NALP Bulletin+
October 2023

The relative buying power of the U.S. dollar in any two cities is important when comparing the nominal dollar amounts of typical salaries in those cities. Law students considering where to work post-graduation, for example, might ask how the buying power of a $215,000 salary in Boston, MA compares to the same nominal salary in San Francisco, CA. The question becomes, "Which location offers the most buying power?" Cities with more buying power offer additional lifestyle options and discretionary income for new lawyers or may allow recent law graduates to achieve personal goals such as paying off student loans, buying a home, or starting a family more quickly.

To illustrate purchasing power differentials, NALP has analyzed salary data from the Class of 2022 Employment Report and Salary Survey in conjunction with cost-of-living data from the Council for Community & Economic Research (C2ER) to rank cities on the basis of a Buying Power Index (BPI). The BPI was calculated using New York City's Class of 2022 median overall private practice salary and cost of living as the benchmark. New York City's BPI is thus 1.00. BPIs for other cities demonstrate how much buying power the median law firm salary for the Class of 2022 in that city provides compared with the New York City median.

Table 1 below shows the BPI calculated for 102 cities for which at least ten law firm salaries were reported for the Class of 2022, and for which cost-of-living information was available for the 2022 calendar year. The 52 cities with a BPI greater than 1.0 offer more purchasing power compared to New York City and the 49 cities with a BPI below 1.0 provide less purchasing power. Thus, in just over half of the cities included in the table, the buying power of the median salary exceeds that of New York City's when the relative cost of living is factored in. For example, the median reported law firm salaries in Cleveland, OH and Grand Rapids, MI are about 60% of New York City's, but nonetheless each offers about 50% more buying power than does the New York City salary. As another example, the buying power of the median salaries in Louisville, KY and Greenville, SC exceed that of New York City's even though these cities' median salaries are less than half that of New York.

Additionally, salaries in any two cities with similar salaries but different BPIs can be compared. For example, the difference in purchasing power between $215,000 in San Francisco and $215,000 in Boston, MA can be determined. The BPI in San Francisco is 1.275 and the BPI in Boston is 1.521. This means that the Boston salary offers 19% more purchasing power than the identical salary in San Francisco [1.521/1.275] = 1.19 or 19%. Viewed the other way around, the San Francisco salary offered about 84% of the purchasing power of the Boston salary [1.275/1.521] x 100 = 84%.

Likewise, the BPI can be used to compare any salary in a listed city (not just the median) with that for New York City because the salary required to provide the same purchasing power as the $215,000 New York City salary does not change. For example, in Cincinnati, OH that figure is about $91,000. If the actual salary obtained in Cincinnati is $180,000, it will purchase nearly twice as much as the $215,000 salary in New York City [$180,000/$91,000] = 1.98 or 98% more purchasing power.

Table 1. Class of 2022 Buying Power Index for Cities with at Least 10 Reported Law Firm Salaries

*Note: For ease of presentation, these figures are rounded to the nearest $5.
Sources: Cost of living information comes from the Council for Community & Economic Research (C2ER) and its Cost of Living Index for calendar year 2022. Median law firm salary data is from NALP's Jobs & JDs, Class of 2022.

Notes on Resources and Methodology for Calculating the Buying Power Index

The BPI uses as its benchmark New York City's median starting salary and cost of living. Cost-of-living information was obtained from the C2ER and its Cost-of-Living Index for the 2022 calendar year. C2ER is a non-profit professional organization of research staff of chambers of commerce, economic development organizations and agencies, and related organizations. C2ER obtains information through the participation of local Chambers of Commerce or similar organizations. 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; however, 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. Median salary information for each city was obtained from analysis included in NALP's Jobs & JDs, Class of 2022 report.

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 City when the cost-of-living differential is considered. For example, the C2ER Cost of Living index for Indianapolis, IN is 92.5. Comparing this to New York City's index of 227.7 means that about $0.41 is needed in Indianapolis to obtain purchasing power equal to that of $1.00 in New York City (92.5/227.7 = 0.4062).

This adjusted index was then used to determine how the New York City median private practice salary would have to be scaled to provide comparable purchasing power in each city. Using the Indianapolis example, the lower cost of living means that a salary of approximately $87,300 is equivalent in purchasing power terms to the $215,000 salary in New York ($215,000 x 0.4062 ≈ $87,300).

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 par with New York City. Continuing with the Indianapolis example, the BPI of 1.431 means that the $125,000 median salary has about 43% more purchasing power than the New York salary ($125,000/$87,340 = 1.431).