It is getting easier to earn a living in the United States.
At least, that's what the statistics say. The economic expansion that began in mid 2009 is already one of the longest of the post-World War II era. Unemployment has been driven down to 4.1 percent while year-over-year compensation growth recently matched its ten-year high.
The problem with statistics is that they are often based on averages that do not adequately reflect the full range of actual conditions.
Relocating to earn a better living
To get a better sense of the range of conditions facing Americans trying to make a living, MoneyRates.com looked at a variety of factors in each of the 50 states for the latest study of Best and Worst States to Make a Living.
The idea is not simply to point out which areas are doing better than others. One of the toughest career decisions you can face is whether or not to relocate. Could you be doing better somewhere else? If you move, what is the impact likely to be on your ability to make a living?
With this study, MoneyRates.com hopes to provide some guidance on which states offer good or bad conditions for making a living and, more broadly, offer thoughts on some of the conditions you should check into before making a move.
Best and worst states to make a living: methodology
So what makes a state a good place to make a living? Is it a matter of a healthy job market with a low unemployment rate? What about where the highest wages are? How do cost of living and state taxes factor into the decision? Beyond economic factors, which states have the safest workplace conditions?
When you start to consider conditions for making a living from all those different angles, you find that these various factors tend to represent trade-offs. For example, a high median wage might be somewhat offset by the fact that the state has a high cost of living. To accurately capture the positives and negatives that go into these trade-offs, MoneyRates.com weighed those factors via a formula that combined them to produce a single number.
The data used was obtained from the US Bureau of Labor Statistics, the Tax Foundation, and the Council for Community and Economic Research. This was then processed through a proprietary MoneyRates.com formula.
The starting point for this methodology is the median wage in each state. That wage was then adjusted for cost of living and state taxes. That number in turn was adjusted again to factor in the chances of being unemployed and of suffering a workplace-related injury or illness in each state. The result is an adjusted compensation figure for each state that was used to determine the rankings for this study.
Based on those rankings, the following are the ten best and worst states to make a living.
Best states to make a living in 2018
Here are the states where the combination of wages, cost of living, tax environment, job market and workplace conditions combined to make them the most favorable places to make a living:
A repeat winner, Washington starts with the advantage of being one of nine states that does not tax wage income. What helps it stand out even further is that it has the fourth-highest median income in the nation. It also has fewer incidents of workplace illnesses and injury than most states. These strong positives more than make up for the fact that Washington's cost of living and unemployment rate are both a little higher than the national average.
This state climbed up to the number two position after ranking fifth last year. It is one of the best states for employment opportunities with an unemployment rate of just 3.0 percent, and its median wage is higher than that of most states. An additional plus was that Colorado has a lower rate of workplace incidents than most states. Finally, its cost of living is a little below the national average, which somewhat makes up for the fact that the income tax burden is a tad higher than in most states.
Moving up one slot from fourth to third, Texas combines being one of the ten cheapest states to live in with having no tax on wage income. As a result, paychecks stretch a little further in Texas, which helps compensate for the state having a so-so median wage.
Despite slipping a bit from second last year to fourth this year, Minnesota still has some strong points in its favor. It ranked as one of the top states to live in because it has the ninth-highest median wage nationally (which helps it overcome a relatively high state income tax burden) and unemployment and frequency of workplace incidents are both lower than average.
The middle-of-the-pack income level in Ohio is actually better than it looks, because a low cost of living and small state income tax burden help those wages go farther. Ohio is also one of the best states for workplace safety.
Michigan is among the lowest when you look at cost of living by state, so it gets more bang for its buck out of a mediocre median income. That affordability was the biggest factor that landed Michigan in this top ten.
- North Dakota
The combination of a high median wage with low state income taxes and low unemployment make North Dakota one of the best states to live in financially. The catch is that it has one of the highest rates of workplace injuries and illnesses.
The cost of living is a little cheaper than average in Illinois, while median wages are a little better than in most states. That combination, along with a low rate of workplace safety incidents, helps Illinois make the top ten despite a relatively high state tax burden.
Being one of the cheapest states to live in did a lot to help Missouri in this study. It also has lower-than-average rates of unemployment and state taxes.
This state is better than most when it comes to median wages, low unemployment, and good workplace safety. That helps compensate for the cost of living and state income taxes being slightly on the high side.
Worst states to make a living in 2018
Here are the ten states that fared the worst in this year's study:
How can the state with the nation's lowest unemployment rate be considered the worst state to make a living? The problem is that, while it may be fairly easy to get a job in Hawaii, the combination of a cost of living that is 88 percent higher than the national average and the third-highest state income tax burden in the nation make Hawaii the worst state to live in financially.
Median wage earners in Oregon face the highest state income tax burden in the nation, which compounds the problem of a cost of living that is well above average. As a result, wage earnings in Oregon don't go nearly as far as they do in most states.
Wages might look attractive in California, but keep in mind that the cost of living there is more than 40 percent higher than the national average, so adjust any job offers accordingly.
- South Carolina
Low wages are the primary reason why South Carolina landed in the bottom ten, and the unemployment rate is a little worse than the national average as well.
- West Virginia
Comparing the cost of living by state, we found that the good news is that the cost of living in West Virginia is cheaper than in most of the country. That means that your wages should go a long way. The bad news is that the prospects for earning a strong wage in the state are not good -- it has the third lowest median wage and the third-highest unemployment rate.
This state fared a little worse than average in most categories, but the big problem was workplace safety. Montana has the third highest rate of workplace injuries and illnesses.
Like all the New England states, Maine is a relatively expensive place to live, with a cost of living that is nearly 14 percent above the national average. Unlike some of those states, though, Maine does not offer a particularly high median wage to make up for the high cost of living.
Considering that it has one of the lowest unemployment rates in the nation, Vermont might be expected to have a fairly high median wage, but it ranks just a little above the middle of the pack. That is not enough to compensate for a cost of living that is more than 20 percent higher than the national average.
- South Dakota
Despite the advantage of having no state income tax, South Dakota is not an attractive place to make a living because its median wage is in the bottom five nationally. This is a good example of how even a little difference in location can make a big difference -- neighboring North Dakota landed in the top ten in this study largely on the strength of a median wage that is well above average.
- New York
It shouldn't come as a shock to find that New York is an expensive place to live: the cost of living is more than 30 percent higher than the national average, and the state income tax burden is also on the high side. This is more than enough to water down a relatively good median income.
Obviously, across hundreds of different occupations and given people with various types of training and levels of ability, the general conditions in each state will not always apply to every individual. However, the above should give you a big-picture view on whether you live in a state that makes it relatively easy or much tougher to make a living.
Full Ranking of All 50 States
Didn't see your home state among the best and worst states to live in? Here is the full ranking of 50 states:
|Rank||State||COL||Median Income||Tax Burden (as a % of Income)||Unemployment Rate||Work-related Injury, Illness, and Fatality Rates|
Purpose Of Account:
Currently Banking With:
- Capital One
- Synchrony Bank
- Ally Bank
- CIT Bank
- Sallie Mae Bank
- American Express National Bank
- Discover Bank