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Your paycheck could be worth a lot more — or much less — than you realize.
That’s because the purchasing power of money can vary dramatically from one state to another. For example, when purchasing goods at the national average price level, $100 in income will buy you goods worth as little as $84.18 in Hawaii, and worth as much as $116.01 in Mississippi.
To arrive at those numbers, the nonprofit Tax Foundation parsed the latest real personal income data from the U.S. Department of Commerce. According to the foundation:
“Adjusting incomes for price level can substantially change our perceptions of which states are truly poor or rich.”
Take Mississippi, the state where $100 in income goes furthest when buying goods. For purposes of day-to-day living, Mississippi residents are 16 percent richer than their incomes suggest, according to the foundation.
By that logic, residents of Washington, D.C. — where the real value of $100 is $85.47 — are about 15.5 percent poorer than their incomes suggest.
As the Tax Foundation notes, regional price differences can be “strikingly large.” For example, the purchasing power of $100 in Mississippi is 36 percent greater than it is in Washington, D.C. The foundation continues:
“In other words, by this measure, if you have $50,000 in after-tax income in Mississippi, you would need after-tax earnings of $68,000 in the District of Columbia just to afford the same overall standard of living.”
If you’ve ever felt jealous of folks in areas like New York City or Silicon Valley — where it seems like everyone earns at least six figures a year — perhaps you should take this as a reminder to avoid trying to keep up with the Joneses.
Concerning yourself with others’ apparent wealth — whether they live one door down or one state over — is among the costliest lifestyle missteps you can make. As we detail in “7 Financial Sins of People Who Retire Poor,” the average person cannot look rich and be rich — or retire rich.
Besides, the reality is that in states where paychecks are higher, price levels are generally higher as well. The Tax Foundation says this is why the same jobs pay higher salaries in areas with higher costs of living. Economists call it “a compensating differential.”
The 10 states where $100 has the greatest purchasing power are:
- Mississippi — $100 can buy goods that would cost $116.01 in a state at the national average price level
- Alabama — $115.21
- Arkansas — $114.42
- South Dakota — $113.38
- Kentucky — $112.87
- West Virginia — $112.49
- Ohio — $112.11
- Missouri — $111.98
- Tennessee — $111.23
- Oklahoma — $111.23
The 10 states, along with Washington, D.C., where $100 has the weakest purchasing power are:
- Hawaii — $100 can buy goods that would cost $84.18 at the national average price level
- District of Columbia — $85.47
- New York — $86.73
- California — $88.18
- New Jersey — $88.18
- Maryland — $91.24
- Connecticut — $92.00
- Massachusetts — $93.55
- Alaska — $94.70
- New Hampshire — $95.24
- Washington — $95.42
What’s your take on these numbers? Sound off below or over on our Facebook page.