Higher Salary but Higher Rent
“It’s not about how much you make; it’s about how much you get to keep” anonymous Recently, due to COVID-19 and many IT engineers working from home, Mark Zuckerberg, the CEO of Facebook, declared that his employees might be soon allowed to work remotely for as long as they want. But if they were to move out of the Bay Area to the Midwest, for example, they would have to accept lower pay to account for the lower cost of living in their new city . This story starts to reflect a reality long known that wages are based on the average price level of where workers live, more than on the individual productivity of these workers as classical economic theory claims. I live in Montreal and am more familiar with the Canadian context. In this context, the biggest driver of the cost of living is the cost of housing . Indeed, in most cities in the United States and Canada, housing is the most significant factor. Therefore, say you earn a certain high wage in a big metropolitan city...