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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. 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

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  1. Comparing Job Offers 1.1.3 Take Charge of Your Finances Family Economics and Financial Education

  2. 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.

  3. Congratulations! • Sara just graduated from college with a teaching degree and received two job offers. Which is the best deal?

  4. 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?

  5. 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.

  6. 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

  7. 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.

  8. 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

  9. 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.

  10. 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.

  11. 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

  12. 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

  13. Joe’s Cost of Living Equations • 24,000 × 148.2 = $34, 565.60 102.9

  14. 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?

  15. 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.

  16. 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

  17. 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

  18. Sara’s Job including benefit package $39,800 × 123.1 = Equivalent Salary in Anchorage 105.1

  19. 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.

  20. 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

  21. 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

  22. 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.

  23. 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

  24. Questions?

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