Class of 2016 Buying Power Index

April 2018

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 Chicago 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 2016 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 2016 in that city provides compared with the New York City median. The table below shows the BPI calculated for 87 cities for which at least 15 law firm salaries were reported for the Class of 2016 and for which cost of living information was available. It is evident that the buying power of the median salary in over half 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, Columbus, Richmond, and Cleveland 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 Lexington, KY and San Antonio exceed 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 $130,000 in Charlotte and $130,000 in San Diego can be determined. The BPI in Charlotte is 1.739; that in San Diego is 1.141. This means that the Charlotte salary offers 52% more purchasing power than the identical salary in San Diego [1.739/1.141] = 1.52 or 52%. Or, viewed the other way around, the San Diego salary offered about two-thirds of the purchasing power of the Charlotte salary [1.141/1.739] x 100 = 66%.

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 $180,000 New York salary does not change. For example, in Atlanta, that figure is about $78,000. If the actual salary obtained in Atlanta is $135,000, it will purchase 73% more than the $180,000 salary in New York [$135,000/$78,000] = 1.73 or 73%.

City Median Reported
Law Firm Salary 2016
Salary required to Yield
New York City Buying Power*
Buying Power Index
Houston, TX $160,000 $67,320 2.377
Dallas,TX 150,000 70,240 2.136
Austin, TX 130,000 67,890 1.915
Wilmington, DE 160,000 84,950 1.883
Charlotte, NC 130,000 74,780 1.739
Chicago, IL 160,000 93,470 1.712
Atlanta, GA 130,000 77,855 1.67
Nashville, TN 105,000 63,130 1.663
Roseland, NJ 160,000 98,280 1.628
Philadelphia, PA 150,000 93,550 1.603
Boston. MA 180,000 116,820 1.541
Milwaukee, WI 110,000 71,580 1.537
Kansas City, MO 112,500 73,435 1.532
Washington, DC 180,000 117,685 1.529
Costa Mesa, CA 180,000 119,580 1.505
Columbus, OH 105,000 70,990 1.479
Richmond, VA 107,000 72,510 1.476
Phoenix, AZ 110,000 76,510 1.438
Madison, WI 120,000 84,005 1.428
Los Angeles, CA 160,000 112,245 1.425
Cleveland, OH 110,000 77,855 1.413
Newark, NJ 134,000 96,230 1.392
Indianapolis, IN 100,000 72,410 1.381
Minneapolis, MN 115,000 83,295 1.381
Detroit, MI 100,000 74,855 1.336
Salt Lake City, UT 90,000 67,610 1.331
Cincinnati, OH 95,000 71,940 1.321
Birmingham, AL 90,000 69,810 1.289
Redwood City, CA 180,000 139,930 1.286
Denver, CO 110,000 87,080 1.263
St. Louis, MO 89,000 71,305 1.248
New Orleans, LA 95,000 76,750 1.238
Seattle, WA 100,000 81,810 1.222
Pittsburgh, PA 90,000 74,145 1.214
Baltimore, MD 105,000 91,185 1.152
Memphis, TN 70,000 61,070 1.146
San Francisco, CA 160,000 139,930 1.143
San Diego, CA 130,000 113,900 1.141
Des Moines, IA 80,000 70,910 1.128
San Antonio, TX 70,000 62,850 1.114
Lexington, KY 80,000 73,040 1.095
Fort Worth, TX 71,000 64,910 1.094
Rochester, NY 87,000 79,825 1.09
Hartford, CT 100,000 96,390 1.037
Omaha, NE 75,000 72,410 1.036
Jackson, MS 68,000 67,915 1.001
New York City 180,000 180,000 1
Grand Rapids, MI 70,000 70,835 0.988
Las Vegas, NV 80,000 82,270 0.972
Winston-Salem, NC 70,000 72,175 0.97
Akron, OH 75,000 79,350 0.945
Tampa, FL 68,000 72,175 0.942
Orlando/Winter Park, FL 70,000 74,305 0.942
Raleigh, NC 70,000 74,460 0.94
Chattanooga, TN 70,000 75,485 0.927
Oklahoma City, OK 60,000 66,730 0.899
Tulsa, OK 63,000 70,125 0.898
Baton Rouge, LA 67,500 75,880 0.89
El Paso, TX 62,500 70,430 0.887
Knoxville, TN 55,000 63,420 0.867
Buffalo, NY 65,000 75,015 0.867
Jacksonville, FL 65,000 75,565 0.86
Marietta, GA 65,000 75,960 0.856
Lubbock, TX 58,750 70,520 0.833
Miami, FL 72,750 87,555 0.831
Sacramento, CA 75,000 91,895 0.816
Albuquerque, NM 60,000 74,855 0.802
Louisville, KY 55,000 70,045 0.785
Alexandria, VA 80,000 102,760 0.779
Portland, ME 67,500 88,345 0.764
Virginia Beach, VA 58,000 77,065 0.753
Boise, ID 53,500 72,175 0.741
Portland, OR 75,000 101,360 0.74
Southfield, MI 54,500 74,855 0.728
Spokane, WA 50,000 77,300 0.728
Oakland, CA 84,000 117,290 0.716
Fort Lauderdale, FL 65,000 90,950 0.715
Irvine, CA 85,000 119,580 0.711
Albany, NY 60,000 87,080 0.689
Newport Beach, CA 80,000 119,580 0.669
Long Beach, CA 75,000 112,245 0.668
Beverly Hills, CA 70,000 112,245 0.624
Pasadena, CA 67,500 112,245 0.601
Providence, RI 57,500 96,310 0.597
Charleston, SC 46,500 82,035 0.567
Honolulu. HI 82,750 150,265 0.551
Brooklyn, NY 53,500 136,935 0.391

*Note: For ease of presentation, these figures are 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 2016. 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 89.8. Comparing this to New York's index of 228.2 means that about $0.39 is needed in Grand Rapids to obtain purchasing power equal to that of $1.00 in New York (89.8/228.2 = 0.394).

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 $71,000 is equivalent in purchasing power terms to the $180,000 salary in New York ($180,000 x 0.394 = $70,835).

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 0.988 means that the salary has just about the same purchasing power as the New York salary. However, a similar $73,000 median salary reported for Miami provides just 83% of the purchasing power of New York's median because the cost of living is higher in Miami 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 Sacramento and Louisville. 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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