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So, a couple things. First, when you say your rent is cheaper, what you really mean is rent and food and parking and entertainment and dining out and having drinks out are all cheaper. That should all be part of your analysis when you decide whether your $40K drop is a net positive. If you’re in the same place at the end of the day, who cares?
Second, once you determine that, you need to also ask if $120 is actually market and, if so, whether taking a job at market is better than not having one at all. If it is, you can probably leverage your existing pay to get a bump above market, but you won’t make up the difference, because….
Third, firms with any size need to balance paying above market to one associate who is not bringing a special skill or higher rates or clients to the fold against the rest of the associate ranks in that tier. Yes there’s also a business analysis of “why pay 160 if I can pay 120” but those are hand in hand analyses.
Didn’t you look into this before you moved? I’m surprised your old firm didn’t want to keep you on remotely or transfer to a local office.
Pro
You think the economy of a geographical location is punishing you? Yikes, I'd have that one looked at by a therapist.
Keep in mind also offices in smaller places with LCOL may have lower hours expectations because they expect a better work life balance. Factor that in to the lower salaries you're being quoted.
It also isn't necessarily just rent. You may very well find lower real estate costs, general cost of living (entertainment, groceries, childcare, etc.), lower taxes, better work-life balance as someone else alluded to, etc. It's not uncommon for people to move to lower COL cities, despite associated paycuts, for those very reasons. Not sure if it will be your experience, but there may be more than meets the eye.
Well it doesn’t sound like you have been hired yet, so yes it could be your “market value” pursuant to the geographical area you are in, but you could very well negotiate an offer up to $135,000 with a YOE bonus, maybe. With the cheaper cost of living, you will probably be fine.