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American Morning
Exploring U.S. Cost of Living Disparity
Aired July 11, 2001 - 09:40 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
STEPHEN FRAZIER, CNN ANCHOR: This could be your view if you chose to live in one of the most expensive cities in the country, San Francisco's beautiful skyline only part of the reason it would cost you big bucks to live there. This is the season, of course, when so many people make transfers to new cities for new jobs and for a lot of other reasons. If you're planning to move this summer, you'll want to take into account the disparities in the cost of living.
Here's a case in point. If you and your family are living now in an eight room, 2,200 square foot house in Kansas City, Missouri, it would be valued there at $185,600. suppose you transferred to San Francisco, for example? The same house would cost you $746,500.
Joining us now live to talk about big money moves is somebody who keeps track of that kind of information, Katrina Jaehnert, principal consultant with Runzheimer International, a management consulting firm that analyzes the cost of living for international and domestic cities. Ms. Jaehnert, thanks for joining us.
KATRINA JAEHNERT, RUNZHEIMER INTERNATIONAL: Good morning.
FRAZIER: Amazing disparities among American cities and you've listed some of the high ones and some of the bargains, too.
JAEHNERT: There is a big difference in cost of living throughout the United States. Most people, the majority of our money is spent on housing related costs, which include mortgage payments, real estate taxes, utilities, maintenance and insurance.
FRAZIER: So we talk about San Francisco being so expensive. Is it the worst?
JAEHNERT: It is the number one city. On that high side we have San Francisco at about $746,000; Los Angeles about 450 and Boston around 357. In our mid range cities in the low 200s, St. Louis, Phoenix and Milwaukee. And the real bargain areas, as you mentioned, is Kansas City along with Nashville and Miami.
FRAZIER: Now, the expensive towns are the same. They're the usual suspects. But is there any radical change or any surprise in those other ranges, the middle and the bargains?
JAEHNERT: As far, they've been pretty, they've been, those costs have stayed pretty much the same. As we know, the San Francisco market has had very high housing costs due to the technology sector and that's what has been driving up those costs in that market. We're starting to see some changes in that market a little bit where housing is becoming a little bit more stable.
FRAZIER: I like the fact that you guys also track what it would cost to keep a salary the same if you were to move, and we've done an example here of moving from Columbus, Ohio, the kind of town where you find a lot of, say, regional managers, and if they were going to headquarters in New York, a salary of $100,000 in Columbus would have to bump up a huge amount to let you live in New York, specifically in Manhattan, to $271,000. Do corporations who are your clients actually provide that much more income for people they transfer?
JAEHNERT: Companies will order what we -- we have a report that's called, it's a cost of living report. We analyze all the cost components which equal your income. Those include housing, the goods and services, transportation and taxes. Companies will order a report specific to an income level and a family size, whether that person's a homeowner or a renter, and we will analyze each component, looking at what the cost differences are moving from one area to another.
FRAZIER: And in your experience do they then say, OK, this is what Runzheimer says so here's the package for our executive we're moving or do they cut that in half and say take it or leave it?
JAEHNERT: They use the report for a lot of different reasons. One of the applications is a cost of living financial assistance program, which is a program that's phased out over three years. And typically they will, the report will display a dollar value difference in the two locations and the companies will give the transferee temporary assistance which is phased out declining payment over three years to get them accustomed to the new area and they, in turn, then their salary will catch up.
They will also use that report to provide housing subsidiary payments in large...
FRAZIER: A way to soften -- in other words, to soften the blow...
JAEHNERT: Absolutely.
FRAZIER: ... and to take the edge off the shock of moving to these costlier cities.
JAEHNERT: Right. And other companies will use the data, again, you know, to justify salaries. They'll use it for new hires, etc., just to look at what the benchmark information is and what the differences in salary dollars, buying power between locations.
FRAZIER: Well, we see you're joining us from a pretty nice mid range city of Milwaukee. Katrina Jaehnert, thank you for those insights and good luck now to all the people who've got to make a move this summer.
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