The best states for the middle class

The Middle Class Is Shrinking — but Not Everywhere
The Middle Class Is Shrinking — but Not Everywhere

The middle class is shrinking. According to a 2015 analysis by Pew Research, for the first time in recent history less than half of American households are part of the middle class, with greater numbers of households moving into the upper and lower classes.

Likewise, while middle-income Americans used to earn more than 60% of total U.S. income, today their combined paychecks add up to just 43% of the whole pie.

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In some parts of the country, however, the middle class has not been shrinking so rapidly, if at all. Indeed, in 18 states, the number of middle-class jobs has increased by more than 10% since the year 2000. On the other hand, in 14 states, the total number of such jobs has actually declined over the past 15 years.

Methodology

To find the best states for middle-class families and workers, SmartAsset collected data on income, jobs, taxes and housing costs across all 50 states. We looked at the following eight metrics to gauge the size, strength and financial prospects of the middle class in each state:

  • Percentage of households in the middle class. The percentage of households with a household income between $35,000 and $100,000 per year, approximately 2/3rds to two times the median U.S. income of $53,482.

  • Percentage of households that are low income. This is the percentage of households with total household income of less than $35,000.

  • Total middle class job growth. The total increase in employment from 2000 to 2014 in jobs that earn a median annual income between $30,000 and $70,000 in 2014 dollars.

  • Percentage middle class job growth. Using the same definition, the increase in middle class jobs as a percentage of the total number of middle class jobs in 2000.

  • Tax fairness. A measure calculated by the Institute on Taxation and Economic Policy that compares the tax burden (including all types of taxes) of the middle 60% of earners to the top 1%.

  • Effective income tax rate. The effective state income tax rate for a four-person household earning the U.S. median household income of $53,482. Calculated using SmartAsset's income tax calculator.

  • Average effective property tax rate. The median annual property tax paid by homeowners as a percentage of median home value.

  • Median home value.

We ranked all 50 states according to those eight metrics. We then averaged those rankings, giving double weight to the percentage of households in the middle class, the median home value and tax fairness, and single weight to all other metrics. Finally, we applied an index score from 0 to 100 according to those average rankings.

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Key Findings

  • Best for middle class? Upper Midwest. Nebraska, Iowa, Minnesota and North Dakota all rank among the top six states for the middle class. The middle class in these states is larger than in most other states.

  • The Northeast is losing middle class jobs. Northeastern states account for five of the bottom eight states in our analysis. These states have all lost middle class jobs since the year 2000.

middle class 2 map The Best States for the Middle Class
middle class 2 map The Best States for the Middle Class
middle class 1 table update The Best States for the Middle Class
middle class 1 table update The Best States for the Middle Class

Sources

Data on the percentage of households earning between $35,000 and $100,000 per year comes from the U.S. Census Bureau's American Communities Survey for 2014, as does data on the percentage of households earning less than $35,000. Data on average effective property tax rates and median home values also comes from that survey. Data on the growth in jobs that earn between $30,000 and $70,000 comes from the Bureau of Labor Statistics occupational employment statistics for the years 2000 and 2014.

The average effective income tax rate for middle class taxpayers was calculated using SmartAsset's income tax calculator, which was built using data from federal, state and local tax forms. Data on the fairness of state tax systems comes from the Institute on Taxation and Economic Policy.

Questions about our study? Contact us at blog@smartasset.com.

The post The Best States for the Middle Class appeared first on SmartAsset Blog.

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