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Regional Distribution of Household Income in the United States

12 Sep 07

The Northeast still contains most of the high-income states, while the South contains the lowest-income ones. But some of the low-income states have shown potential for improvement, based on recent income and employment gains.

Recently announced results from the American Community Survey 2006 of the United States Census Bureau indicate that regional household income distribution is skewed. Given a national average household income of $48,451 for 2006, a majority of states (31 out of 50) fall below the average. The discrepancy between the highest-income and the lowest-income state is almost 100%; compare Maryland, with a median household income of $65,144, to Mississippi, with a median household income of $34,473.

Other than Hawaii, Alaska, and California, all of the other states classified in the highest-income group (above $55,000/year) are in the eastern United States. As noted, Maryland tops the list; New Jersey and Connecticut follow in the second and third positions. The Northeast remains the predominantly richest region in the country. The data indicate, however, that states in other parts of the country are gaining wealth.

Median Household Income by State
(Thousands of dollars)

There is a complex mix of geographical, demographic, and economic factors that determine the variations in the median household income among the states. The table below summarizes some of the macroeconomic characteristic of the top-10 and bottom-10 states according to their 2006 median household income rankings.


		Ranks Based on 2006 Values				Ranks Based on 10-Year Compound Annual Growth
	Median HH Income		Per Capita	Labor-Force	Annual Avg.	Personal	Annual Avg.	GSP	Employment
State	Dollars	Rank	Income	Participation	Wage	Income	Wage
Maryland	65144	1	5	12	7	9	9	15	15
New Jersey	64470	2	3	23	5	30	37	40	29
Connecticut	63422	3	2	22	2	32	10	36	45
Hawaii	61160	4	20	37	24	43	48	38	16
Massachusetts	59963	5	4	24	4	23	3	32	44
New Hampshire	59683	6	8	7	14	21	5	31	19
Alaska	59393	7	16	13	15	35	51	22	11
California	56645	8	11	35	6	11	7	12	14
Virginia	56277	9	10	20	11	10	4	7	12
Minnesota	54023	10	12	1	16	26	29	24	28
New Mexico	40629	42	45	45	38	13	30	19	8
Montana	40627	43	43	32	49	18	25	18	10
Tennessee	40315	44	35	40	27	25	28	27	36
Kentucky	39372	45	47	46	39	36	35	48	33
Louisiana	39337	46	42	49	30	47	11	14	50
Alabama	38783	47	41	48	35	24	34	30	40
Oklahoma	38770	48	38	47	42	12	30	10	23
Arkansas	36599	49	50	44	46	33	17	35	37
West Virginia	35059	50	49	51	48	49	49	49	42
Mississippi	34473	51	51	50	47	37	33	47	47

Some states' riches are due to natural resources, such as Alaska, which is blessed with oil wealth and is ranked seventh in median household income (at $59,393). Other states are raising their income through high labor-force participation, such as Minnesota, which is ranked 10^th for median household income and has the highest participation rate in the nation, estimated at 71.9% in 2006. The bottom-10 states, meanwhile, are among the lowest in per capita income, labor-force participation, and annual average wages.

The last four columns in the table show the rankings based on the compound annual growth rates over the past 10 years in personal income, annual average wages, GSP, and nonfarm employment. Looking at these historical growth rates, we see indications of a possible improvement in some of the bottom-10 states. For example, New Mexico and Montana secured high rankings in personal income growth, GSP growth, and in employment growth. These and other states with similar growth rates could increase their average household income significantly. Nevertheless, these states need to pursue policies to dramatically boost their labor-force participation rates, implement measures to induce productivity gains, and cultivate significant increases in average annual wages.

by Mohammad Iqbal

U.S. Regional Services

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