Buying Power Index - Class of 2014

March 2016

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 2014 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 2014 in that city provides compared with the New York City median. The table below shows the BPI calculated for 78 cities for which at least 15 law firm salaries were reported for the Class of 2014 and for which cost of living information was available. It is evident that the buying power of the median salary in almost two-thirds 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 Indianapolis, New Orleans, Grand Rapids, Austin, and Salt Lake City is about 60% that of New York's, but nonetheless each offers over 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 exceeds that of New York's even though the median salary is less than half that of New York.

Additionally, salaries in any two cities with similar salaries but different BPI's can be compared. For example, the difference in purchasing power between $160,000 in San Francisco and $160,000 in Los Angeles can be determined. The BPI in San Francisco is 1.289; that in Los Angeles is 1.621. This means that the Los Angeles salary offers 26% more purchasing power than the identical salary in San Francisco [1.621/1.289] = 1.26 or 26%. Or, viewed the other way around, the San Francisco salary offered about 80% of the purchasing power of the Los Angeles salary [1.289/1.621] x 100 = 80%.

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 $70,000. If the actual salary obtained in Atlanta is $135,000, it will purchase almost twice as much as the $160,000 salary in New York [$135,000/$70,000] = 1.93 or 93%.


Median Reported Private Practice Salaries in Selected Cities
Ranked by Buying Power of the Salary — Class of 2014

City Median Reported
Salary 2014
Salary required
to Yield New York City
Buying Power*
Buying Power Index
Dallas, TX $160,000 67,615 2.366
Houston, TX 160,000 69,095 2.316
Wilmington, DE 145,000 74,510 1.946
Charlotte, NC 130,000 67,830 1.917
Richmond, VA 115,000 66,770 1.722
Cincinnati, OH 110,000 63,960 1.720
Chicago, IL 140,000 81,760 1.712
Kansas City, MO 110,000 66,210 1.661
Atlanta, GA 115,000 70,290 1.636
Milwaukee, WI 115,000 70,750 1.625
Los Angeles, CA 160,000 98,715 1.621
Birmingham, AL 102,500 64,520 1.589
Boston. MA 160,000 101,530 1.576
Roseland, NJ 140,000 89,075 1.572
Nashville, TN 105,000 66,985 1.568
Madison, WI 115,000 73,525 1.564
Washington, DC 160,000 103,290 1.549
Costa Mesa, CA 160,000 104,555 1.530
Detroit, MI 100,000 67,055 1.491
Jackson, MS 85,000 58,540 1.452
Minneapolis, MN 110,000 76,130 1.445
Indianapolis, IN 92,500 64,100 1.443
New Orleans, LA 95,000 66,350 1.432
Denver, CO 110,000 77,115 1.426
Grand Rapids, MI 92,500 65,015 1.423
Austin, TX 96,000 67,545 1.421
Salt Lake City, UT 95,500 67,830 1.408
Cleveland, OH 100,250 71,205 1.408
Fairfax-McLean, VA 140,000 103,290 1.355
San Antonio, TX 80,000 61,425 1.302
Redwood City, CA 160,000 124,115 1.289
San Francisco, CA 160,000 124,115 1.289
Philadelphia, PA 107,500 84,080 1.279
Columbus, OH 80,000 63,675 1.256
Newport Beach, CA 130,000 104,555 1.243
St. Louis, MO 80,000 65,085 1.229
Rochester, NY 85,000 69,800 1.218
Omaha, NE 78,000 64,240 1.214
Des Moines, IA 75,000 63,185 1.187
Phoenix, AZ 80,000 67,475 1.186
Tampa, FL 76,000 64,450 1.179
Hartford, CT 102,500 87,530 1.171
Fort Worth, TX 84,000 72,460 1.159
Pittsburgh, PA 80,000 69,375 1.153
Seattle, WA 110,000 98,715 1.114
Raleigh, NC 70,000 63,675 1.099
Baton Rouge, LA 70,000 65,015 1.077
Tulsa, OK 65,000 60,510 1.074
Memphis, TN 60,000 59,455 1.009
New York City 160,000 160,000 1.000
Orlando/Winter Park 67,500 69,095 0.977
Las Vegas, NV 74,000 76,130 0.972
Louisville, KY 62,500 64,870 0.963
Knoxville, TN 60,000 62,900 0.954
Baltimore, MD 75,000 79,370 0.945
San Diego, CA 95,000 101,880 0.932
Columbia, SC 61,000 66,913 0.912
Southfield, MI 60,000 67,055 0.895
Oklahoma City, OK 55,000 61,990 0.887
Miami, FL 70,000 79,015 0.886
Harrisburg, PA 60,000 69,515 0.863
Irvine, CA 90,000 104,555 0.861
Portland, OR 75,000 91,120 0.823
Little Rock, AR 55,000 66,985 0.821
Lexington, KY 51,500 63,605 0.810
Charleston, SC 57,500 71,065 0.809
Buffalo, NY 54,000 67,055 0.805
Alexandria, VA 80,000 103,290 0.775
Coral Gables, FL 60,000 79,015 0.759
Albany, NY 60,000 79,295 0.757
Fort Lauderdale, FL 60,000 80,350 0.747
Santa Monica, CA 72,500 98,715 0.734
Providence, RI 60,000 86,755 0.692
Oakland, CA 70,000 103,430 0.677
Newark, NJ 60,000 89,075 0.674
Jacksonville, FL 45,000 69,655 0.646
Santa Ana, CA 64,000 104,555 0.612
Honolulu, HI 80,000 132,420 0.604

*For ease of presentation, these figures have been rounded to the nearest $5.


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 Cost of Living Index for 2015. 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 C2ER Cost of Living index for the Grand Rapids, MI area is 92.4. Comparing this to New York's index of 227.4 means that about $0.41 is needed in Grand Rapids to obtain purchasing power equal to that of $1.00 in New York (92.4/227.4 = 0.406).

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 Grand Rapids example, the lower cost of living means that a salary of about $65,000 is equivalent in purchasing power terms to the $160,000 salary in New York ($160,000 x 0.406 = $65,013).

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 Grand Rapids example, the BPI of 1.423 means that the salary has about 42% more purchasing power than the New York salary. However, a similar $95,000 median salary reported for San Diego, CA provides just 93% of the purchasing power of New York's median because the cost of living is higher in San Diego compared with Grand Rapids, 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 Portland, OR and Baltimore, MD. In contrast, the purchasing power in nearly every city with a reported median of at least $90,000 exceeds that of New York.

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