Where Wages Are Lowest and Highest in America

Workers are feeling the pinch the most in the South and in areas highly dependent on the tourism industry. View data for nearly 200 metro areas.
by | March 13, 2015

Inflation-adjusted wages for the typical American worker haven’t changed much over the past several decades. Just how much workers are feeling the pinch from low wages, though, depends in large part on where they live.

Average wages can vary greatly from region to region, and adjusting for the cost of living provides an approximation of how far workers need to stretch their paychecks. Governing compiled federal earnings data for private-sector workers, adjusting for the cost of living using an index published by the Council for Community and Economic Research. The resulting cost-of-living adjusted wages show wide variation across regions, ranging from an average of more than $28 per hour in the Austin, Texas, and Durham-Chapel Hill, N.C., metro areas to less than $17 an hour in other parts of the South.

Many areas with the lowest estimated wages are found along the coasts, particularly in economies tied to tourism. Areas of the South with few higher-paying jobs are also characterized by similarly low cost-of-living adjusted wages. Some of the main drivers pushing wages up or down include regional industry concentration, education levels and housing costs.

The following is a summary of key points from the data:

Low wages are prevalent in the Sun Belt

Workers in the southern United States have historically earned lower wages than the rest of the country, a fact some argue is merely a result of lower living expenses. But even after adjusting for the costs of living, average earnings in most southern metro areas lag behind the rest of the country.

Parts of the Sun Belt are saddled with higher housing costs, as is the case in Florida. High poverty and few employers paying high wages plague other regions, like the McAllen-Edinburg-Mission, Texas, metro area.

Of the 20 metro areas with the lowest estimated wages adjusted for cost of living, all are located in the southern U.S. except for Honolulu and New York. While there are exceptions, this low-wage segment of the country stretches from the Atlantic coast all the way to southern California. 

As a whole, cost-of-living adjusted earnings in 69 southeastern metro areas averaged $21.84 an hour, compared with $22.70 for the 122 other areas reviewed. The Pacific region actually recorded the lowest average adjusted earnings, mostly as a result of few metro areas with available data and notably low wages in Honolulu and southern California.

By contrast, adjusted wages were significantly higher throughout much of the Midwest. Workers in the Des Moines-West Des Moines, Iowa, metro area earned an average of $27.54 an hour after adjusting for cost of living, while those in Indianapolis-Carmel, Ind., earned an average of $27.35 an hour.

Region Average Adjusted MSA Hourly Earnings Number of MSAs
Pacific* $21.52 17
Southeast $21.84 69
Northeast $22.07 15
Southwest $22.08 32
West $22.99 10
Midwest $23.68 48
U.S. Total $22.39 191
*Pacific average would be $21.95 if Honolulu were excluded.

SOURCE: Governing calculations of Labor Department, Council for Community and Economic Research data

A region's wages depend to a large degree on the mix of industries and the availability of qualified workers. Regional economies in parts of the South are hinged more to slow-growing industries supporting fewer high-skill occupations that pay well, such as nondurable goods manufacturing.

The Center on Education and the Workforce at Georgetown University has identified a growing gap between the South and the rest of the country in jobs requiring a post-secondary education. The group projects that 65 percent of all U.S. jobs will need some form of post-secondary education and training by 2020; Maryland, North Carolina and Virginia are the only southern states expected to exceed national levels.

Much of the South, according to the center, finds itself stuck in a “low-wage, low-skill equilibrium.” Less demand for higher-skilled jobs translates into fewer workers seeking to pursue further training and education. Areas that do have more young college-educated workers risk a brain drain without an ample supply of good jobs.

“You really need to have this sweet spot where education and industry coexist,” said Nicole Smith, a senior economist at the center.

Today’s manufacturing jobs require an advanced set of skills favoring workers with bachelor’s degrees, and it’s these people who are seeing wage increases, Smith said.

As expected, workers are generally earning higher adjusted wages in metro areas with above-average educational attainment. The pay gap is particularly evident for those metros with the highest and lowest shares of adults with college degrees.

Share of Adults with Bachelor's Degrees Number of MSAs 2014 Average MSA Hourly Earnings
20% or less 30 $21.08
20.1 to 30% 96 $22.22
30.1 to 40% 52 $23.08
Greater than 40% 13 $23.98
SOURCE: Governing calculations of Labor Department, 2010-13 American Community Survey data

The scarcity of organized labor in the southern U.S. further explains low wages. Unions represent less than 10 percent of workers throughout most of the South, and less than 5 percent in Arkansas, Mississippi, North Carolina and South Carolina. Part of the wage disparity also has to do with the absence of state minimum wage laws, as Florida and Arkansas are the only southern states with minimum wages above the federal minimum.

The tourism industry drags down wages

In no metro area are adjusted private-sector wages lower than Flagstaff, Ariz. After adjusting for cost of living, workers there earned an average of just $14.31 an hour last year.

Flagstaff’s economy is typical of other tourism-intensive regions. A large number of low-paying jobs pull down overall average wages. At the same time, the region’s housing market remains tight, with among the priciest real estate in the state.

It comes as no surprise, then, that many regions with the lowest wages rely heavily on tourism. In these areas, workers may forego higher wages in favor of regional amenities aligning with lifestyle preferences.

In Flagstaff, those willing to pay the higher cost of living have access to the region’s numerous outdoor activities and transportation costs lower than most large urban centers.

“People make conscious decisions to stay here when they look at the income versus the overall cost of living,” said Richard Bowen, president of the Economic Collaborative of Northern Arizona. “Because of the high quality of life, people make adjustments to live here.”

[click_to_tweet]Of the 20 metro areas with the lowest wages, all are located in the southern U.S. except for Honolulu and New York.[/click_to_tweet]

Cost of living, of course, can also vary greatly within a metro area. The Council for Community and Economic Research's coverage areas used for the cost-of-living data don't all correspond perfectly with metro area boundaries used by the Labor Department, so the average adjusted wages represent approximations. Metro areas with missing or significantly different cost-of-living data were excluded.

In Flagstaff, some lower middle class workers employed in sectors like manufacturing, construction and retail jobs couldn’t afford to live in the area during the recession, opting instead to move out. Over the past two years, though, this segment of the region’s workforce has started to rebound, Bowen said.

Flagstaff’s top employers include Northern Arizona University, a local medical center and medical products manufacturer W.L Gore & Associates. Still, a large number of tourism-supported jobs pay at or near the minimum wage. Many of these belong to high school or college students, for whom the cost of living isn’t as much of an issue as it is for families, Bowen said.

Here’s an illustration of just how far leisure and hospitality earnings trail other industries:

John Schmitt, senior labor economist for the Center for Economic and Policy Research, said that the labor market has yet to tighten up enough for workers on the lower end of the payscale to earn more. Parts of the South and tourism regions, he noted, also cater to retirees, creating demand for assisted living and other services that generally don’t pay well, either.

Areas with the highest earnings

Areas where workers’ earnings go the farthest enjoy two distinct advantages: An abundance of high-paying, high-skill jobs and costs of living that remain below national averages.

Durham-Chapel Hill, N.C., metro area private-sector employees earned an average of $29.92 an hour in 2014 after adjusting for cost of living – the highest of any reviewed. The next highest-paying region was Austin-Round Rock-San Marcos, Texas, where workers earned an adjusted hourly wage of $28.80.

Both metro areas benefit from strong high-tech sectors. They’re also home to large universities and below-average overall costs of living.

For the most part, industries faring well in the recovery prop up the highest paying regions. One metro area some might be surprised to see higher on the list is Detroit, with an average hourly wage of $26.92.

While hourly wages haven’t yet accelerated nationally, recent signs may give workers reason for hope.

Some employers are opting to raise base wages on their own. Aetna, Starbucks, Walmart and several large retailers all announced pay hikes in recent months. The job market also appears to be tightening, with the unemployment rate dropping to 5.5 percent last month. Economists expect an increase in wages to coincide with declining unemployment, but it’s difficult to say when this will happen and how many workers have yet to re-enter the labor market.

Lower consumer prices, mostly resulting from low gasoline costs, have also helped boost Americans' spending power.

Metro areas with the lowest adjusted wages

The following 50 metro areas recorded the lowest cost-of-living adjusted wages of the 191 reviewed:

SOURCE: Governing calculations of Labor Department, Council for Community and Economic Research data

Metro Area Map

Open an interactive map with wages for all 191 metro areas with available data.

Data Notes

  • Metro area wages were compiled from Labor Department data on average hourly earnings for all private sector employees. A calculated 12-month average included preliminary estimates for December 2014.
  • Wages were adjusted for cost of living using the 2014 Q3 “Cost of Living Index” published by the Council for Community and Economic Research. The composite index compares costs of living relative to all participating areas, considering expenses for housing, groceries, health care, transportation, utilities and miscellaneous goods and services. 
  • One limitation of this adjustment is that cost of living varies within metro areas. The Council for Community and Economic Research's coverage areas used for the cost-of-living data don't all correspond perfectly with metro area boundaries used by the Labor Department. The urban area(s) used for the cost of living adjustment is listed in the map info window.
  • A total of 191 metro areas had available BLS and corresponding Cost of Living Index data.
  • Definitions used for regions: Midwest: IL, IN, IA, KS, MI, MN, MO, NE, ND, OH, SD, WI; Northeast: CT, ME, MA, NH, NY, PA, RI, VT; Pacific: AK, CA, HI, OR, WA; Southeast: AL, AR, DE, DC, FL, GA, KY, LA, MD, MS, NC, SC, TN, VA, WV; Southwest: AZ, NM, OK, TX; West: CO, ID, MT, NV, UT, WY.