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Buying Power Index Class of 2011

January 2013

How much buying power did starting salaries offer?

The relative buying power of the dollar in any two cities is very important when comparing the nominal dollar amounts of the salaries in those two cities. Those interested in this topic might, for example, ask about the "buying power" of a salary of $160,000 in Boston compared to a similar nominal salary in San Francisco. The question becomes, "Which location offers the most buying power?" The answer, and the dollars that accompany it, often translates into discretionary income and lifestyle options for new attorneys.

To illustrate purchasing power differentials, cities are ranked on the basis of a Buying Power Index (BPI). The BPI was calculated using New York City's median reported private practice salary for the Class of 2011 and cost of living as the benchmark. New York City's BPI is thus 1.00. BPI's for other cities show how much buying power the median reported law firm salary for the Class of 2011 in that city provides compared with the New York City median. The table below shows the BPI calculated for 76 cities for which at least 15 law firm salaries were reported for the Class of 2011 and for which cost-of living information was available. It is evident that the buying power of the median salary in more than 60% of the cities listed exceeds that of New York's when relative costs of living are factored in. For example, the median reported law firm salary in Cleveland, Detroit, and Pittsburgh is about two-thirds that of New York's, but nonetheless each offers about 40% more buying power than does the New York salary. As a second example, the buying power of the median reported salary in Raleigh, NC slightly exceeds that of New York's even though the median salary is less than half that of New York.

The difference in purchasing power between $145,000 in San Francisco and $145,000 in Wilmington, DE can be determined. The BPI in San Francisco is 1.219; that in Wilmington is 1.819. This means that the Wilmington salary offers almost half again as much purchasing power than the identical salary in San Francisco [1.819/1.219] = 1.49 or 49%. Or, viewed the other way around, the San Francisco salary offered about 67% of the purchasing power of the Wilmington salary [1.219/1.819] x 100 = 67%. Salaries in any two cities with similar salaries but different BPI's may be compared in this manner.

Likewise, the BPI can be used to compare any salary in a listed city (not just the median) with that for New York because the salary required to provide the same purchasing power as the $160,000 New York salary does not change. For example, in Atlanta, that figure is about $71,150. If the actual salary obtained in Atlanta is $100,000, it will purchase about 41% more than the $160,000 salary in New York [$100,000/$71,150] = 1.41 or 41%.



Median Reported Private Practice Salaries in Selected Cities
Ranked by Buying Power of the Salary — Class of 2011

City Median Reported Salary Salary required to Yield New York City Buying Power* Buying Power Index
Dallas, TX $135,000 $70,350 1.919
Wilmington, DE 145,000 79,710 1.819
Houston, TX 115,000 65,670 1.751
Charlotte, NC 115,000 68,230 1.686
Los Angeles, CA 160,000 97,110 1.648
Boston, MA 160,000100,400 1.594
Costa Mesa, CA 160,000 104,350 1.533
Washington, DC 160,000 104,790 1.527
Nashville, TN 100,000 65,960 1.516
Grand Rapids, MI 97,500 65,375 1.484
Detroit, MI 100,000 68,520 1.459
Menlo Park, CA160,000 109,910 1.456
Mountain View, CA 160,000 109,910 1.456
Palo Alto, CA 160,000 109,910 1.456
Pittsburgh, PA 100,000 69,320 1.443
Austin, TX 97,500 67,790 1.438
Newark, NJ 135,000 95,940 1.407
Cleveland, OH 104,000 74,150 1.403
Salt Lake City, UT 97,000 69,180 1.402
Birmingham, AL 90,000 64,790 1.389
Irvine, CA 140,000 104,350 1.342
New Orleans 93,000 69,910 1.330
Denver, CO 100,000 76,780 1.302
Phoenix, AZ 91,250 70,570 1.293
Seattle, WA 110,000 85,630 1.285
Atlanta, GA 90,000 71,150 1.265
Minneapolis, MN 102,000 80,880 1.261
Philadelphia, PA 115,000 91,410 1.258
Ft. Worth, TX 85,000 68,080 1.249
Milwaukee, WI 89,000 72,610 1.226
San Francisco, CA 145,000 118,980 1.219
Chicago, IL 100,000 83,880 1.192
Kansas City, MO 85,000 72,690 1.169
Tampa, FL 76,500 67,130 1.140
St. Louis, MO 75,000 66,620 1.126
Louisville, KY 75,000 67,060 1.119
Cincinnati, OH 75,000 68,230 1.099
Hartford, CT 98,500 90,530 1.088
Des Moines, IA 72,000 66,690 1.080
Charleston, WV 73,500 68,885 1.060
Richmond, VA 77,500 73,200 1.059
Alexandria, VA 110,000 104,790 1.050
San Antonio, TX 71,000 68,080 1.043
Memphis, TN 65,000 62,815 1.035
Las Vegas, NV 75,000 73,200 1.025
Raleigh, NC 70,000 68,590 1.021
New York, NY 160,000 160,000 1.000
Wichita, KS 63,000 67,420 0.934
Jacksonville, FL 64,000 68,665 0.932
Omaha, NE 60,000 65,375 0.918
Miami, FL 70,000 78,320 0.894
San Diego, CA 85,000 95,500 0.890
Madison, WI 69,000 79,050 0.873
Albuquerque, NM 60,000 69,180 0.867
W. Palm Beach, CA 70,500 81,170 0.862
Columbia, SC 60,000 69,835 0.859
Baltimore, MD 74,000 87,090 0.850
Oklahoma City, OK 56,250 66,180 0.85
Oakland, CA 84,000 99,450 0.845
Baton Rouge, LA 57,500 68,450 0.840
Tulsa, OK 55,000 65,810 0.836
Knoxville, TN 54,250 65,300 0.831
Southfield, MI 56,000 68,520 0.817
Lexington, KY 52,500 67,200 0.781
Newport Beach, CA 80,000 104,350 0.767
Boca Raton, FL 60,000 81,170 0.739
Ft. Lauderdale, FL 60,000 81,170 0.739
Orlando, FL 52,000 71,520 0.727
Little Rock, AR 50,000 69,980 0.714
Montgomery, AL 47,500 71,150 0.668
Albany, NY 54,000 81,390 0.660
Long Beach, CA 63,700 97,110 0.649
Beverly Hills, CA 60,000 97,110 0.618
Charleston, SC 45,000 72,910 0.617
Fairfax, VA 62,500 104,790 0.592
Honolulu, HI 70,000 122,710 0.571

*For ease of presentation, these figures have been rounded to the nearest $10.


Notes on Resources and Methodology for Calculating the Buying Power Index

The Buying Power Index (BPI) uses as its benchmark New York City's median starting salary and cost of living. Cost of living information was obtained from The Council for Community & Economic Research (C2ER) and its ACCRA Cost of Living Index for 2011. C2ER is a nonprofit professional organization of research staff of chambers of commerce, economic development organizations, and related organizations. C2ER obtains information through the participation of local Chambers of Commerce. C2ER uses this information to develop a cost of living index relative to a U.S. average of 100. The index measures differences in the costs of goods and services; C2ER does not attempt to incorporate tax differentials into its index. The index is not available for metropolitan areas whose Chamber(s) of Commerce do not participate.

These indices were used to create an adjusted cost of living index for each city, with New York City, rather than the U.S. average, set as 1.00. This adjusted index thus indicates the dollar amount equivalent to a dollar in New York when the cost of living differential is considered. For example, the ACCRA Cost of Living index for the Louisville, KY area is 91.7. Comparing this to New York's index of 218.8 means that $0.42 is needed in Louisville to obtain purchasing power equal to that of $1.00 in New York (91.7/218.8 = 0.4191).

This adjusted index was then used to determine how the New York median private practice salary would have to be scaled to provide comparable purchasing power in each city. Using the Louisville example, the lower cost of living means that a salary of about $67,060 is equivalent in purchasing power terms to the $160,000 salary in New York ($160,000 x 0.4191 = $67,056).

This purchasing power equivalent was then compared to the actual median reported private practice salary in each city to determine a BPI. The closer the BPI is to 1.00, the closer the salary comes to providing purchasing power on a parity with New York City. Continuing with the Louisville example, the BPI of 1.119 means that the salary has about 12% more purchasing power than the New York salary. However, a comparable $74,000 median salary reported for Baltimore, MD provides just 85% of the purchasing power of New York's median because the cost of living is higher in Baltimore compared with Louisville, though still lower than that of New York. Other cities where the reported median does not provide the purchasing power of the New York salary include Jacksonville, FL and Albany, NY. In contrast, the purchasing power in every city with a reported median of at least $90,000, exceeds that of New York.



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