Should You Move to California for a Higher Salary?

Salary is not the only factor you need to consider.

California is home to Hollywood, Silicon Valley, and Beverly Hills -- places that are synonymous with wealth for many people. Even the state as a whole has more money than average. Its median household income for 2021 was $81,575, according to the Federal Reserve Bank of St. Louis. That's well above the national median of $70,784 per year.

But if you're thinking about striking out for California in the hopes of securing a better-paying job, you may want to take a minute and think about that. There's a lot more to the story than just the median household income.

A lot of Californians earn a lot less

It's true that people in urban areas often earn more than people in rural areas. So if you move from a small town to a large city in California, it's possible that you could make more money annually than you did back home. But where you live doesn't change your resume.

Those with only a high school diploma are going to have limited opportunities no matter where they live compared to someone with a Bachelor's, Master's, or a doctorate degree. So rather than focusing on how much Californians make in general, you should look at how much Californians in your field make to decide if it's worth the move.

California wages are pretty close to stagnant

Another reason you may not want to rush out to California is that its average weekly wages only rose by 1% from March 2021 to March 2022, according to the Bureau of Labor Statistics. This is one of the lowest rates of wage increases in the nation, and it's especially disappointing in a year of record inflation.

If this trend continues, it's possible that California's high salaries may start to look less competitive compared to what other states with faster-growing wages can offer.

And then there's the cost of living

California has the third-highest cost of living of any state in the nation, according to the Missouri Economic Research and Information Center (MERIC), coming in just behind Hawaii and Massachusetts. Its housing costs, in particular, are very high at nearly double the national average.

These high costs mean you'll have to spend more money to enjoy the same standard of living you have in your current city. That offsets a lot of the benefit of a high salary.

If you're trying to decide whether a move to the Golden State is worth it for you, you should estimate what percentage of your salary you'd have to spend to cover your living costs in California and look at how this compares to your current city. Estimate how much your monthly income and expenses would be in California and divide your expenses by your income to figure this out.

For example, if you expect to bring home $6,000 per month in California and you think you'll spend $4,000 per month, that means you need about 67% of your monthly income to cover your living costs there. If this is a larger percentage of your income than you're currently using to cover your bills, the move probably doesn't make financial sense for you. It'll just strain your bank account even further.

None of this is meant to dissuade you from moving to California if that's something you really want to do. The state has a lot of other attractions that might make up for its high cost of living. But it's still a good idea to think about how this move might affect your finances. Make sure you feel comfortable with this before you make any decisions.