankings are from the Golden State. These include both interior metropolitan areas -- No. 101 Fresno and No. 104 San Bernardino-Riverside -- that suffer from rising house prices and California’s draconian regulatory and tax regime but without the benefit of above average salaries. Other interior areas hurting include Modesto, ranked 91st, and Stockton,95th. Both have seen home prices rise as newcomers, fleeing the Bay Area’s insane costs, have settled in for long commutes but still working there. Indeed, Stockton has now been included in the Bay Area combined statistical area by the Office of Management and Budget.

Yet the coast is not in the clear either, as No. 102 Oxnard’s ranking suggests. But perhaps more surprising is the poor showing by No. 92 San Diego, which has a strong technology economy, and even worse the massive Los Angeles area, home to Hollywood, which ranks 100th, by far the worst among the 10 largest metropolitan areas on our list. The reason? An average salary that is barely above the national average but with a cost of living, driven by high housing prices that drops the value of the paycheck to 20% below the national average.

Full List: The Cities Where A Paycheck Stretches The Most And Least

What The Future Holds

The widening divergence in housing costs -- an issue which has occupied much of the recent tax reform debate -- is becoming an increasingly determinative factor in the evolution of metropolitan economies. The largest cost difference in goods and services other than rents among the 107 metropolitan areas is 35%. The spread from lowest to highest in rents is 255%. The biggest gap, however, is in the cost differences for purchasing the average-priced house – a whopping 624%, nearly 2.5 times the differences in rents. This drives the overall cost of living difference up to 124% between the least and most expensive metropolitan areas.

As we have seen some areas -- notably San Jose, Boston and Seattle -- have been able to cope with higher costs because industries there are able to offer relatively fat paychecks. But even these storied areas may face challenges as the cost gaps rise. Already growth has slowed, and even gone into reverse in the Bay Area, a downturn at least somewhat tied to bloated housing costs. A 2015 survey found some 74 percent of millennials in the area were contemplating leaving, largely due to high rents and home prices.

These issues will become larger as millennials begin to look to buy houses for their young families. We have calculated the difficulty of transitioning from renting to purchasing, by comparing annual average housing costs for renters to average housing costs for a newly purchased house. The gaps tend to be much wider in places like the Bay Area, Los Angeles and New York, than for example, in Chattanooga, Tampa-St. Petersburg, Indianapolis, Orlando, San Antonio, Atlanta or Birmingham.

Some people are moving in large numbers from the more expensive areas to areas where costs are lower.. The 10 most expensive metropolitan areas (including San Jose), where the cost of living is 25% or higher than average, exported 1.4 million domestic migrants to other parts of the country from 2010 to 2016. In contrast, the 77 metropolitan areas with costs of living below average attracted more than 2,000,000 net domestic migrants. This could also accelerate the flow of business investment to these places, as skilled labor becomes more constrained, or the demands for compensation more extreme, as people struggle to meet costs.

This piece originally appeared on

Joel Kotkin is executive editor of He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book is The Human City: Urbanism for the rest of us. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photo: Adam Simmons, via Flickr, using CC License.