I was talking to someone recently and the subject of cost of living came up. Now, according to wikipedia, Cost of Living is a measure of the relative price of goods and services in two locations. It's widely used to try to guarantee that real wages don't decline or to give employees comparable salaries despite them living in different areas. I hit Sperling's Best Places for information on the relative cost of living in different places.
The most obvious example is housing prices, but lots of other things contribute. For instance, housing in Austin is about 1/3 as expensive as housing in San Francisco, but twice as expensive as San Antonio. Lots of things change. I regularly get a report from my local utility company comparing the cost of power with them vs other cities in Texas (they're the last publicly own utility in the state and they've got some of the lowest rates and most progressive environmental policies). The price of fuel in Austin is usually 10% or more higher than the prices in Houston.
Prices don't vary the same way across the board. Housing might be 3 times as expensive in San Francisco, but the overall cost of living is only double that of Austin. I spend about 10% of my gross income on my house payment. Does this mean someone with similar tastes and salary would spend 15% over there, or would they just find smaller and (relatively) cheaper accomodations? I'd imagine that there's a realistic floor to housing prices in a given locality. You can't just pick your price, you have to pick it within an available range. The cheapest apartments I can find in Austin proper are $325/mo and are fancy enough to advertise amenities. It looks like San Francisco starts at at least double that, and probably more.
What about things that don't vary? A new iPad will cost the same amount no matter where you are in the continental US. If you're making $50,000 a year in Austin, a $500 iPad will run you 1% of your yearly income. With cost of living adjustment, living in San Francisco you'd probably be getting more like $100,000 a year and that iPad would only be 0.5% of your gross income.
Part of how I afford fun toys like laptops and smartphones is that I try not to spend too much on big fixed expenses. I'd rather drive a boring car or live in a less prestigious neighborhood so I can have more disposable income. There are limits to how much you can save by choosing more modest accomodations, though. You can't just arbitrarily knock $1000 off your house payment without consequences. More likely, you can knock 1/3 off of it by choosing a smaller house and a longer commute. In Austin that might free up $500 per month. In San Francisco that might be a $1500 savings, and in San Antonio only $250. Does a higher cost of living really translate to more disposable income for nice toys?
I wonder if this means folks in lower cost of living cities are less likely to buy fancy luxury goods (like iPads, kindles and automated coffee makers). Cost of living is based on getting the necessities, not getting the nice to haves. High tech items are always nice to haves. If this is true I'd be willing to bet that folks from less expensive areas are much less likely to have computers at home, and the computers they have will be more basic. Are we creating a technological divide as a side-effect of housing prices? Is raising a child in a less expensive area going to make them less able to compete with kids from more expensive places?
Maybe not. Salaries don't vary nearly as much as cost of living. A quick search of Salary.com shows the base salary range for a programmer in Austin being from $46-$60k. San Francisco (with a cost of living twice as high) has $50-$75k, so programmers over there are relatively poorer. It might be that living in a more expensive area is a huge handicap because your salary won't increase enough to cover the difference in cost of living. This would imply that luxuries are relatively more affordable here and it would be easier to save for retirement. A job that provides a very comfortable living in one area might be pretty close to poverty wages somewhere else, so rather than folks from the cheaper places getting screwed, it's the folks living in expensive areas who are at a serious disadvantage.
So why isn't there a big influx of Californians moving to Austin these days? That was certainly an issue in the past, but I haven't noticed it lately.