As more people work from home, employers should reconsider how the cost of living affects salary negotiations.
When looking for life sciences research talent, many companies know the obvious places to be: Boston/Cambridge, the San Francisco Bay Area, and San Diego. These are also among the most expensive places to live in the country.
There is one way for life sciences companies to gain a slight competitive advantage in hiring and retention: hiring in lower-cost-of-living markets. This strategy has become increasingly viable in recent years as the supply of life sciences talent has expanded into markets beyond the traditional industry strongholds.
Here is the basis of this theory:
Unlike most occupations, life sciences salaries do not vary greatly between metro areas compared to the cost of living. From the top market for a biochemist salary (San Francisco Bay Area) to 25th (Nashville), the salary gap is $31,054 compared to the cost of living of $43,218, according to the Economic Research Institute. Put another way, in Houston, the average salary for a biochemist is 204 percent of the cost of living. In the Bay Area, it’s 128 percent. While biochemists in the San Francisco Bay Area would have no problem, all else being equal, they would not have the same financial freedom as their Houston counterparts.
From a worker’s perspective, metropolitan areas like Houston, Raleigh-Durham, or Atlanta could be cheaper in purely financial terms. It even takes state income taxes into account, which vary greatly in the United States
The benefit is less direct financially for companies. You don’t get the usual cost savings from paying lower salaries in lower-cost-of-living markets because life sciences wages are relatively rigid in all markets. However, companies could appeal to a market’s lower cost of living when recruiting and retaining life sciences talent.
Interestingly, of the top 25 US life sciences markets for research talent, Nashville had the lowest cost of living at $48,112 and the highest five-year job growth rate of 110 percent, according to a recent CBRE report. In fact, 17 of the top 25 life sciences centers in the US had a below-average cost of living. Five-year employment growth for researchers was positive in all metro areas, with the cost of living below $52,000 and all but 3 metro areas below the median cost of living of $60,073.
Granted, this theory can be a bit simplistic. There are other factors that influence where life sciences talent works, including proximity to universities, research institutes and established clusters of talented colleagues. For these reasons, life science companies may be choosing metropolitan areas with large clusters of life science talent and a strong pipeline of emerging researchers. According to a recent CBRE report, Boston/Cambridge, Washington, DC/Baltimore and the San Francisco Bay Area are the top three markets for life science research talent.
Still, myriad other business factors need to be considered, including real estate costs. As of the second quarter of this year, the average asking price for laboratory space in Boston/Cambridge is $101.85/sqm. ft. with top-of-the-line spaces at $130/sq. ft. in downtown. Compare this to Raleigh-Durham, the second best salary-to-cost-of-living ratio, where prices are $38.50/sq m. ft. Or think of Washington, DC/Baltimore, the second largest life sciences research talent cluster, where prices are $41.46/m². feet
From a financial perspective, this means two very different things for researchers and employers. For white-collar workers, the gap between life science wages and the cost of living in a metro can be a boon. For companies, the benefits are more strategic than directly financial. Real estate finance aside, educational and career data plays the primary role in determining the best markets for life sciences employers to put down roots to attract the best talent.
Taylor Stucky is a Senior Research Analyst at CBRE, specializing in Life Sciences in Reno, NV.