As most of us already know, the median annual salary (around $52,000) will stretch much further in some places than in others. Now, if you live in an expensive location, like New York City, you’d need much more money than a person living in a place like Knoxville, Tennessee. The difference is incredible when you think about it — a $55,000 salary in Knoxville has the same purchasing power as a $136,504 salary in Manhattan.
Because the cost of living is so different across the country, so are the respective salaries. Again, using Manhattan as an example, salaries are much higher in that area to account for the higher living costs. “Manhattan’s average weekly wage during the first quarter of 2012 was two and a half times the national average — $2,448 compared to $989,” reports the Bureau of Labor Statistics.
This is not always the case, though. In some states, median salaries are low relative to the cost of living. We’ve created a list of states that do not have high enough salaries to match their living costs. All salary data come from the Census Bureau and the Bureau of Labor Statistics. Cost of living data are from the Missouri Economic Research and Information Center (MERIC). The ranking of each state is based on the degree of disparity, and states with the largest gaps between the required salary and actually median salary ranked the highest.
Methodology: The table below multiplies each state’s cost of living index (obtained from MERIC) by the most recent national median household income estimates (from the Census Bureau) to determine what median income should be. It then compares that figure to each state’s actual median income. States where the cost of living index-based median income is higher than the actual median income are highlighted in light orange. These are the states where median salaries are too low. The states in green represent places where the actual median income is higher than the cost of living index-based median income. These are the states where you can get more bang for your buck.
States with the largest gaps between cost of living-based median income and actual median income:
10. Alaska: Alaska has a high cost of living index, at 132.2, and although median salaries are higher than the national median, they are not quite high enough to compensate for the increased living costs.
9. Arkansas: Although Arkansas has a lower cost of living index (91.8), its median salaries are relatively even lower, at $39,919.
8. Oregon: Although median salaries in Oregon are not that much higher than the national median, the cost of living index is a lot higher, at 123.8.
7. California: With median salaries in California at less than $58,000, this is not enough money to compensate for the high living costs.
6. North Carolina: Although the cost of living index in North Carolina is 97 (close to the benchmark), North Carolina’s median annual salaries are around one-fifth less than the national median.
5. Louisiana: In Louisiana, living costs are a bit lower (the index is 94), but median salaries ($39,622) are still not quite high enough to match living costs.
4. West Virginia: Like in Louisiana, living costs are lower in West Virginia (the index is 96). However, median salaries are even lower, at $40,241.
3. New York: In some parts of New York, salaries are more in line with living costs. But as for the state as a whole, the less than $54,000 median income is not enough to cover a 131.8 cost of living index.
2. District of Columbia: The District of Columbia ranks third in terms of high cost of living, with an index of 138.2. But in spite of these high costs, median salaries still sit close to the national median, creating a large disparity between cost and earnings.
1. Hawaii: Based on a cost of living index of 158.9, median income should be $82,531. However, it is much lower than that, at $61,408. This represents a difference of $21,123.