Should you move to California for a higher salary?

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Salary is not the only factor you need to consider.

key point

  • Median household income in California is higher than in many other U.S. states
  • But it also has other drawbacks that can offset some people’s high incomes.
  • Many Californians have lower incomes, and stagnant wages combined with a high cost of living may mean moving for a higher paycheck isn’t what you’d like.

California is home to Hollywood, Silicon Valley and Beverly Hills — places that are synonymous with wealth for many. Even the entire state has more money than average. Its median household income in 2021 is $81,575, according to the Federal Reserve Bank of St. Louis. That’s well above the national median of $70,784 per year.

However, if you’re considering a strike in California in the hope of getting a better-paying job, you might want to take a moment to think about it. The story goes beyond median household income.

Many Californians earn much less

Indeed, people in urban areas generally earn more than those in rural areas. So if you move from a small town in California to a big city, you may make more money each year than you would make at home. But where you live doesn’t change your resume.

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Those with only a high school diploma will have limited opportunities no matter where they live, compared to those with a bachelor’s, master’s or doctorate. So instead of focusing on Californians’ overall earnings, look at how much Californians in your field make to decide if it’s worth taking action.

California wages are almost stagnant

Another reason you might not want to rush to California is that its average weekly wage rose just 1% from March 2021 to March 2022, according to the U.S. Bureau of Labor Statistics. It was one of the lowest wage growth rates in the country and was particularly disappointing in a year of record inflation.

If this trend continues, California’s high wages may start to appear less competitive compared to other states with faster wage growth.

Then there is the cost of living

According to the Missouri Economic Research and Information Center (MERIC), California has the third highest cost of living in the nation, behind only Hawaii and Massachusetts. In particular, its housing costs are very high, almost double the national average.

These high costs mean you have to spend more to enjoy the same standard of living as the current city. This negates many of the benefits of higher salaries.

If you’re trying to decide if it’s worth moving to the Golden State, you should estimate how much salary you’ll have to spend to cover your living expenses in California and see how that compares to your current city. Estimate how much your monthly income and expenses are in California, then divide your expenses by your income to work out this number.

For example, if you expect to take home $6,000 a month in California and you think you will spend $4,000 a month, that means you’ll need about 67% of your monthly income to pay for living there. If that’s a larger percentage of your income than what you’re currently using to pay your bills, then the move probably doesn’t make financial sense for you. It will only strain your bank account even more.

None of this is to stop you from moving to California if that’s what you really want to do. There are many other attractions in the state that make up for its high cost of living. But it’s still a good idea to consider how this move might affect your finances. Make sure you’re comfortable with it before making any decisions.

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