The Census Bureau released its estimates for median household income by state and metropolitan area this week. Which states lead and lag the nation?
1-Maryland $70,004 50-Mississippi $36,919
2-Alaska $67,825 49-West Virginia $38,482
3-New Jersey $67,458 48-Arkansas $38,758
4-Connecticut $65,753 47-Kentucky $41,141
5-Massachusetts $62,859 46-Alabama $41,415
One problem with this data is that it doesn't take into account differences in the cost of living between states. Most people recognize that the cost of living is higher in the northeast and west coast and less expensive elsewhere. However, there isn't official data regarding differences in the costs of living between states (there are some private estimates). The Bureau of Economic Analysis recently released estimates of regional pricing parities for the period 2006-2010; this is experimental data designed to capture cost differences at the state and local level. Note that estimates for 2011 are not available, but 2006-2010 data should still help explain most of the differences in cost of living. Here's the five most and least expensive states in which to live (US=100):
1-Hawaii 116.1 50-South Dakota 87.2
2-New York 114.1 49-North Dakota 88.2
3-New Jersey 111.5 47-Missouri 88.7
4-California 110.7 47-West Virginia 88.7
5-Connecticut 110.5 46-Mississippi 88.9
What happens to median household income by state after adjusting for differences in the cost of living?
1-Alaska $63,925 50-Mississippi $42,529
2-Maryland $63,467 49-West Virginia $43,384
3-New Jersey $60,500 48-Arkansas $43,402
4-Virginia $60,021 47-Florida $44,299
5-Connecticut $59,505 46-New Mexico $44,594
The top three and bottom three remain the same, but the gap between them declines. The Dakotas benefitted the most from the low cost of living, with North Dakota moving from 20th to 9th, once one takes into account its low cost of living. Meanwhile, New York fell from 16th to 32nd. A surprise to some may be Florida having the 4th lowest median household income, after adjusting for cost of living.
Estimates of poverty at the state and local level are also distorted by cost of living differences (i.e., it's hard to use a national standard when the cost of living differs significantly between states, but that's the approach used when determing official estimates of poverty). That's a story for another day...