Your Mileage May Vary: Wage Differences Between States

You don’t have to have an advanced economics degree to know that not all wages are created equal. Cost of living varies widely from state to state and even city to city. Wage differences between states are not uncommon and can directly impact your purchasing power.

Where you live can impact the value of your paycheck. To a certain degree, people already understand this. After all, we know that it costs more to live in certain areas, notably when it comes to cities. However, the true difference isn’t always apparent until it’s staring you in the face.

Everyone knows someone who bemoans their $500 per month rent. At the same time, there’s another friend who knows that $500 a month would barely afford a parking space in New York City. 

(How satisfied you are with your current housing costs may depend greatly on which friend you are. )

Time magazine recently conducted an experiment to measure the price parity of wages between the states. The findings are based on 2015 median household income from the Census Bureau’s American Community Survey.

The results were then adjusted based on each state’s regional price parity, a calculation by the U.S. Bureau of Economic Analysis. The result is a breakdown of the true level of income of each state.

Wage Differences Between States

Wage Differences Between States

The full list of states is available on here

This map breaks down the wage difference between states into three colors: red, blue, and yellow. The red states indicate areas where median household incomes are high, yellow is middle of the road, and blue is on the low-end.

More important than the actual pay, however, is the true value of the wages. When adjusted for regional price parity, the value of the real wages change. In some states, the real income level is higher than the median. In others, the opposite is true.

New York or New Mexico?

In New York, for example, the median household income is $60,850. That’s great compared to New Mexico’s $45,382. However, when adjusted to the “real” pay, the wage differences between states becomes apparent.

New York’s $60,850 is adjusted to $52,775

New Mexico’s $45,382 turns into $48,074

What Gives?

How do New York and New Mexico go from a $15,000 difference to a $4,700 one? It all comes down to cost of living. The price of goods, housing, transportation, and more vary from state to state.

Sure, a nearly $5,000 difference is still a lot. However, when adjusted for cost of living, it’s nothing compared to the $15,000 difference in raw numbers. All things being equal, you may be better off buying a home in New Mexico rather than New York.

According to Trulia’s national home prices index, the average listing price for a home in New York is $565,227 compared to New Mexico’s average listing of $254,798.

Of course, not all states are created equal. You might expect the wage differences between states to be apparent when comparing two extremes such as New York and New Mexico. However, what about two states where the differences aren’t quite so drastic?

Texas has an average median income of $55,653. When adjusted for regional price parity, those earnings become $57,493. Compare that with Washington State’s $64,129 which adjusted to a real income of $61,192.

Both states see a change in real income when adjusted. However, Texas’ wages see an increase in real value while Washington state residents see their wages devalued by $3,000. It might have something to do with the fact that Texas residents are seeing a technology boom in cities like Austin while Seattle residents are being taxed on soft drinks. 

Here’s a closer look at the the comparison between living in Austin and Seattle:

One More

Washington, D.C is known as one of the most expensive places in the country to live. However, so is California. What about these two locations?

Washington, D.C has a median household income of $75,628 and an adjusted real income of $64,639

California has a median household income of $64,500 and an adjusted real income of $56,878

Both areas see a substantial decrease in the real value of their wages. Washington, D.C by nearly $11,000! California is no slouch either, with a loss of $7,622.

Here’s a closer look at Washington, D.C versus San Francisco

Of course, Washington, D.C is technically not a “state” and San Francisco is, of course, a city in California and not necessarily indicative of the entire state.

What About Cities?

San Francisco is known to be an expensive place to live, as is Seattle. If you were to remove Seattle from Washington state’s evaluation, the numbers would change, and likely for the better. With some of the highest cost of living in the country, Seattle is certainly tipping the scales for Washington. The same goes for San Francisco.

However, it serves as an example that wage differences between states are not the only thing to consider. Cities, even those within the same state, can see a noticeable difference in wage value, home prices, and more.

In Westchester County, New York the median home price is $640,000. Less than two hours away in the state capital of Albany, the price drops to $213,000. It doesn’t take too much distance to see a noticeable difference in the cost of living.

This is why City vs City examines the true cost of living at the zip-code level in order to deliver an accurate comparison of the cost of living between cities. Our app examines after-tax income, housing costs, household expenses, and more.

The result is a side by side comparison that shows the true cost of living in your chosen city.

Looking to move? Download the City vs City app today!