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
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.