Salary and quality of life: where is more cost-effective to live?

One of the most important choices of a person in life is where to live. There are many factors, such as the people, the climate, the gastronomy, the services, or the job, to take into account when choosing a city or town. As we say in Galicia, this is a decision that “depends” in many different ways, since some factors are more important to each one than others when they make this decision. The good thing is that you can always change your mind and move to another place.

Our living preferences go hand in hand with our circumstances. Nowadays, living in the centre of a capital, where housing prices have reached record levels, is not like living in the outskirts or in a neighboring city. In most cases, it is the salary what determines where we live.

In this article, we will focus on objective information on salaries and cost of living in different places of the world to show that the number of zeros on a paycheck does not always reflect personal success, quality of life, or happiness.

The rise of the technology sector has created a demand for world-wide jobs, both on-site and remote. But our purchasing power is not going to be the same depending on the region we are in, and we need to keep that in mind when we make decisions, because it will affect our quality of life.

Is Silicon Valley really the haven for IT professionals?

Located in Santa Clara Valley, California, Silicon Valley is known as the Capital of technology. Leading companies such as Google, Apple, Facebook, Microsoft, and Netflix have settled here due to the technological growth in the area since the 1980s.

The average annual salary of the big tech companies is more than \$200,000/year, or in other words, about \$15,000 gross/month. For anyone living in Alicante or Valladolid, it may seem shocking, but to earn a salary with 6 figures/year is not so much in Silicon Valley. Statements of those who live and have lived it explain that a third of their salary “disappears” in rent. This is usually more than \$3,000/month for an old-fashioned and unheated 85m2 2-bedroom apartment. Something newest can go up to \$6,000/month.

Add it all up, and the cost for a couple with one child is about \$9,000/month (that doesn’t include childcare, which can run about \$3,000/month). Even entertainment is expensive: it can cost a total of \$66 to enjoy a few glasses of wine and some tapas on a terrace.

Living in Silicon Valley

Working in Silicon Valley pays well, but does the standard of living match the salary? Most people agree: there is no socializing, no community. The streets are always empty. You have to drive everywhere. In an area where there is so much talent, the competition to attract it keeps driving up salaries. And that drives up the cost of living in the area, where a house costs about \$2 million to buy. Many of the European residents save as much as they can (even living in campers near the companies) to return to their home countries or move to more affordable places.

It’s not just about the salary. Although many companies in the Valley allow their employees to work remotely while maintaining their U.S. salary, the lack of qualified local professionals is a risk they are not taking.

Europe: living or surviving

The situation in European capitals is not much better than in the U.S. The price of housing has become one of the major problems in Europe. Salary for renting a house can be up to 70% in some cases. In Paris, for example, the average annual salary for an salary is around 42,000 euros/year (around 3,500 euros/month). However, the average rent is around 1,600 euros/month. The average purchase price is 800,000 euros. Housing inflation makes it increasingly difficult to start a new life in the city, as in Paris or London. Let’s see it with an example: an 85m2 apartment in Chamberí easily costs 2,500 euros a month (plus expenses); if we go to Getafe or Móstoles, this figure drops to 1,300 euros a month (plus expenses). A figure appropriate to the busy life of a city of over 3 million people.

Vigo, best place to live

Spain is one of the preferred destinations for workers leaving Silicon Valley. They see it as an opportunity because of people, quality of life and leisure, among others. The Organization of Consumers and Users in Spain has evaluated these and other criteria, such as health, education or security, in the 2023 annual survey, in which nearly 3,000 citizens took part to determine the best Spanish city to live in. Vigo got the top 1 with a score of 70 points, closely followed by Zaragoza and Bilbao.

In Galicia, an employee in the technology sector with at least 3 years of experience can earn around 30,000 euros/year. These are not numbers like in the United States or any European capital, but rent is 8 times cheaper. The price of a flat in Vigo centre, in the same case of a 85m2 apartment, does not exceed 190,000 euros when buying or 800 euros/month when renting.

In reality, purchasing power in Vigo is 4 times higher than in Silicon Valley, if we estimate that living in Vigo costs 30,000 euros/year, or 200,000 US dollars in Silicon Valley. Without mentioning all the alternatives in the metropolitan area, 20 minutes away by public transport, with rentals under 500 euros/month.

Higher salary does not mean a better quality of life

According to these estimates, in early 2024, living in London on £70,000 will be similar to living in Silicon Valley on \$200,000. On the other hand, living in the British capital will be 30% more expensive than Paris, while Madrid will be about 45% cheaper than Paris. But Vigo takes the biscuit: it is 80% less expensive than Madrid, 169% less expensive than Paris and even 900% less expensive than Silicon Valley.

We can see this in more detail in the following table:

Salary vs. purchasing power

We may be surprised to find higher purchasing power in areas with seemingly lower salaries. In these places, the relative amount of savings tends to be higher than it is in metropolitan areas where housing and goods are more expensive. Less can mean more. It all depends on where we live, our lifestyle and our savings capacity. And if that is not the case, there is always the option to make a change and move somewhere else.

Also, although it is not reflected in the information, it is necessary to mention the welfare state that we enjoy in our country, which provides us with universal basic services that are not available in other countries (for example, the national health system in Spain cannot be compared to the United States one).

There are many reasons that lead us to make the decision to live in one region or another, in one city or another… But if the decision is based on the salary that we receive as workers, it is necessary to know how much of that salary we will be able to enjoy.