June 24th, 2014

Study Finds Best and Worst States to Make a Living

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Study Finds Best and Worst States to Make a Living

As we’ve recently touched on, the American job market seems to finally be gaining some steam. When considering the national economy, though, we often overlook regional variation. Not all areas of the country are created economically equal.

A recent study by finance site MoneyRates.com analyzed average salaries, employment rates, cost of living figures and workplace conditions in order to determine which U.S. states are the best to live and work in. Their findings include plenty of regional variation, as well as a big gap between the best performers and the worst.

The Good

The top ten states draw heavily from the Midwest and Mountain West. Virginia, with low unemployment and high average salaries, is the only state from the East Coast represented at the top.

A common thread at the top is little or no state income tax. Three of the top ten (Washington, Texas and Nevada) feature no state income tax, while one other, North Dakota, taxes at very low rates. Washington was able to grab the number one spot by adding great workplace conditions and a high average salary to their tax-free zone.

In some cases, being income tax-free was enough for a state to rank well despite other weaknesses. Nevada, which was devastated by the recession, still has high unemployment and below-average wages. Still, the state was able to sneak into #8 based largely on its lack of taxes and a below-average cost of living.

Tax-free wasn’t the only way to win, though. Minnesota, Colorado and Utah, ranked at #3-5, all have above-average state income taxes. However, amid other factors, Minnesota and Utah both compensated with low unemployment totals. Colorado, most interestingly, rode to #4 based only on its high average income coupled with a typical cost of living.

The Bad

Quite noticeably, the ten worst performers mostly fit into two distinct geographic clusters.

The Northeast, put simply, suffers from high cost of living. New York, Rhode Island, Connecticut and New Jersey all land in the bottom 10 despite high average incomes, as even elevated salaries can’t make up for painful expense levels. Each of these states scored below average on workplace conditions as well, and each featured very high unemployment levels, including Rhode Island’s national worst of 8.3 percent.

Bad unemployment numbers are something that Northeastern states share with the old South. Mississippi, South Carolina, Alabama and Arkansas all appear in the bottom 10, and only South Carolina amongst those has an unemployment rate below the national average. The main problem afflicting these states, though, is the converse of the northeast. These states all feature great cost of living averages, but their wages simply aren’t high enough to take advantage. Add in bad working conditions in Mississippi, Alabama and Arkansas, and you have a recipe for a discontented job market.

The only states in the bottom 10 outside of these two areas are the relative newcomers, Hawaii and Alaska. Both suffer from cripplingly high costs of living. Alaska’s costs are high enough that they wipe out the benefits of no state income tax, and Hawaii’s expenses are so high that it grabs dead last for the second straight year.


There are a lot of factors that go into economic quality of life, and there is more than one path to best or worst. While states without income tax are attractive to many, exceptions like Alaska (with no state tax but low overall rankings) and Minnesota (with above average taxes but great salaries and low unemployment) prove that it’s not only as simple as cutting taxes.

The ultimate takeaway is that where you live can have a huge effect on your financial outlook. If you’re looking to move in the near future, it might be best to keep these rankings in mind as you consider your next hometown.


is a Content Writer at Credit Karma. Since joining the team in June 2013, he’s been delivering the financial know-how on the daily. When away from work, you can find Mike watching hockey, Twittering for hours and frequenting trivia nights.

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