Determining the Most Financially Prosperous Place to Work
In America, the cost of living from state to state and city to city differs vastly. As a result, people performing the same jobs in different regions will get paid different wages and generate different levels of earnings for performing the same tasks. A janitor in NYC will make considerably more than a janitor in Wichita, KS. This is to compensate for the fact that the cost of living in NYC is incredibly high relative to the cost of living in Wichita. This concept is very important to people that are contemplating moving to new areas, especially if they are doing so in order to work. The following will analyze the various price indexes to average earnings and determine the most profitable place to live as well as the least profitable place to live. A good place to start is defining the various concepts that will be discussed. Exhibit 1 displays the various statistics that are used for analysis on the state level and Exhibit 2 displays the statistics used on the city level. The cost of living index (CLI) is derived from a price index, which is a composite measure of the price of a basket of goods. This basket consists of various goods that are likely to be purchased by consumers such as, but not limited to, education, clothing, and shelter. The CLI provides a weight to achieve real earnings as opposed to nominal earnings, which are arbitrary when doing comparisons. It does this by combining the average costs of goods in a given area and indexing them on a scale to 100. A low cost of living indicates that money in that area has a higher purchasing power than in areas with a high cost of living. The other statistic that needs to be defined is earnings. First, earnings need to be differentiated from income because earnings pertain solely to money generated from performing work. Income includes various other sources such as returns on investments, inheritance, or gifts. Second, earnings statistics used in this analysis were collected by the United States Census Bureau, via the Current Population Survey (CPS), and are an average of overall household earnings by state. These two statistics, when compared, can help determine where in the United States one has the best earning potential, or “bang for the buck.” The five states with the lowest costs of living, based on information found on the Missouri Department of Economic Development website, are Oklahoma (90.5), Tennessee (90.6), Kentucky (91), Arkansas (91.5), and Indiana (91.7).1 The five states with the highest costs of living are Hawaii (167.1), Alaska (134.5), Connecticut (132.7), New York (130.4), and New Jersey (129.8). 1 If the data is confined to the continental United States, where goods are cheaper and more easily accessible, Hawaii and Alaska are replaced by California (125.6) and Rhode Island (123.5). 1 Now, a trend starts to develop. Clearly, the cost of living is higher in the Northeast and much lower in the Southeast/lower Midwest. This suggests that a dollar will be able to purchase more in the Southeast than in the Northeast.
Average earnings by state in the United States have a fairly large range, Maryland has the highest average earnings with $67,469 and Mississippi has the lowest with $39,078 for a range of $28,390.2 The five states with the highest average household earnings are Maryland ($67,469), New Hampshire ($67,287), Connecticut ($67,185), New Jersey ($65,072), and Massachusetts ($62,809). 2 The five states with the lowest average household earnings are Mississippi ($39,078), Arkansas ($39,806), Tennessee ($41,524), Montana ($41,753), and South Carolina ($42,065). 2 Similar geographic trends appear in earnings as they did in the cost of living index. Earnings in the Northeast are much higher, on average, than the Southeast and Midwest. This suggests that people make more money for performing work in the Northeast than they do performing the same work in the Southeast...
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