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Why living in a big city for a higher salary may not pay off

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WATCH: Why living in a big city for a higher salary may not pay off – Oct 16, 2021

Dave Battersby and Cindy McAdam always planned a return to small-town life. The COVID-19 pandemic merely sped up the couple’s plans.

“It was extremely scary to pick up and move during the pandemic,” Battersby tells Global News.

In April 2020, after they sold their 1,000 square-foot home in Toronto’s Davisville Village neighbourhood, they moved to a 5,000-square foot home with a sprawling backyard and outdoor pool in Cobourg, Ont. The price difference between the two properties allowed them to purchase their new home mortgage-free, with enough money left over to buy investment property as part of their retirement plan.

Labour shortages across Canada are resulting in big pay bumps for many job seekers. Getty Images

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“We have a home now where we can entertain guests. We have enough room that they can stay over as well,” says Battersby. “We have a pool that the kids have been enjoying every day during the summer months.”

Read more: Scores of Canadians have ditched the city. Will the office claim them back?

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Battersby, a director of media sales advertising, has since expanded his responsibilities while reducing his need to make the 1.5-hour commute to Toronto down to twice a week, without impacting his annual salary.

By greatly reducing their housing costs, they’ve managed to capitalize on big-city pay.

David Battersby and Cindy McAdam moved their family from Toronto to Cobourg early in the pandemic.
David Battersby and Cindy McAdam moved their family from Toronto to Cobourg early in the pandemic. Photo supplied

Researchers at the University of California at Berkeley and the U.S. Census Bureau released a report this month titled “Location, location, location” which digs into whether higher salaries in major urban centres are worth moving to the big city for. The report’s lead author, Canadian David Card, was named on Tuesday as a winner of the Nobel Prize in economics for his study of labour markets.

Their conclusion? It’s complicated.

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Adjusting for a variety of factors such as education and skills, moving from a smaller community to a larger, higher-wage area reduces real earnings, according to the report. That’s because, the report said, “housing costs consume more than 100 per cent of the nominal earnings gain that a typical worker obtains from moving to a larger or higher-earnings commuter zone.”

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Read more: Ontarians look to Atlantic Canada for chance at better quality of life amid COVID-19 pandemic

With new, COVID-era flexibility in the form of remote positions and hybrid work models, that calculation is expected to shift even more, according to some economists.

Economist and McDonald Laurier Institute Senior Fellow Linda Nazareth says corporations may be tempted to reduce pay for employees who live in a lower-cost jurisdiction, but the tight labour market may hinder their ability to do that as they compete for talent.

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Mass exodus

 

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The pandemic has amplified an existing trend of migration away from downtown cores that began after 2015.

“We saw our millennial generation begin to have their second child and they looked longingly for more space and that ‘white picket fence’ upbringing that many of them had when they were kids,” Phil Soper, CEO of Royal LePage told Global News. “And the first wave of baby boomers began to retire and they no longer needed to live in city cores.”

Read more: Some Canadians say coronavirus was the push they needed to leave the city for good

This trend accelerated last year and into this summer, though it is moderating, according to Royal LePage. The migration has pushed home prices in rural areas and suburbs to new heights. On average, the price tag on homes is up 33 per cent during the pandemic according to Royal LePage’s latest figures, released Friday.

Soper says Royal LePage has noted migration pockets of people moving from the two most expensive mega centers–Toronto and Vancouver. A key driver of this trend are moves from Ontario to Atlantic Canada, as well as from the Lower Mainland to Kamloops and Northern British Columbia, or into Alberta to Okotoks, Turner Valley and even Calgary.

Should where you live determine your pay?

This past summer, big names in tech including Google and Facebook made headlines for announcing plans to reduce compensation for employees choosing to work from home in cities where the cost of living is lower.

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In an email to Global News, a Google Canada spokesperson says “outside the U.S. each country has a single compensation category, so there are no differences in pay whether you’re a fully remote or in-office employee.”

Facebook Canada did not respond to Global’s request for comment.

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Given the current tech skills gap and the shortage of workers in high-demand fields, Nazareth says that the talent has the upper hand.

“We’re seeing this debate starting about whether we should pay different wages to people working different places. I don’t think that will go too far, but it’s part of the bigger picture,” she says.

According to Statistics Canada, one in four workers is currently able to work remotely.

Read more: Will Canadians ditch the office? Many want to keep working at home after the pandemic

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“It’s hard to find good people and if you find the worker you want that is not close to where your office is, you’re going to be pretty flexible about letting them work with you,” Nazareth says. “I think everything is on the table in terms of options.”

Recruiting is part of Battersby’s job and he says the “number one thing people ask about” is whether a position can be done from home or outside the office. He understands that desire for flexibility.

Getty Images. Getty Images

He says COVID has prompted him to prioritize spending time with his two sons: Gavin, nine and Carson, five.

“I spend less time in a car now. I’m not working 10, 11-hour days,” says Battersby. “I have the opportunity to spend quality time with the family. It has really changed our lifestyle. I couldn’t be happier about our decision to move.”

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