14

This isn't my situation, but my sister's.

She is quite qualified (one bachelor's degree, one master's, one diploma in software enterprise management from a reputable management institute (IIM Bangalore)). She also has 9 years experience.

Due to family problems, she has had to move to a smaller city with her husband. Now while looking for a job, they have offered her a significantly smaller salary than what she was getting in Bangalore.

Should she accept the pay cut just because the city's smaller? I don't know the nature of the job or anything, but I do know the newer company is smaller than the older one.

VTC Note: I myself was confused over this, but I don't think this question asks for advice on what to do(like: should I take the $40K package or the $50K package?); rather I'm trying to understand the companies' mindset in offering lower salaries to really qualified employees, which might be reasonable, or might not be.

closed as off-topic by Xavier J, gnat, Chris E, Adam V, user9158 Apr 12 '16 at 22:52

This question appears to be off-topic. The users who voted to close gave this specific reason:

  • "Questions asking for advice on what to do are not practical answerable questions (e.g. "what job should I take?", or "what skills should I learn?"). Questions should get answers explaining why and how to make a decision, not advice on what to do. For more information, click here." – gnat, Chris E, Adam V
If this question can be reworded to fit the rules in the help center, please edit the question.

  • The first two paragraphs of my answer here may be of use to you. Keep in mind that this question is not very useful as currently written. Better would be something like "Is it normal for salary to be lower in smaller cities?" It would also be useful to explicitly mention India as the country though the trend probably holds for most countries and industries. – Lilienthal Apr 12 '16 at 10:26
  • 7
    The issue is that she should not compare what they offer her now and what she earned in Bangalore, she should compare the different job offers that are available to her now (and of course, she is free to continue looking for a new job in the future). – SJuan76 Apr 12 '16 at 13:30
  • 2
    Salary is/should be about supply and demand. If there's no job for her at that price, then she has no choice but to accept a lower salary. Same way around, if she is so good at her job, she'll be able to get a raise. – the_lotus Apr 12 '16 at 14:18
  • @the_lotus She is good at her job, that's for certain. The previous company has sent her abroad many times, she has even conducted interviews of new candidates on the company's behalf. – cst1992 Apr 12 '16 at 15:05
  • This is not unique to India. Consider salaries in Paris vs. the rest of France or London vs. the rest of UK of example. – Dmitry Grigoryev Apr 12 '16 at 16:25
3

There are two factors: How much are companies willing to pay, and how much do you want to earn.

In a different town, average living costs may be higher or lower, and because of that companies will have to pay higher or lower salaries. The salaries offered will depend on the average living cost. They may also depend on the demand for employees (in a place where everyone is fighting for employees, the salary will be higher). There is not much you can do about that

On the other hand, if you move to a different town, your individual cost of living will change. And your quality of life will change. You may change from a one hour train journey to work to a five minute walk, if you are very lucky. So your need for salary will change, and your quality of life will change. That's things you need to take into account. (However, if you manage to find a home very close to your work place that's good luck for you, it is not an excuse to pay you less. Just as you can't expect the company to pay more because you are living far away. That's purely your good or bad luck).

So look at the salary on offer, and check what it actually means for your living conditions, and see if it is acceptable taking into account changed cost of living and other things. If it's not, negotiate. (Actually, if the salary is acceptable, still negotiate). Once a company is interested in you, they will be a bit flexible in payment, depending on your negotiation skills. And if you decided that 15% pay cut is acceptable (because the new location is cheaper to live), and they offer 20% less, since not wanting a pay cut is a very understandable argument you might be able to increase the salary to a 10% cut and be happy.

Remember the big cost factor for the company is how good or bad the employees are that they hire. Your salary is a tiny part of the cost.

  • 2
    +1 You had me at "negotiate". People complain about a gender pay gap, yet there is so little attention to making a polite counteroffer. Everyone should, really. – donjuedo Apr 12 '16 at 13:20
  • Being worked freelance myself(I'm no expert), I'm of the opinion that salaries should be based purely on value. Maybe there are other considerations, but 'they were paying you too much' seems unreasonable to me. Maybe it's just not that simple. – cst1992 Apr 12 '16 at 21:07
39

It is too easy to look at salary amount and make a blanket value statement as to whether a compensation package is better or worse. But to truly compare compensation packages, you need to take a lot of other factors into account.

These can include other additional compensation elements such as :

  • Incentive Pay (Bonuses)
  • Annual Vacation/Sick Time
  • Corporate Culture (including expected weekly working hours, family friendliness, fringe benefits)
  • Retirement Plan
  • Growth Opportunity (both inside the company and how it looks on your resume)

In addition you need to evaluate cost of living expenses for the area:

  • Travel/Commute Cost
  • Housing and Land Cost (Rent and Mortgages)
  • Grocery & Food Cost
  • Luxury Item Costs

Lastly, there are also less tangible factors to weigh such as:

  • Appeal of Location
  • How close you are to friends and family
  • Work/life balance
  • Stress toll

Each of the above factors may have more importance to one individual over another so weighing them all equally will not work from one person to another. For instance, a younger worker is going to care more about growth opportunity than an older work who is looking towards retirement.


To put this in perspective, take the following two (simple) examples:

1) Bob lives in California and makes 100K. Jim lives in Kansas and makes 75K. Clearly Bob makes more, right? Maybe not... due to cost of living, Bob pays $1500/month to rent a tiny 400 sq ft studio apartment (as he can't affort home prices) and shells out $2000/month on living expenses while Jim pays $1000/month mortgage on a 2,000 sq ft house and pays $1000/month on living expenses.

At the end of 2 years, the net worth of the two is:

  • Bob = 200K salary - 48K living expense - 36K lost rental = 116K
  • Jim = 150K salary - 24K living - 24K mortgage + 24K home equity = 126K

2) Dave makes 100K in New York working for a high stress firm while Arnold makes 70K/yr in Indiana at a more leisurely pace. Who makes more money? Well, if Dave is required to work a 60 hour week per the norm while Arnold only put in his normal 40 hours then actually Arnold is making more money per hour:

  • Dave = 100K / (60 hrs * 52 wks) = $32.05 per hour
  • Arnold = 70K / (40 hrs * 52 wks) = $33.65 per hour

Conclusion

Ultimately, only your sister can decide whether the other benefits of the job, the new location and her family circumstances are worth the pay cut to actual salary. But she should be sure to weigh more factors than just what the number is at the bottom of her paycheck each week.

  • 5
    Cost of living is an important factor, I believe from Bangalore to a smaller city in India, the cost of living may change everything. – Pierre Arlaud Apr 12 '16 at 14:57
  • Really good answer DanK. It's nice to see those two simple examples, I certainly had never actually thought through the ramifications of those, especially the longer hours one. – Ian Apr 12 '16 at 15:18
  • 8
    Paying 24K on a mortgage != 24K in home equity – MDLNI Apr 12 '16 at 16:46
  • 3
    @MDLNI True, but excluding for PMI, Interest and Taxes overly complicates example without adding any real value. The point is that some equity is better than no equity. – DanK Apr 12 '16 at 16:59
  • +1 I live in TN. It's funny to see the reactions of people from the Bay Area when they see look at the real estate market here. Another important part about the buying vs. renting issue is that eventually your house payment will be zero (because it will be paid off.) And, in areas with low cost-of-living, that 'eventually' might not be all that far away. Of course, you'll still have taxes, insurance, and upkeep. – reirab Apr 12 '16 at 20:55
15

Should she accept the pay cut just because the city's smaller?

No. She should accept the pay cut if this company is her best option.

That might mean it has the best benefits, the best commuting considerations, the best opportunity to grow long term, etc.

Or it might mean that the pay, while less than she had in a bigger city, is the best she can get in the new locale.

Don't accept less just because the city is smaller, accept less pay if overall this is still the best deal.

3

Salary does depend on quite a few things. Company Size is one of the most important. Location will also play a part in the salary.

Both will cut the salary by a few notches. Depends on the ratio of the compared companies and the remoteness of the new location.

For eg a MNC might pay 20 lacs in city A , but a smaller co might pay 10 lacs in the same city. MNCs ( non service oriented ) play much more

We cannot tell you if she should take the job but yes there will be differences.

2

As many have already mentioned, there are far too many variables at play here which are not explicitly mentioned for a simple "yes/no" answer. However, even assuming that this really is the exact same job with the exact same company with the only difference being it being in a smaller city, this is still not a reason to simply accept a lower salary unless it is the best deal available: Smaller cities are not necessarily cheaper than relatively bigger ones, and, even if housing costs in the smaller city are less than in a bigger one, other things may in fact be more expensive. For example, Oxford in England is very small and yet is significantly more expensive to live in than some bigger cities, such as Nottingham or Birmingham --- and even housing costs by themselves are much higher in Oxford than in Nottingham or Birmingham.

  • The funny thing is that, rents are lower, and cost of living is lower, but cost of owning a home is actually higher due to smaller size of city and saturated residential areas. Bangalore is kind of rent-and-work city with a lot of work available for able people, but with a high cost of living to go. Our city hasn't got that much work, so salaries are lower, but property costs are actually higher per square foot. – cst1992 Apr 12 '16 at 20:57
1

Should she accept the pay cut just because the city's smaller?

No, unless she is desperate for work, she should keep job hunting all else being equal. There's a lot of factors that could reduce offers, seniority, local human resource pool in that city, competition etc,. But all else being equal pay should be fairly equal as well.

  • 1
    Then you feel there shouldn't be a cost-of-living adjustment when moving to a more expensive location? That argument cuts both ways. (Though, yes, in fact many would say that adjustments should be upward only, and justifications can go hang.) – keshlam Apr 12 '16 at 9:58
  • 1
    @keshlam "All else being equal" negates that... (or was supposed to, I may not have written it well).... but in fact I'm one of the believers in moving upwards constantly, without caring what others are making or other outside factors. You should only take a step back if you see a clear way to take two steps forward in a reasonable timeframe. I'm in the third World, making more than I did in the first World, so it's worked for me anyway. – Kilisi Apr 12 '16 at 10:04
1

It generally happens I believe with the following rationale: Smaller city equals shorter commutes (less petrol/gas or less ticket fares or you could walk to work) cheaper rents or houses and generally a different cost of living. So the salary adjust to reflect that.

I know of friends doing more or less the same job with a considerably higher salary for the "big city" ending up with less savings at the end of the month than the same person one year before in the "small city".

A problem that this might have is that it can disrupt the trail of pay rises while moving jobs, as the "current" salary will be lower when negotiating the next thing.

Not the answer you're looking for? Browse other questions tagged or ask your own question.