© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Comparing Job Offers 1.1.3

Take Charge of Your Finances

Family Economics and Financial Education

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Comparing Job Offers 1.1.3

•Lesson Objectives–Examine the importance of career planning, salaries, and benefits to overall financial well-being–Differentiate salaries in different cities using the cost of living equation

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Supply and Demand

• The availability of jobs and the rate of pay is dependent upon the economic concept of supply and demand.

• Supply – the relationship of prices to the quantities of a good or service that sellers are willing to sell at any given point in time.

• Demand – the relationship between prices and the corresponding quantities of a good or service individuals are willing to purchase at any give point in time.

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Supply and Demand

• High Supply = Low Demand• Low Supply = High Demand

• There are more individuals with the abilities and training to be a teacher than an NFL football player.

• Ultimately there are less available jobs for NFL football players because there are not enough qualified individuals to fill those positions.

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Supply and Demand

• Because there is a lower supply of NFL players and higher demand compared to teachers, they are paid millions of dollars per season.

• The more people available for one job, the less money they will be paid.

• Therefore, teachers will be paid less money for their position because there are more trained individuals and more positions available.

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Congratulations!

• Sara just graduated from college with a teaching degree and received two job offers. Which is the best deal?

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

A. Job Offer 1– $35,000 in Reno, NV

B. Job Offer 2– $40,000 in Anchorage, AK

C. Not enough information to decide

• Which option is best?

Which is the better deal?

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Cost of Living

• Cost of living – includes housing, food, transportation, and other everyday expenses

–Rural communities often have a lower cost of living than urban communities.

• Index form – rates communities on a scale of 100.0 and gives an average cost community a rating of 100.0.

–A lower index means a lower cost of living.–A higher index means a higher cost of living.

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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Location and environment

Commute time Affordable housingLow crime rate Good schools Desired climate

Location and environment

Commute time Affordable housingLow crime rate Good schools Desired climate

Additional perks

Relocation allowances Company

car Repayme

nt of education loans

Stock options

Additional perks

Relocation allowances Company

car Repayme

nt of education loans

Stock options

Employer provided servicesGym membership Flexible hours Merchandise discounts Child care

Employer provided servicesGym membership Flexible hours Merchandise discounts Child care

Opportunity for

advancement and other

work incentives

Raised based on performance

Bonuses

Opportunity for

advancement and other

work incentives

Raised based on performance

Bonuses

Fringe Benefits

Paid sick time

Holidays and vacation time

Bonuses Health and life insurance

Workman’s compensation

Retirement contributions

Fringe Benefits

Paid sick time

Holidays and vacation time

Bonuses Health and life insurance

Workman’s compensation

Retirement contributions

Base SalaryDollar amount a person will receive in his/her monthly paycheck before taxes. Based upon supply and demand

Base SalaryDollar amount a person will receive in his/her monthly paycheck before taxes. Based upon supply and demand

Comparing Job Offers

Comparing Job Offers

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Cost of Living

• Cost of Living Equation

Salary in city 1 x

Cost of Living Index of City 2 Cost of Living Index of City 1

= Equivalent Salary in city 2

• Round dollar amounts to two decimal places

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Sara’s Job Offers

• Job Offer 1 – Reno, NV– $35,000 salary– 105.1 cost of living index

• Job Offer 2 – Anchorage, AK– $40,000 salary– 123.1 cost of living index

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Salary in city 1 x

Cost of Living Index of City 2 Cost of Living Index of City 1

= Equivalent Salary in city 2

Cost of Living

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Sara’s Cost of Living Equations

$35,000 in Reno x

123.1

105.1= Equivalent Salary in Anchorage

$40,000 in Anchorage x

105.1

123.1= Equivalent Salary in Reno

Option 1 or Option 2

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Sara’s Cost of Living Equations

$35,000.00 x 1.1712654 =$40,994.29 = Equivalent salary in Anchorage

$40,000 x .8537774 =$34,151.35 = Equivalent salary in Reno

Option 1 or Option 2

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Sara’s Job Outcome

Option 2 Job Offer 1 $40,994.29 in Anchorage, AK Job Offer 2 $35,000 in Reno NV A person earning $40,000 in Anchorage must earn $34,151.35 in Reno to have the same spending power.

Option 1Job Offer 1$35,000 in Reno, NVJob Offer 2 $40,994.29 in Anchorage, AK

•A person earning $35,000.00 in Reno must earn $40,994.29 in Anchorage to have the same spending power.

•Therefore, the salary offer in Reno is better by $994.29 ($40,994.29 - $40,000.00).

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Joe’s Offers

• Job Offer 1- Denver, CO – $24,000 salary– 102.9 cost of living index

• Job Offer 2 - Seattle, WA – $32,000 salary– 148.2 cost of living index

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Cost of Living Equation

Salary in city 1 x

Cost of Living Index of City 2 Cost of Living Index of City 1

= Equivalent Salary in city 2

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Joe’s Cost of Living Equations

$24,000 in Denver x

148.2

102.9= Equivalent salary in Seattle

$32,000 in Seattle x

102.9

148.2

= Equivalent salary in Denver

Option 1 or Option 2

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Joe’s Cost of Living Equations

$24,000.00 x 1.4402332 = $34,565.60 = Equivalent salary in Seattle

$32,000 x .6943319 = $22,218.62 = Equivalent salary in Denver

Option 1 or Option 2

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Joe’s Job Outcome

• A person earning $24,000.00 in Denver must earn $34,565.60 in Seattle to have the same spending power.

– Or • A person earning $32,000 in Seattle must

earn $22,218.62in Denver to have the same spending power.

• Therefore, the salary offer in Denver is better by $2,565.60 ($34,565.60 - $32,000.00).

Job Offer 1$24,000 in Denver, CO

Job Offer 2$34,565.60 in Seattle, WA

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Benefits

• Fringe benefits and employer provided services can make a difference:

– For example, if a $35,000.00 job had 100% of medical insurance coverage valuing $400.00 per month, a person would not have to budget for $4,800.00 in medical insurance per year. This would increase the value of his or her salary to $39,800.00.

– Benefits and services should be included within the salary before calculating the cost of living.

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Sara with benefits

• Job Offer 1 – Reno, NV– $35,000 salary + $4,800

benefits = $39,800– 105.1 cost of living index

• Job Offer 2 – Anchorage, AK– $40,000 salary + $5,200

benefits = $45,200– 123.1 cost of living index

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Sara With Benefits

Salary in city 1 x

Cost of Living Index of City 2 Cost of Living Index of City 1

= Equivalent Salary in city 2

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Sara with benefits

$39,800 in Reno x

123.1

105.1= Equivalent salary in Anchorage

$45,200 in Anchorage x

105.1

123.1= Equivalent salary in Reno

Option 1 or Option 2

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Sara with benefits

$39,800.00 x 1.1712654 = $46,616.36 = Equivalent salary in Anchorage

$45,200 x .8537774 = $38,590.74 = Equivalent salary in Reno

Option 1 or Option 2

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Sara with benefits

• With the benefits package included, the job offer in Reno is higher.

• A person earning $39,800.00 in Reno must earn $46,566.00 in Anchorage to have the same spending power.

Or • A person earning $45,200 in

Anchorage must earn $38,590.74 in Reno to have the same spending power.

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Joe with benefits

• Job offer 1 - Denver, CO– $24,000 salary + $4,500

benefits =$28,500– 102.9 cost of living index

• Job offer 2 - Seattle, WA– $32,000 salary +$6,000

benefits = $38,000– 148.2 cost of living index

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Salary in city 1 x

Cost of Living Index of City 2 Cost of Living Index of City 1

= Equivalent Salary in city 2

Cost of Living

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Joe with benefits

$28,500 in Denver x

148.2

102.9= Equivalent salary in Seattle

$38,000 in Seattle x

102.9

148.2= Equivalent salary in Denver

Option 1 or Option 2

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Joe with benefits

$28,500 x 1.4402332 = $41,046.65 = Equivalent salary in Seattle

$38,000 x .6943319 = $26,384.61 = Equivalent salary in Denver

Option 1 or Option 2

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Joe with benefits

• With the benefits package included, the job offer in Denver is higher.

• A person earning $28,500.00 in Denver must earn $41,046.65 in Seattle to have the same spending power.

Or• A person earning $38,000 in

Seattle must earn $26,384.61 in Denver to have the same spending power.

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Additional Web sites

• Web sites available to help calculate salaries and cost of living in various locations– www.homefair.com – www.bankrate.com/brm/move

calc.asp– www.accra.org

•$12.95 fee

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

conclusion• The base salary is not the only

thing to consider when evaluating a job offer.

– Also evaluate:• Fringe benefits• Opportunities for

advancement and work incentives

• Employer provided services• Additional perks• Location and environment

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Cost of Living Index -- Review

• Index form – rates communities on a scale of 100.0 and gives an average cost community a rating of 100.0.

–A lower index means a lower cost of living than the U.S. average.–A higher index means a higher cost of living than the U.S. average.

• Example: An index value of 115 indicates that the cost of living in that area is 15% higher than the average.

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Comparing Job Offers 1.1.3

•Lesson Objectives -- Review

–Examine the importance of career planning, salaries, and benefits to overall financial well-being–Differentiate salaries in different cities using the cost of living equation

© Family Economics & Financial Education – Revised May 2008 – Career Development Unit – Comparing Job OffersFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

Comparing Job Offers 1.1.3

•Assignments–What is the Best Job Offer? 1.1.3.L1 (in class)

–Cost of Living Equation Practice 1.1.3.A1 (in class)

–Comparing Job Offers 1.1.3.A2 (homework)