- A recent GOBankingRates study identified the best and worst states for families and people who are in the middle class.
- The worst states for the middle class tend to have expensive real estate and tuition.
- In previous studies, GOBankingRates also identified the best places for poor Americans and the best places for rich Americans.
What is the middle class? Pew defines “middle class” as households with income that is two-thirds to double the U.S. median. In 2016, the median household income was $57,617, according to the U.S. Census Bureau. Applying Pew’s definition means the middle class is comprised of households with an income range of $38,411 to $115,234. Keep reading to find out which states are the best and worst for the middle class.
The Best and Worst States for Middle-Class Incomes
As many of us in the middle class are already well aware, the cost of living and work opportunities in the state we choose to live in play a significant factor in our chances of surviving or escaping the middle class. For the average household, mortgage or rent is the largest expense category followed by transportation and food.
A recent GOBankingRates study analyzed household income, home values and in-state tuition costs to determine the best and the worst states for middle-class Americans.
The 10 Best States for Middle-Class Incomes
Some states are better than others for the middle class. Here are the 10 best states for the middle class:
- South Dakota
- West Virginia
- North Dakota
The 10 Worst States for Middle-Class Incomes
Here are the 10 worst states for the middle class:
- New York
- New Jersey
Click to See: Places in the US With the Most Income Inequality
It Takes Hard Work Just to Stay Stuck in the Middle
In their analysis for “The Two-Income Trap: Why Middle-Class Mothers and Fathers are Going Broke,” the authors found there is no evidence of an epidemic in overspending that could explain a 255 percent increase in foreclosure rates, 430 percent increase in bankruptcies or 570 percent increase in credit card debt since the early 1970s. When asked, survey respondents cited just three common factors that primarily contributed to their financial insecurity:
- Job loss
- Family breakup or divorce
- Medical costs
Another measure of how easily individuals can climb into the middle class from poverty or out of the middle into wealth is economic mobility. Many people believe that the pursuit of this mobility is part of the American dream itself.
However, if you were not born into wealth or “self-made” like recent Forbes cover star Kylie Jenner, then you might have a slightly different perspective. For many working folks, the American dream combined with stagnant wages is causing more and more work just for the privilege of remaining stuck in the middle.
Escaping the Middle Class Takes a Lifetime
The top 1 percent — those taxpayers making an adjusted gross income of $465,626 and above as of 2014 — are far more likely to remain wealthy than middle-class households are to rise to wealth. Besides homeownership, the pathway to wealth building most familiar to middle-class Americans is typically the stock market. But according to a 2014 study by economist Edward N. Wolff, Wall Street not only creates new wealth, but also reinforces wealth inequality. His analysis found that the richest 10 percent of American households held more than 80 percent of the stock market’s value in 2013.
For our work and money podcast, Paychecks & Balances, I researched what it would take to reach $1 million for an individual living on the median salary of about $31,000. Assuming a retirement age of 67 and a moderately optimistic return of 7 percent, they would need to save $253 per month, or $8 day, starting at age 20. If they waited until age 35, their contributions would increase to $963 per month.
Without significant increases in investment savings or a salary above the median, many individuals might reasonably expect to spend their entire working lives striving to escape the middle class.
More on the Economy
- The Richest and Poorest Area Codes
- Cities Where You Can Realistically Live on Minimum Wage
- Follow This One Tip to Be Financially Successful
Methodology: GOBankingRates determined the best and worst states to live on a middle-class income by analyzing the following data and factors: (1) change in median household income of middle-class families from 1999 to 2014; (2) change in proportion of households earning middle-class incomes from 2010 to 2015; (3) six-year college graduation rates of students earning bachelor’s degrees in 2015; (4) in-state tuition for 2017-18; (5) change in tuition costs over the last five years; (6) five-year change in median home values between May 2013 and May 2018; (7) median home list price as of May 31, 2018; and (8) homeownership rates.
All factors were weighted equally. The following sources were used to compile the data: the Pew Research Center, the U.S. Census Bureau, the College Board, Zillow and the National Center for Higher Education Management Systems.