OR WAIT null SECS
With more people working from home, employers should rethink how cost-of-living impacts salary negotiations.
When looking for life sciences research talent, many companies know the obvious places to go: Boston/Cambridge, San Francisco Bay Area, and San Diego. Those also are among the most expensive places to live in the country.
There’s a way for life sciences companies to gain a slight competitive advantage in hiring and retention: Hire in markets with a lower cost of living. This strategy has grown more feasible in recent years as the supply of life sciences talent has expanded in markets beyond the industry’s traditional strongholds.
Here’s the basis of this theory:
Unlike most occupations, life sciences salaries do not vary much across metros in comparison to the cost of living. From the top market for a biochemist salary (San Francisco Bay Area) to the 25th ( Nashville), the difference in salary is $31,054 compared to the difference in cost of living of $43,218, according to the Economic Research Institute. Put another way, in Houston, the average biochemist salary 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 not be struggling by any means, all things being equal, they would not have the same amount of financial freedom as their Houston counterparts.
From an employee perspective, metros such as Houston, Raleigh-Durham, or Atlanta may be more favorable strictly in terms of financials. This even takes into account state income taxes, which vary greatly across the U.S.
The benefit is less financially direct for companies. They don’t get the usual cost savings of paying lower salaries in markets with a lower cost of living because life sciences wages are relatively rigid across markets. However, companies could cite a market’s lower cost of living in recruiting and maintaining life sciences talent.
Interestingly, of the top 25 U.S. life sciences markets for researcher talent, as ranked by a recent CBRE report, Nashville had the lowest cost of living at $48,112 and the highest five-year employment growth at 110 percent. In fact, 17 of the top 25 U.S. life sciences hubs had below average cost of living. Five-year researcher occupation growth was positive in all metros with cost of living under $52,000 and all but 3 metros under the average cost of living of $60,073.
Granted, this theory can be a bit simplistic. There are additional factors that influence where life science talent works, including close proximity to universities, research institutions, and established clusters of talented peers. For those reasons, life sciences companies may opt for metros with large clusters of life sciences talent and a strong pipeline of upcoming researchers. Boston/Cambridge, Washington, D.C./Baltimore, and San Francisco Bay Area are the top three markets for life sciences researcher talent, according to a recent CBRE report.
Still, a myriad of other business factors must be considered, including real estate costs. As of this year’s second quarter, average asking rates for laboratory space in Boston/Cambridge are $101.85/sq. ft. with top-of-the-line space going for $130/sq. ft. in the urban core. Compare this to Raleigh-Durham, second for best salary to cost of living ratio, where rates are $38.50/sq. ft. Or consider Washington, D.C./Baltimore, second for top life sciences research talent clusters, where rates are $41.46/sq. ft.
From a financial perspective, this means two very different things for researchers and employers. For employees, the gap between life sciences wages and a metro’s cost of living can be a boon. For companies, the benefits are more strategic than directly financial. Excluding real estate financials, education and occupation data play the main role in determining the best markets for life sciences employers to put down roots in order to attract the best talent.
Taylor Stucky is a CBRE Senior Research Analyst specializing in Life Sciences based in Reno, NV.