Is Tebow Taking a Pay Cut?

Both players are moving to more expensive places, making for effectively smaller pay.

By + More

When Tim Tebow packs his U-Haul (or Gulfstream, or whatever a millionaire quarterback uses to move) to become a New York Jet, he could be giving up more than a view of the Rockies.

According to one measure, he could effectively give up millions of dollars in salary.

[See Three Big March Madness Losers]

True, the New York Jets will take over Tebow's current contract. But the cost of living in the New York City metro area can be painfully high, effectively reducing the value of any paycheck.

Tebow's five-year Broncos contract was worth a maximum of $33 million, averaging out to $6.6 million per year. That $6.6 million can buy a lot more in Denver than New York City. The cost of living in The Big Apple can be nearly twice as high as in Denver, according to the 2011 Cost of Living Index from the Council for Community and Economic Research, an organization that provides community data. The index measures relative price levels for different areas, based around an average equalling 100.

In Denver, the cost of living index is slightly above average, at 105. So if Tebow received $6.6 million in annual pay, it would be worth slightly less in Denver compared to the national average—around $6.3 million. But in Manhattan, the cost of living is more than double Denver's. If the cost of living were to remain relatively constant throughout Tebow's contract, this would mean that his $6.3 million in Denver would be worth somewhere around $2.9 million in Manhattan.

He could shop around, of course. If he embraces his inner hipster and moves to Brooklyn, he'll do a little better, at around $3.4 million. Across the river in Bergen-Passaic, N.J., near where the Jets play at MetLife Stadium, he can live even more cheaply, with his pay worth around $4.8 million a year.

Peyton Manning, who also this week announced a move from the Indianapolis Colts to the Broncos, will see a bump in the cost of living.

[John Carter Flops, but Disney Too Big to Fail]

Manning was under a five-year, $90 million contract at the Colts, making for an average of $18 million per year. With the Broncos, his pay jumps a bit, with a contract worth $96 million over five years, averaging around $19.2 million per year.

But adjusted for cost of living, Manning also takes a slight pay cut. According to figures from the third quarter of 2010 (the most recent period for which Indianapolis data is available), the Indianapolis cost of living is below average, and well below Denver's. Manning's $18 million in Indianapolis, compared to a national average cost of living, is worth around $20.6 million. Meanwhile, using the same data, $19.2 million in Denver is worth less than $18.5 million by national standards.

But don't cry for these quarterbacks just yet. All of these facts and figures don't take into account the other perks that go with being an NFL star.

"The team provides for all the players. You have a team nutritionist or a team acupuncturist or whatever. Everybody gets to use them," says Kenneth L. Shropshire, the director of the Wharton Sports Business Initiative at the University of Pennsylvania. In other words, players get some basic needs, like food and medical care, from their team. Not having to spend on every basic need can dampen the effect of a cost of living hike.

In addition, big stars like Tebow and Manning can get millions of dollars from endorsement deals, padding their pockets even more. It's still worth less in New York than in Denver or Indianapolis, but it can soften the blow of moving to a new, expensive place.

Why twenty-somethings could soon compete with Mom and Dad for internships.

Twitter: @titonka