<p>The major objection I’ve always had with cost-of-living adjustments is that, by design, they deliberately ignore the fact that certain regions in the world are simply more desirable places to live, whether because there are more things to do, better weather, less crime, more job opportunities, people to meet, or whatnot. Let’s face it - the ultimate reason why NYC is such an expensive city is because many people want to live there, and that’s because NYC offers many things to do. If people didn’t want to live in NYC, prices would surely drop.</p>
<p>Think of it this way. No matter what city you live in, you can always reduce your ‘cost of living’ by choosing to live in a rundown, crime-infested slum that every city has. For example, everybody in the SF Bay Area could dramatically reduce their cost of living by moving to, say, East Oakland. But does anybody actually want to do that? Heck, even the people of East Oakland don’t really want to be there.</p>
<p>The fact that people are telling me to stop posting is obviously highly relevant to me, but their attempted rationales for convincing me to do so are not relevant to me. </p>
<p>True, maybe my posts are annoying to some people. But hey, I find plenty of other posters to be annoying. Yet I don’t go around telling them to stop posting. They have the right to post, and so do I. An open and freewheeling discussion forum will inevitably include some opinions that some people find annoying.</p>
The major benefit I’ve always seen with cost-of-living adjustments is that, by design, they only include facts which are applicable to all and exclude opinions only held by a certain portion of the population. With COL calculations, I can decide for myself whether the benefits of a particular location are worth the costs to me.</p>
<p>You yourself may consider places such as NYC and San Francisco to be utopias to which all should aspire, but the reality is that many people choose to leave those places, or never live there at all because… well, that’s just not our scene. I have friends in both cities who love renting crappy apartments smaller than the living room in the house I own, who enjoy lugging everything they own on buses and subways and taxis instead of having two cars and a garage, and who like nightclubs and bars to other pursuits like hiking and backyard hot-tubbing. That’s fine. But you can’t put EITHER of those into a form universal to everyone.</p>
<p>You CAN however, describe the costs of living in a particular area, since those costs are not dependent on how much you like or dislike the area, or whether you chose to be there or had to to find work. Plus, COL is useful for understanding just those things that you chose to ignore. Like, for example, the pay at many financial firms are not as good as they seem, simply because the costs of necessities are so much higher. Which I believe is the point the last poster was trying to make, and which you ignored.</p>
<p>Just saw this thread after about a month. My simple argument was a job offer in engineering could be more lucrative then one in investment banking nothing more. Its also important to note that it is a lot easier to get into a top engineering school G.Tech/Purdue then a top target for a bank. Banks are also a lot more selective then most engineering companies. You will typically get interviews with a 3.0+ and no internship experience in Engineering. While Business majors with 3.5+ have trouble getting banking jobs depending on the state of the economy. Maybe Engineering is not perfect but does it always have to be compared to Wall Street where people work long hours?(My Dad is in the office 75-80 hours a week.) </p>
<p>Btw, I have an engineering job that will pay more per hour worked in LA then one of my investment banking friends in the same city considering the fact that he is salaried and working 80-90 hours per week. Its really not that much more money per hour than a McDonald’s employee. </p>
<p>You can’t blame the few true geniuses, those that are/were at the top of their field in engineering, to go into finance or some other industry and leave engineering altogether. </p>
<p>The field has become saturated with the intellectually incapable who aren’t creative and innovative, and management is mostly composed of troglodytes that live to marginalize the few intelligent and creative engineers there are these days. </p>
<p>Finance is just the industry to work in these days, while R&D and manufacturing industries are either being outsourced or collapsing due to the high volume of idiots with engineering degrees.</p>
<p>Dead wrong, for the differentials in living costs inherent to those adjustments are themselves nothing more than aggregated opinions. For example, it is not I that decided, for whatever reason, that NY or SF should be a more desirable place to live. It is that millions of people made that decision. Like I said, if nobody wanted to live in NY or SF, then the costs of living in those cities would surely plummet. The fundamental reason why their costs are so high is only because people made the conscious choice to pay those costs and thereby outbid others who would rather pay less. </p>
<p>Cost of living therefore serves as proxy for the desirability of certain locations over others. Is is therefore the only universal measure that aggregates the entire population’s preferences. You may find those preferences to be silly, even irrational, but whether we like it or not, they are the aggregated preferences of the population. Somebody may indeed prefer to live in their isolated and inexpensive corner of the world, but clearly most other people don’t because if they did, they would all try to move in and prices would surely explode. And that is the point that I was making in my previous post that you chose to ignore.</p>
<p>Busting a popular myth. Supply and Demand does not control the price of everything their are external factors with things like salary and housing among others. Anyway, I tried arguing with Sakky but he ignored the biggest part of my argument that Investment Bankers on average work twice(if not more) as many hours as an engineer. You can only pay a salary for value of what an employee is giving to a corporation. First year management consultants bill at 150 bucks an hour and then are paid less than half that. Hence they make a lot of money for corporation and themselves in exchange they work long hours and travel sometimes every week. Engineers have a far more cushy work schedule in general and are compensated accordingly. </p>
<p>By your logic Detroit is just as desirable a place to live as Miami and Riverside City, CA is just as desirable as Chicago.</p>
<p>Um, salary and housing are not external factors, but are endogenous features of the system itself. A waitress in New York tends to make far more than a waitress in a small village, even if they do exactly the same work. </p>
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<p>Sure, but then (upon gaining experience) will make far more than twice what an engineer will make. </p>
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<p>Hey, it’s not my ‘logic’. It’s a simple outcome of the fact that if truly nobody wanted to live in any particular city, prices there would sure plummet. </p>
<p>But speaking to your point, I certainly agree that there are plenty of non-market factors that affect price. Indeed, I have discussed them quite extensively on other threads. Nevertheless, the influence of underlying individual preferences in determining why certain places exhibit such high costs of living is undeniable.</p>
<p>the assertion that “Cost of living serves as proxy for the desirability of certain locations over others” is simplistic nonsense. To prove it to yourself, just posit the situation of a high priced urban environment in a period of great decline, like NYC in the 70s. People were fleeing the city in droves, … voting with their little economic feet as to the desirability of the area, yet the cost of living remained high due to structural factors. Sure housing prices suffered a decline eventually, as folks moved out, but other cost of living factors, such as food, transportation, fuel, recreation, education, taxes etc remained extremely high. providing goods and services to folks crammed in a small geographic area in and of itself imposes costs.</p>
<p>Actually, the assertion that cost of living is not a proxy for the desirability of certain locations over others is truly simplistic nonsense. And indeed, mia, you admitted as much when you said that in your example of declining NYC, prices did indeed eventually fall.</p>
<p>Note, to be clear, I never said that cost of living was a perfect proxy. There are no such things as perfect proxy variables, which would be an oxymoron. {If one variable is a perfect indicator of another, then it’s no longer a proxy.} </p>
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<p>This is actually logically false. While providing goods and services to a large number of people crammed in a small area obviously imposes costs, the question is whether the costs would be higher to serve the same number of people spread across a wide area. The answer to that is almost certainly yes. </p>
<p>It is precisely for that reason that mass transit systems are generally economically viable only in urban areas and hence why many people in those regions feel no need to own cars. Similarly, utility services are far more inexpensively provided when provided within urban regions. {For example, an entire apartment building of 1000 residents can be served by a single telephone trunk line connection, whereas 1000 residents spread across hundreds of suburban homes requires an elaborate and extensive web of phone line drops}.</p>