6 ms·

> When you're "making 90k" in the valley you have the quality of life worth 30k in a midwestern city. Not true at all, yet this is constantly repeated like it'

> When you're "making 90k" in the valley you have the quality of life worth 30k in a midwestern city. Not true at all, yet this is constantly repeated like it's fact. Look up indifference curves and consumption bundles. You're ignoring microeconomics. For anyone that doesn't assign excessively high utility towards housing size, 90k in the valley is a much better quality of life than 30k in a midwestern city. This is where cost of living calculators fail as well. You can't compare the same basket of goods everywhere you go. People will adjust their basket of goods depending on relative prices; it doesn't mean that their utility has dropped. It's income effect vs substitution effect. Edit: The number above has been changed to 60k~. I'd say this is probably a more reasonable argument. As for the suburban argument, I don't really know the numbers and I can't argue there. As a person in my 20s who grew up in San Jose, the suburbs are like a bad dream that continuously haunts me.

UK-AL 12y ago
Surely most of you money is going on rent, so the money left will be the same as other cities.
- dashboardfront 12y ago
  You can always adjust your consumption bundle. If I'm living in a high rent city, I'm more likely to find a friend to share an apartment with or settle for something not that great. This is a drop in utility (though I'd argue living with a friend is a positive for myself), but I also have a lot more money to use on other things, which increases my utility. Spending most of your money on rent when you're pulling something like 5,000 after tax a month is a choice, not a given, and is reflective on how much utility you perceive a better apartment to give you. In reality, we're probably terrible at accurately estimating utility of a good, but I personally have lived in a variety of places, and I was most happiest living in my tiny dorm room, so I personally don't care much about having a big place.
  - UK-AL 12y ago
    Your average friend is likely to want a close to market price for that room. Relying on friends is not a way to plan an economy. A lot of people won't have friends willing to let them stay.
    - dashboardfront 12y ago
      That's not what I was saying at all, but alright. If you're interested in the topic, look up utility curves, income effect, and substitution effect in a microeconomics textbook. It'll probably have a much better explanation than I can communicate through text (unless I start making graphs, which would be a bit time consuming). Here's a copy paste of my explanation on reddit though (where this topic also constantly comes up): Living in the Bay Area results in a higher wage, which increases consumption (income effect), but at the same time the price of housing is much higher as well (to a greater degree than the increase in income). You substitute sq ft with other goods. If you place relatively heavy utility on housing by sq ft in comparison to all other goods, then I guess it's a bad idea to come out here, because you're going to be on a lower indifference curve. Otherwise (and I think most people fall under 'otherwise', which is why they come out here ) its not that bad of an idea, and you'll probably end up on a higher indifference curve.
      - UK-AL 12y ago
        I think you need a certain amount of sq ft regardless. Most people aren't going to trade living in a tiny room for more stuff. Your living area is probably No.1 contributor to quality of life.
        dashboardfront 12y ago
        > Your living area is probably No.1 contributor to quality of life. That might be true for you. Everyone has different indifference curves determined by the utility they place on different goods. As for sq. feet minimums, at lower levels of sq ft. you will place higher utility on marginal sq. feet, sure, and diminishing returns will probably not have kicked in.
michaelochurch 12y ago
If you're comparing cities to cities (e.g. Chicago vs. SF, Minneapolis vs. Seattle) then I'd say that it's closer to 65k than 30k to get an equivalent lifestyle to $90k on the West Coast. There are (contrary to coastal stereotype) great places to live in the Midwest, and they are cheaper than SF, but they aren't super-cheap either. The 2500 SF houses for $300k aren't in downtown Chicago. They're in suburbs where most 25-year-olds would be pretty bored because walking or biking to work is very rare and you can't go out without a designated driver (i.e. cab service and public transportation aren't options). If you're comparing suburbs (Silicon Valley) to suburbs, the discrepancy is much greater and I'd say that $90k/CA ~= $40k/Midwest. That's because Silicon Valley has so much less in the way of urban amenity, but still charges an urban premium that you wouldn't see 20 miles out of Minneapolis. When you adjust for commute, suburban California ("the Valley") looks even worse.
krschultz 12y ago
Exactly. When I lived in the suburbs I had a 3 bedroom condo, and my wife and I owned two cars. I moved to the city and we now have a 1 bedroom apartment and no cars. Total cost of living is roughly the same. My happiness in my living arrangements is about the same. A cost of living calculator would make it look like we are getting absolutely hosed. Our take home $ into bank accounts tells an entirely different story. The raise more than made up for any increased cost of living. It kind of makes sense too, if it didn't make sense, people wouldn't be doing it, there wouldn't be so much demand, and prices would fall.
- jarek 12y ago
  You can also live in the city with no cars in midwest or many other places with lower CoL than Bay Area
logfromblammo 12y ago
If you want your comparison to be equally valid wherever you make it, you have to use the same basket of goods everywhere you go. Otherwise, I can't tell whether you are comparing apples to oranges or pears to grapefruit. When I look at the numbers for that basket of goods that I currently consume, and price it out for San Francisco, I find that it is completely unattainable for anything less than 3 times what I currently pay, and could be difficult to reliably source for less than a multiple of 4. That's the fact. It does not matter that I would in reality have to substitute down to inferior goods. It would still be objectively worse than what I have now. The value of my willingness to substitute counterbalances the savings I make by substituting. If I move back to the cheaper area, I won't keep the SV basket; I will substitute right back to the best goods that I can afford.
- gjm11 12y ago
  I agree that there's a big transparency benefit to using the same basket everywhere, but I don't think that actually gives the most realistic answer. Imagine that every day, for every meal, you eat spaghetti carbonara. You'd be almost as happy eating linguine with pesto, but you happen to have a slight preference for spaghetti carbonara. Now you move somewhere else where, for whatever reason, spaghetti is 100x the price and every other ingredient is only 2x the price. Are you suddenly 100x poorer? No, much nearer 2x, because you'll just switch from spaghetti to linguine. You'll be slightly worse off than 2x because, darn it, you preferred spaghetti, but only slightly. Moving to San Francisco from (say) Minnesota is a bit like that. Housing is a bajillion times more expensive, so you'll have to make do with a lot less of it, but unless housing is the only thing you care about that doesn't mean you're a bajillion times worse off. You do need some housing, and many other things are also more expensive, so there's no argument that you're worse off in SF for any given level of income. But not by the factor the price of housing would suggest. (A couple of other remarks about this sort of comparison. 1. The richer you are, the less these things matter -- if you're putting a substantial fraction of your income into investments, those don't change in price at all just because you move to San Francisco. 2. Relatedly, if you are able to buy a house rather than renting, you're not as much worse off as the eyewatering price of the house would suggest -- because later on you can move out of San Francisco, sell that house, and get the money back again.)
mbreese 12y ago
> Not true at all, yet this is constantly repeated like it's fact. That's because it is true... I moved from the Midwest to the peninsula 3 years ago (for my wife's work). I made roughly those numbers there and here and the standard of living was roughly the same, maybe even dropped a little. Living in Silicon Valley is easily 2-3X more expensive than living in a place like Indianapolis or Columbus, OH. You honestly don't feel these pressures as much until you're older and have a family. At least, the differences between the regions are much more apparent with a family. For example, we need a certain amount of living space, and there are a set of fixed expenses. We lived in about the same size homes here and there, and just the cost for that alone more than tripled.
- dashboardfront 12y ago
  Housing might very well be 2-3x (or more) expensive, but not all goods have gone up 2-3x more. This allows for an adjustment of your consumption bundle; your housing is not going to be as large, but you might have access to a greater amount of other goods. Of course, you can choose to easily make it 2-3x more expensive if you desire. Family makes this difficult because your personal indifference curve places higher utility towards space, but the parent was discussing intern salaries, who generally don't have to support families.
  - mbreese 12y ago
    You have the same access to goods almost anywhere in the US. The basic problem is that certain basic needs (energy, housing, child care) cost 2-3X more in the Bay Area than the Midwest. The only things that isn't the case for are food and transportation, which are slightly more expensive, but not as nearly as much. Transportation may be slightly cheaper out here, but not by a significant margin. Your idea of a consumption bundle is appealing, but not very practical... you are assuming that there are things that can be adjusted, but for many, that just isn't the case. If you don't have a family, you might be able to get away with living in a smaller place. But if you do have one, for any given standard of living, there is a certain minimum size that you need. And the increase in costs in housing severely limit the flexibility that you might have in other areas. I was mainly replying to your assertion that it isn't 2-3X more expensive to live in the Bay Area than the Midwest. I'm sorry to tell you that it is.

UK-AL 12y ago

Surely most of you money is going on rent, so the money left will be the same as other cities.

dashboardfront 12y ago
You can always adjust your consumption bundle. If I'm living in a high rent city, I'm more likely to find a friend to share an apartment with or settle for something not that great. This is a drop in utility (though I'd argue living with a friend is a positive for myself), but I also have a lot more money to use on other things, which increases my utility. Spending most of your money on rent when you're pulling something like 5,000 after tax a month is a choice, not a given, and is reflective on how much utility you perceive a better apartment to give you. In reality, we're probably terrible at accurately estimating utility of a good, but I personally have lived in a variety of places, and I was most happiest living in my tiny dorm room, so I personally don't care much about having a big place.
- UK-AL 12y ago
  Your average friend is likely to want a close to market price for that room. Relying on friends is not a way to plan an economy. A lot of people won't have friends willing to let them stay.
  - dashboardfront 12y ago
    That's not what I was saying at all, but alright. If you're interested in the topic, look up utility curves, income effect, and substitution effect in a microeconomics textbook. It'll probably have a much better explanation than I can communicate through text (unless I start making graphs, which would be a bit time consuming). Here's a copy paste of my explanation on reddit though (where this topic also constantly comes up): Living in the Bay Area results in a higher wage, which increases consumption (income effect), but at the same time the price of housing is much higher as well (to a greater degree than the increase in income). You substitute sq ft with other goods. If you place relatively heavy utility on housing by sq ft in comparison to all other goods, then I guess it's a bad idea to come out here, because you're going to be on a lower indifference curve. Otherwise (and I think most people fall under 'otherwise', which is why they come out here ) its not that bad of an idea, and you'll probably end up on a higher indifference curve.
    - UK-AL 12y ago
      I think you need a certain amount of sq ft regardless. Most people aren't going to trade living in a tiny room for more stuff. Your living area is probably No.1 contributor to quality of life.
      - dashboardfront 12y ago
        > Your living area is probably No.1 contributor to quality of life. That might be true for you. Everyone has different indifference curves determined by the utility they place on different goods. As for sq. feet minimums, at lower levels of sq ft. you will place higher utility on marginal sq. feet, sure, and diminishing returns will probably not have kicked in.

michaelochurch 12y ago

If you're comparing cities to cities (e.g. Chicago vs. SF, Minneapolis vs. Seattle) then I'd say that it's closer to 65k than 30k to get an equivalent lifestyle to $90k on the West Coast. There are (contrary to coastal stereotype) great places to live in the Midwest, and they are cheaper than SF, but they aren't super-cheap either. The 2500 SF houses for $300k aren't in downtown Chicago. They're in suburbs where most 25-year-olds would be pretty bored because walking or biking to work is very rare and you can't go out without a designated driver (i.e. cab service and public transportation aren't options). If you're comparing suburbs (Silicon Valley) to suburbs, the discrepancy is much greater and I'd say that $90k/CA ~= $40k/Midwest. That's because Silicon Valley has so much less in the way of urban amenity, but still charges an urban premium that you wouldn't see 20 miles out of Minneapolis. When you adjust for commute, suburban California ("the Valley") looks even worse.

krschultz 12y ago

Exactly. When I lived in the suburbs I had a 3 bedroom condo, and my wife and I owned two cars. I moved to the city and we now have a 1 bedroom apartment and no cars. Total cost of living is roughly the same. My happiness in my living arrangements is about the same. A cost of living calculator would make it look like we are getting absolutely hosed. Our take home $ into bank accounts tells an entirely different story. The raise more than made up for any increased cost of living. It kind of makes sense too, if it didn't make sense, people wouldn't be doing it, there wouldn't be so much demand, and prices would fall.

jarek 12y ago
You can also live in the city with no cars in midwest or many other places with lower CoL than Bay Area

logfromblammo 12y ago

If you want your comparison to be equally valid wherever you make it, you have to use the same basket of goods everywhere you go. Otherwise, I can't tell whether you are comparing apples to oranges or pears to grapefruit. When I look at the numbers for that basket of goods that I currently consume, and price it out for San Francisco, I find that it is completely unattainable for anything less than 3 times what I currently pay, and could be difficult to reliably source for less than a multiple of 4. That's the fact. It does not matter that I would in reality have to substitute down to inferior goods. It would still be objectively worse than what I have now. The value of my willingness to substitute counterbalances the savings I make by substituting. If I move back to the cheaper area, I won't keep the SV basket; I will substitute right back to the best goods that I can afford.

gjm11 12y ago
I agree that there's a big transparency benefit to using the same basket everywhere, but I don't think that actually gives the most realistic answer. Imagine that every day, for every meal, you eat spaghetti carbonara. You'd be almost as happy eating linguine with pesto, but you happen to have a slight preference for spaghetti carbonara. Now you move somewhere else where, for whatever reason, spaghetti is 100x the price and every other ingredient is only 2x the price. Are you suddenly 100x poorer? No, much nearer 2x, because you'll just switch from spaghetti to linguine. You'll be slightly worse off than 2x because, darn it, you preferred spaghetti, but only slightly. Moving to San Francisco from (say) Minnesota is a bit like that. Housing is a bajillion times more expensive, so you'll have to make do with a lot less of it, but unless housing is the only thing you care about that doesn't mean you're a bajillion times worse off. You do need some housing, and many other things are also more expensive, so there's no argument that you're worse off in SF for any given level of income. But not by the factor the price of housing would suggest. (A couple of other remarks about this sort of comparison. 1. The richer you are, the less these things matter -- if you're putting a substantial fraction of your income into investments, those don't change in price at all just because you move to San Francisco. 2. Relatedly, if you are able to buy a house rather than renting, you're not as much worse off as the eyewatering price of the house would suggest -- because later on you can move out of San Francisco, sell that house, and get the money back again.)

mbreese 12y ago

> Not true at all, yet this is constantly repeated like it's fact. That's because it is true... I moved from the Midwest to the peninsula 3 years ago (for my wife's work). I made roughly those numbers there and here and the standard of living was roughly the same, maybe even dropped a little. Living in Silicon Valley is easily 2-3X more expensive than living in a place like Indianapolis or Columbus, OH. You honestly don't feel these pressures as much until you're older and have a family. At least, the differences between the regions are much more apparent with a family. For example, we need a certain amount of living space, and there are a set of fixed expenses. We lived in about the same size homes here and there, and just the cost for that alone more than tripled.

dashboardfront 12y ago
Housing might very well be 2-3x (or more) expensive, but not all goods have gone up 2-3x more. This allows for an adjustment of your consumption bundle; your housing is not going to be as large, but you might have access to a greater amount of other goods. Of course, you can choose to easily make it 2-3x more expensive if you desire. Family makes this difficult because your personal indifference curve places higher utility towards space, but the parent was discussing intern salaries, who generally don't have to support families.
- mbreese 12y ago
  You have the same access to goods almost anywhere in the US. The basic problem is that certain basic needs (energy, housing, child care) cost 2-3X more in the Bay Area than the Midwest. The only things that isn't the case for are food and transportation, which are slightly more expensive, but not as nearly as much. Transportation may be slightly cheaper out here, but not by a significant margin. Your idea of a consumption bundle is appealing, but not very practical... you are assuming that there are things that can be adjusted, but for many, that just isn't the case. If you don't have a family, you might be able to get away with living in a smaller place. But if you do have one, for any given standard of living, there is a certain minimum size that you need. And the increase in costs in housing severely limit the flexibility that you might have in other areas. I was mainly replying to your assertion that it isn't 2-3X more expensive to live in the Bay Area than the Midwest. I'm sorry to tell you that it is.