What are the richest and poorest states in America? Using data from the U.S. Census Bureau’s American Community Survey, we’ll try to answer both of those questions.
Overall, things look like they’re going okay. Data from 2015 shows median household income rising from the prior year, up to $55,775. The U.S. poverty rate is down more than a percentage point to 13.1%. Unemployment continues to decline, down to 4.4% since the latest report in June 2016.
As you’ll see below, this average hides the enormous difference between the nation’s richest and poorest states. Household income differs more than $35,000 between the richest state and the poorest state in the country, a number that is almost equal to the average starting salary for some college graduates.
Does it really matter if there’s that much difference in median household income between different states? After all, lower-income states have a much lower cost of living than high-income states do. A crisp $100 bill in Mississippi goes a whole lot farther than it does in Maryland.
Still, that difference isn’t enough to make up for the difference in household income. To make matters more complicated, household income also correlates with a variety of other factors that indicate future wealth and quality of life, such as education levels and home values). The takeaway there is that wealthier states are likely to stay wealthy while it becomes even more difficult for poorer states to play catch-up.
We’ll look at the five richest and five poorest states in the nation using five different numbers, defined below:
- Median household income: Calculated by determining a given household’s income where half of the homes in the area earn more and half earn less, not an average. (Sourced from the Census ACS)
- Difference from U.S. median household income: How far off is the state’s number from the national number? (Sourced from the Federal Reserve)
- Population: A state’s population is often (but not always) closely tied to income and income growth potential. (Sourced from the Census Bureau)
- Unemployment rate: How many people in the state are currently working? (Sourced from the Bureau of Labor Statistics)
- Poverty rate, meaning the ratio of people whose income falls below the poverty line. The poverty line varies depending on how many people are in a household. The poverty line for a family of five, for instance, would be $28,780. (Sourced from the Census Bureau)
First, look at the nation as a whole to get a baseline.
The United States
Median household income: $56,516
Population: 323.1 million
Unemployment rate: 4.4%
Poverty rate: 13.5%
To understand how these numbers shake out across the country, we can look at a single number: the GINI index, a calculation that indicates a country’s income inequality. A 0 index represents total equality (all incomes are the same) while a 100 represents perfect inequality (one person makes all the money). The U.S. GINI index sits at 41.06; it’s the 43rd most unequal country out of 149, between Peru and Cameroon. While the United States isn’t the most unequal country in the world (that honor goes to the Kingdom of Lesotho in southern Africa), it is in the top third and higher than any other Western nation.
In short, the GINI index gives some mathematical backing to the thought that the gap in income between the richest and poorest states in the country is enormous.
The 5 Richest States in America
Now that we understand the country in general, let’s dive in. What are the five richest states in the U.S.?
5. Connecticut
Median household income: $71,346
Difference from U.S. median household income: $14,830
Population: 3,576,452 (29th)
Unemployment rate: 5% (42nd)
Poverty rate: 10.8% (3rd)
4. New Jersey
Median household income: $72,222
Difference from U.S. median household income: $15,706
Population: 8,944,469 (11th)
Unemployment rate: 4.1% (25th)
Poverty rate: 11.1% (6th)
3. Alaska
Median household income: $73,355
Difference from U.S. median household income: $16,839
Population: 741,894 (48th)
Unemployment rate: 6.8% (50th)
Poverty rate: 11.4% (8th)
2. Hawaii
Median household income: $73,486
Difference from U.S. median household income: $16,940
Population: 1,428,557
Unemployment rate: 2.7% (3rd)
Poverty rate: 11.5% (9th)
1. Maryland
Median household income: $75,847
Difference from U.S. median household income: $19,331
Population: 6,016,447 (19th)
Unemployment rate: 4.1% (25th)
Poverty rate: 10.4% (2nd)
The 5 Poorest States in America
How big is the difference between the richest and the poorest states in the country? You may be shocked to find out.
5. Kentucky
Median household income: $45,215
Difference from U.S. median household income: $11,301
Population: 4,436,974 (26th)
Unemployment rate: 5.1% (46th)
Poverty rate: 19% (47th)
4. Alabama
Median household income: $44,765
Difference from U.S. median household income: $11,751
Population: 4,833,722 (23rd)
Unemployment rate: 4.6% (34th)
Poverty rate: 19.2% (48th)
3. West Virginia
Median household income: $42,019
Difference from U.S. median household income: $14,137
Population: 1,831,102 (38th)
Unemployment rate: 4.6% (34th)
Poverty rate: 18.3% (43rd)
2. Arkansas
Median household income: $41,995
Difference from U.S. median household income: $14,521
Population: 2,988,726 (33rd)
Unemployment rate: 3.4% (12th)
Poverty rate: 18.7% (46th)
1. Mississippi
Median household income: $40,593
Difference from U.S. median household income: $15,563
Population: 2,991,207 (31st)
Unemployment rate: 5% (42nd)
Poverty rate: 21.9% (the most impoverished of all states)
As you can see from the data above, the difference in income and poverty levels between the richest and poorest states in the nation is striking.
However, it’s worth pointing out that the average income in your state is not your destiny; these calculations contain plenty of outliers. The same Census report from which much of this data comes also showed that no state has seen a decline in income in the past year; in fact, 39 out of 50 states saw their median household income grow.
The bottom line: Even if the difference between states is notable, things seem to be getting better in general. To read more related articles stay tuned to NationalDebtRelief.com.