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Comparing Job Offers 1.1.3. Take Charge of Your Finances Family Economics and Financial Education. Supply and Demand. The availability of jobs and the rate of pay is dependent upon the economic concept of supply and demand.

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comparing job offers 1 1 3

Comparing Job Offers 1.1.3

Take Charge of Your Finances

Family Economics and Financial Education

supply and demand
Supply and Demand
  • The availability of jobs and the rate of pay is dependent upon the economic concept of supply and demand.
    • Supply – the relationship of prices to the quantities of a good or service that sellers are willing to sell at any given point in time.
    • Demand – the relationship between prices and the corresponding quantities of a good or service individuals are willing to purchase at any given point in time.
congratulations
Congratulations!
  • Sara just graduated from college with a teaching degree and received two job offers. Which is the best deal?
slide4

Which is the better deal?

  • Job Offer 1
    • $35,000.00 in Reno, NV
  • Job Offer 2
    • $40,000.00 in Anchorage, AK
  • Not enough information to decide

Which option is best?

cost of living
Cost of Living
  • Cost of living – includes housing, food, transportation, and other everyday expenses.
    • Rural communities often have a lower cost of living than urban communities.
  • Index form – rates communities on a scale of 100.0 and gives an average cost community a rating of 100.0.
    • A lower index means a lower cost of living.
    • A higher index means a higher cost of living.
cost of living equation

Cost of Living Index of City 2

Salary in city 1 x

= Equivalent Salary in city 2

Cost of Living Index of City 1

Cost of Living Equation
  • Round dollar amounts to two decimal places
cost of living equation1
Cost of Living Equation
  • In order to compare the cost of living in two cities always follow these three steps:
    • Step 1: Assign each cities numbers. One city will be assigned the number one and the other the number two.
    • Step 2: Provide the corresponding salaries and index amounts.
    • Step 3: Complete the math and indicate which city is a better offer and why.
sara s job offers
Sara’s Job Offers
  • Job Offer 1 – Reno, NV (or City 1)
    • $35,000.00 salary
    • 105.1 cost of living index
  • Job Offer 2 – Anchorage, AK (Or City 2)
    • $40,000.00 salary
    • 123.1 cost of living index
sara s cost of living equations
Sara’s Cost of Living Equations

$35,000 × 123.1 = Equivalent Salary in Anchorage

105.1

$35,000 x 1.17 = $40,994.29 in Anchorage

How much was she offered, when comparing the $40,994.29 needed to live in Anchorage.

If less she chooses Reno

If more she chooses Anchorage.

sara s job outcome
Sara’s Job Outcome
  • A person earning $35,000.00 in Reno must earn $40,994.29 in Anchorage to have the same spending power.
joe s offers
Joe’s Offers
  • Job Offer 1- Denver, CO
    • $24,000.00 salary
    • 102.9 cost of living index
  • Job Offer 2 - Seattle, WA
    • $32,000.00 salary
    • 148.2 cost of living index
cost of living equation2

Cost of Living Index of City 2

Salary in city 1 x

= Equivalent Salary in city 2

Cost of Living Index of City 1

Cost of Living Equation
  • Round dollar amounts to two decimal places
joe s cost of living equations
Joe’s Cost of Living Equations
  • 24,000 × 148.2 = $34, 565.60

102.9

joe s job outcome
Joe’s Job Outcome
  • A person earning $24,000.00 in Denver must earn $34,565.60 in Seattle to have the same spending power.
  • Was Joe offered more or less than $35,565.60 ?
  • Which job offer would give him more spending power?
benefits
Benefits

Fringe benefits and employer provided services can make a difference:

  • For example, if a $35,000.00 job had 100% of medical insurance coverage valuing $400.00 per month, a person would not have to budget for $4,800.00 in medical insurance per year. This would increase the value of his or her salary to $39,800.00.
  • Benefits and services should be included within the salary before calculating the cost of living.
sara s job including benefit package

Cost of Living Index of City 2

Salary in city 1 x

= Equivalent Salary in city 2

Cost of Living Index of City 1

Sara’s Job including benefit package
  • Round dollar amounts to two decimal places
sara s job including benefit package1
Sara’s Job including benefit package
  • Job Offer 1 – Reno, NV
    • $35,000.00 salary + $4,800.00 benefits = $39,800.00
    • 105.1 cost of living index
  • Job Offer 2 – Anchorage, AK
    • $40,000.00 salary + $5,200.00 benefits = $45,200.00
    • 123.1 cost of living index
sara s job including benefit package2
Sara’s Job including benefit package

$39,800 × 123.1 = Equivalent Salary in Anchorage

105.1

sara s job outcome including benefit package
Sara’s Job Outcome including benefit package
  • A person earning $39,800.00 in Reno must earn $46,616.64 in Anchorage to have the same spending power.
joe s job including benefit package
Joe’s Job including benefit package
  • Job offer 1 - Denver, CO
    • $24,000.00 salary + $4,500.00 benefits =$28,500.00
    • 102.9 cost of living index
  • Job offer 2 - Seattle, WA
    • $32,000.00 salary +$6,000.00 benefits = $38,000.00
    • 148.2 cost of living index
cost of living equation3

Cost of Living Index of City 2

Salary in city 1 x

= Equivalent Salary in city 2

Cost of Living Index of City 1

Cost of Living Equation
  • Round dollar amounts to two decimal places
joe s job outcome including benefit package
Joe’s Job Outcome including benefit package
  • A person earning $28,500.00 in Denver must earn $41,046.65 in Seattle to have the same spending power.
additional web sites
Additional Web sites
  • Web sites available to help calculate salaries and cost of living in various locations
    • www.homefair.com
    • www.bankrate.com/brm/movecalc.asp
    • www.accra.org
      • $12.95 fee