There are exactly 90 surgeons in Fort Smith, the metropolitan area encompassing the Arkansas Ozarks and the eastern edge of Oklahoma. For many, it is a tough place to earn a living: A Fort Smith worker now earns 46 percent less than the national average, and that gap has doubled since the recession.
But for those 90 doctors, the Ozark region boasts an impressive superlative. A surgeon in Fort Smith is, by one measure, the single best-paid occupation in the United States, according to new data from the Bureau of Labor Statistics.
One would expect the most lucrative salaries to cluster in cities like Seattle and Washington, D.C. Indeed, rich cities do pay higher wages. But they also cost a lot more to live in—housing is prohibitively expensive in rich downtowns, and so are haircuts, steak, and beer. So, the Bureau of Labor Statistics also measures what it calls “price-adjusted wages” to compare the value of salaries in metro areas with different costs of living. (When it makes these calculations, the government considers what a typical household spends its money on, so that the differences in housing prices and gasoline are more significant than any fluctuation in the cost of, say, lettuce.)
Adjusted for cost of living, a $50,000 salary in New York is as valuable as a $32,000 salary in Danville, Illinois. At first, this gap might seem incomprehensibly wide for two American cities separated by a 12-hour drive. But look at the divide in their real-estate markets. In Manhattan and Brooklyn, it’s almost impossible to buy a two-bedroom apartment for less than $700,000, much less anything resembling a house. In Danville, however, the median home price is one-tenth of that, about $70,000. The region’s only constructed property listed on Trulia for more than $600,000 is an empty gas station.
From this angle, cheap cities are boons to many of those working in white-collar professions. Here is a look at lawyers’ average wages by metro area, including some poor metros and some rich ones. (The Y-axes on these graphs are truncated to accentuate the difference.)
As one might expect, Rome, Georgia, and McAllen, Texas, located in two of the poorest regions in the country, have some of the lowest salaries for lawyers in the country. But including cost of living, the picture changes dramatically.
In Jonesboro, the typical salary for a lawyer goes just as far as those in any metropolitan region in the country. A typical lawyer in the heart of Tennessee goes toe-to-toe with the ones living in Los Angeles and San Francisco in terms of buying power, despite earning $40,000 less (and therefore paying significantly fewer taxes).
The difference between wage and purchasing power is starkest for the highest-paying professions, but that’s not where it’s most important. After all, a surgeon or doctor is going to be okay, no matter where he or she lives. (In fact, most of the highest-paid occupations by BLS calculations are in medicine, because it’s an industry where wages are strongly influenced by government policies that promote higher pay in poor and rural parts of the country, in order to keep doctors from concentrating on the coasts.)
Instead, it’s lower-income workers who are most affected by cost of living. Cashiers are one of the most common and poorly paid jobs in America. The average wage for a cashier ranges from about $18,000 in places like Mobile, AL, to $26,000 in San Francisco. But after adjusting for cost of living, cashiers in San Francisco and San Jose are among the poorest 25 percent in their occupation, nationwide. The worst place to be a cashier, it turns out, is the New York metro area.
The most immediate implication of this research is in the national debate over raising the minimum wage. The Fight for $15 movement is pushing for $15 minimum wages across the country. Many coastal metros can probably absorb much higher wages, and what's more, the extremely high cost of living in these areas creates a powerful moral case for raising the legal minimum. But American cities do not come in a single shape, and they won’t do well with one-size-fits-all policies. Cost-of-living estimates differ by 30 percent between places like San Jose and San Antonio. Those metro areas don’t share the same housing and transportation burdens, and they shouldn’t be subject to the same minimum wages.
The larger point, though, is that America’s biggest cities are both extremely productive and extremely pricey. They are the results of density and talent, but their high costs also drive away thousands of talented people, because life itself becomes too expensive for many people to bear. New York, San Francisco, and San Jose are all more than 20 percent more expensive than the average American metro area. In other words, if somebody making $50,000 in a place like Portland, Oregon, moves to San Jose and gets a $10,000 raise, she’ll actually feel poorer. No wonder so many Americans are moving to the cheap and roomy suburbs of the south and southwest.