A 25% raise to move from Austin to San Francisco sounds great until you run the groceries. A raise into a more expensive city can be a pay cut, and the only way to know is to normalize both offers to the same basket of goods.
The simple formula
Real salary = nominal salary ÷ (destination COL ÷ current COL). If your current city has a COL index of 100 and the new city is 150, a $125,000 offer is only worth $83,300 in your current purchasing power. The 25% raise is a 17% pay cut.
Where the delta lives
- Housing — the dominant factor. A 2-bedroom might be $1,400 in Omaha, $4,200 in Seattle, $5,500 in San Francisco. This single line item swings the whole comparison.
- State income tax — separate from COL indices. Moving from Texas to California on the same nominal salary costs ~8–10% in state tax.
- Groceries & services — 10–30% variation. Real but usually smaller than housing.
- Transportation — car ownership vs transit math flips between metros.
A worked example
You earn $100k in Austin (COL 105). You get offered $140k in NYC (COL 190). Feels like a 40% raise. Real math: $140k ÷ (190/105) = $77,400 in Austin purchasing power. That’s a 22% pay cut. Factor in NYC state + city tax (~10% on top of federal vs Texas’s 0%), and the gap widens another 7–8%.
When the cut is worth it
The career argument: denser markets usually pay faster-growing salaries, so your year-three number in NYC may clear your counterfactual in Austin. The lifestyle argument: some cities are worth a pay cut to you. Both are legitimate — just price them honestly, not by the headline number.
Convert hourly, weekly, or annual. Then divide by the COL ratio to see the real comparison.