Saturday, April 11, 2015

Monetary standard of living by state

Seeing figures on the median income range required for households to fall between 66 percent and 200 percent of each state's median income (via Jayman) set me thinking about differences in monetary standards of living across the US.

Due to the wide variations in costs of living across different regions, income figures alone provide an incomplete picture. Nominally a dollar is a dollar, but the real purchasing power of that dollar not only varies over time (or, more precisely, declines over time), it also contemporaneously varies by location. Last year the Tax Foundation created a map showing the real purchasing power of $100 by state, indexed to an average national purchasing power for that same amount. Using this data in concert with median household income figures provides a seemingly reasonable measure of average monetary standards of livings across states. 

It's still an imperfect measure. The numerator here is income, not wealth, so youthful states like Utah and Alaska get a bit of an artificial boost on account of having fewer retirees than older states like Florida and West Virginia do. In geriatric states, retirees' incomes are often modest compared to the earnings they enjoyed during the middle of their life cycles even though, optimally, their monetary standards of living are at least as high as they were when they were working full time. Despite the name, the Tax Foundation's figures don't take income or sales taxes into account. Additionally, these are state medians and there is a lot of intrastate variation that gets amalgamated into each statewide figure (ie, Washington west vs. east of the Cascades). And, of course, this does not take into account non-monetary intangibles like climate, population density, and the like that factor into real world assessments of how desirable a place is to live.

The following table ranks states by a monetary standard of living (MSOL) index, calculated by multiplying how far $100 goes in a state compared to the national average by the median household income in the state and then dividing that by national median income to derive an index normed to 100. A MSOL index value above 100 indicates an average living above the national average while a value below 100 indicates an average living below the national average:

1. Alaska126.8
2. Maryland122.5
3. Massachusetts117.1
4. Minnesota117.1
5. Utah116.1
6. North Dakota116.0
7. New Jersey115.6
8. Connecticut115.3
9. Wyoming114.6
10. Virginia114.2
11. New Hampshire113.7
12. Iowa109.7
13. Hawaii109.1
14. Colorado108.9
15. Nebraska107.4
16. Kansas106.6
17. Rhode Island106.5
18. Washington106.4
19. Delaware106.4
20. Illinois105.1
21. South Dakota104.4
22. Wisconsin104.2
23. Ohio101.4
24. Texas100.8
25. California100.3
26. Missouri100.2
27. Pennsylvania99.1
28. Indiana98.1
29. Nevada98.1
30. Vermont98.0
31. Georgia97.8
32. Michigan96.2
33. Oregon95.6
34. Oklahoma95.6
35. North Carolina94.3
36. Idaho94.0
37. Montana93.8
38. New York93.5
39. Arizona93.0
40. Kentucky91.9
41. Tennessee91.8
42. South Carolina91.6
43. Alabama91.5
44. Louisiana90.9
45. Maine89.9
46. Florida87.6
47. West Virginia87.6
48. New Mexico87.0
49. Arkansas87.0
50. Mississippi82.6

Kansas beats California again. Jack Cashill 3Thomas Frank 0.

A map of the same. The darker the shading, the higher the MSOL:

Generally speaking, the South is relatively poor while New England and the upper Midwest are pretty well off.

Several years ago I looked at the relationship between a state's "livability index" (calculated by looking at 44 different, pretty wide-ranging factors from things like public libraries per capita to infant mortality rates) and its estimated average IQ and found a vigorous positive correlation of .78. There is more to life than money, and that comparison suggested that the non-monetary good things in life correlated strongly with intelligence. Well, material abundance does, too. The state level correlation between MSOL and IQ is .61 (p-value = .0000003).

Parenthetically, MSOL correlates modestly with 2012 support for Obama (r = .20, p-value = .17). 


JayMan said...

See also a study mentioned in this post, which breaks down the matter by county:

Rural White Liberals – a Key to Understanding the Political Divide | JayMan's Blog

silly girl said...

How about this for real purchasing power.

Median price of a house in a 95% white neighborhood.

Anonymous said...

Median home price in NYC in a 95% white neighborhood, $1,000,000.

Median home price in Nebraska in a 95% white neighborhood, $150,000. Many small towns have a lower price closer to $100,000.

Actually, I could find only one NYC precinct that was at least 95% white and that was census tract 15002 which is bounded by Central Park on the west and Park Ave. on the east. It is included in the 10128 zip code.

census tracts by race:
home values by zip code

Alas, demography is destiny when you feed your enemies.

31% of those under age one in NE are NAM's

Dan said...

The third commenter makes a good point. My sister and her husband live and work in the Bay Area. They are among the top 5% of earners, but cannot come close to buying a house in what they would consider a good neighborhood.

They lack the language to describe what they mean by a good neighborhood, although they would know it when they see it.

Audacious Epigone said...


That's by housing price, right, from the 2000 census? Ideally there'd be an index that mixed property values and taxes with the consumables that are measured in other price indices.


That'd be a list with a much more prominent blue-to=red hue skew.

Anonymous said...

I moved to L.A. to try to be a rockstar. I lived with 6-7 others in a tiny, dilapidated, GI-bill, ranch house on the Westside (Rancho Park--a nice neighborhood). I had three roommates, as in persons who slept in my room. There was one bathroom, and the plumbing was on again / off again. I paid $700 a month to live there.

One day, for kicks, I looked up the value of the house on Zillow--$940k. I then looked up my dad's 5,700 sq. ft. house in my rural hometown in Ohio (on a double lot, with an indoor pool)--$275k. That's what you pay to live 10 minutes from the Sunset Strip.