Why living in a big city for a higher salary may not pay off

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Dave Battersby and Cindy McAdams always planned a return to small town life. The COVID-19 pandemic only stymied the couple’s plans.

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“It was extremely scary to get up and move during the pandemic,” Battersby tells Granthshala News.

In April 2020, when they sold their 1,000-square-foot home in Toronto’s Davisville Village neighborhood, they moved into a 5,000-square-foot home in Coburg, Ont. with a spacious backyard and outdoor pool. The price difference between the two properties allowed him to buy his new home mortgage-free, with enough money left over to buy an investment property as part of his retirement plan.

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“Now we have a house where we can entertain the guests. We have enough space that they can stay too,” Battersby says. “We have a pool the kids are enjoying every day during the summer months.”

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Battersby, a director of media sales advertising, has since expanded his responsibilities by reducing the need to reduce the 1.5-hour commute to Toronto to twice a week, without affecting his annual salary.

By greatly reducing their housing costs, they have managed to cash in on big city salaries.

Researchers from the University of California at Berkeley and the U.S. Census Bureau released a report this month titled “Location, Location, Location,” which explores whether the higher salaries in major urban centers are worth moving to the big city. The report’s lead author, Canadian David Card, was named on Tuesday as the winner of the Nobel Prize in Economics for his study of labor markets.

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His conclusion? this is complex.

According to the report, adjusting for various factors such as education and skills, moving from a smaller community to a larger, higher-wage area reduces real earnings. This is because, the report said, “housing costs consume more than 100 percent of the nominal earnings that a typical worker would receive by moving to a larger or higher-earning commuter zone.”

According to some economists, that calculation is expected to shift even further, with new, post-COVID-era flexibility in the form of remote positions and hybrid work models.

Economist and McDonald Laurier Institute senior fellow Linda Nazareth says corporations may be tempted to reduce wages for employees living in low-cost jurisdictions, but tight labor markets may hinder their ability to do so. Because they compete for talent.

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The pandemic has exacerbated the current trend of migration from the downtown core that began after 2015.

Phil Soper, CEO of Royal LePage, told Granthshala News: “We’ve seen our millennial generation start having their second child and are longing for more space and raising a ‘white picket fence’. ” “And the first wave of baby boomers began to retire and they no longer needed to live in the core of the city.”

According to Royal Lepage, this trend intensified last year and this summer, although it is moderate. Migration has pushed home prices to new heights in rural areas and suburbs. According to the latest figures from Royal Lepage, released on Friday, average homes cost 33 per cent more during the pandemic.

Soper says that Royal Lepage notes the migration pockets of people moving from the two most expensive mega centers—Toronto and Vancouver. A major driver of this trend is movements from Ontario to Atlantic Canada, as well as from the lower mainland to Kamloops and northern British Columbia, or from Alberta to Okotok, Turner Valley and even Calgary.

Should You Set Your Salary?

Last summer, tech’s big names, including Google and Facebook, made headlines for announcing plans to reduce compensation for workers who work from home in cities where the cost of living is low.

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In an email to Granthshala News, a Google Canada spokesperson says that “every country outside the US has the same compensation category, so there is no difference in pay whether you are a fully remote or in-office employee.”

Facebook Canada did not respond to Granthshala’s request for comment.

Given the current technical skills gap and labor shortage in high-demand areas, Nazareth says talent has the upper hand.

“We are seeing the debate starting whether we should pay different salaries to people working in different places. I don’t think it will go much further, but it is part of the bigger picture,” she says.

According to Statistics Canada, one in four employees is currently able to work remotely.

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“Good people are hard to find and if you find the employee you want who isn’t close to your office, you’re going to be pretty flexible about getting them to work with you,” says Nazareth. “I think everything is on the table in terms of options.”

Recruiting is part of Battersby’s job and he says that “the number one thing people ask” is whether a position can be done from home or out of the office. He understands that desire for flexibility.

He says COVID has prompted him to prioritize spending time with his two sons, Gavin, nine, and Carson, five.

“I spend less time in the car now. I’m not working 10-, 11-hour days,” Battersby says. “I have the opportunity to spend quality time with family. It has really changed our lifestyle. I couldn’t be happier about our decision to move.”

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