Highest Cost of Living States

The States With the Highest Cost of Living

August 4, 2013

 

Motley Fool - Few people would argue that it's easy to make ends meet with a minimum-wage job. Given that the federal minimum wage makes no allowance for different costs of living, it's been left up to states in some instances to boost the amount they make employers pay their workers. Yet even with efforts like the recent D.C. measure that would raise minimum wages to $12.50 for certain large retailers -- and was targeted specifically to include Wal-Mart (NYSE: WMT  ) while excluding other stores including Safeway (NYSE: SWY  ) -- minimum-wage earners still have trouble earning enough to cover even basic living expenses.

Researchers at the Massachusetts Institute of Technology recently created a living-wage calculator intended to show the minimum amount that families can earn in order to cover basic costs that low-income families have to bear. Using a methodology similar to the Economic Policy Institute's metropolitan living wage tool, the MIT calculator puts a new spin on affordability and regional differences across the nation. Let's look at the highest-cost states in the country for a family of four to see how well minimum-wage workers are able to make ends meet.

5. Connecticut
Families of four need to earn wages of $21.47 an hour to cover basic living expenses in Connecticut, according to the MIT calculator. Even with a minimum wage of $8.25 that's $1 above the federal minimum, families with two adults in full-time minimum-wage jobs would fall 23% short of covering basic expenses. Costs are even higher in certain parts of the state, especially those closer to New York City. Living wages in Stamford would need to be $4.25 higher to meet the difference, and beyond professional occupations, most jobs don't come close to providing enough income.

4. California
Living costs in California are even higher, at $22.15 an hour, and an $8-an-hour minimum wage leaves double-income families 28% short of covering those costs. As you can expect, city-specific costs are often much higher, with San Francisco requiring more than $3.25 in additional hourly wages to make ends meet. High-paying computer and technical jobs cover those higher costs, but supporting service workers stand little chance of earning enough to reach a living wage.

3. Maryland
In Maryland, a living wage would be $22.41 an hour, yet the federal $7.25 minimum that applies leaves a two-income family even further behind, fully 35% below basic living expenses. Areas close to Washington have even higher expenses, but even at statewide levels, few basic occupations approach what would be necessary for families to make ends meet.

2. Hawaii
At $24.10 per hour, Hawaii's living wage reflects the high costs of living off the U.S. mainland in a resort environment. The $7.25 federal minimum wage leaves two-earner families 40% short of covering that living wage, with construction workers being the only non-professional service-industry jobs that pay enough to meet cost needs. Given the difficulties among low-income families in getting affordable transportation off the islands to lower-cost locales, it's even harder for Hawaiians to deal with high living expenses.

1. District of Columbia
Topping the list is not a state at all, but the District of Columbia. D.C.'s living wage sits at $24.92 per hour, but its $8.25 minimum wage leaves it a little less repressive for double-income earners, falling short of the living-wage level by 34%. With the entire district being an urban area, housing costs are generally higher, and while wages are also at generally higher levels than you'll find elsewhere, they nevertheless make it difficult for low-income workers to cover all the expenses of living in the nation's capital.

When wages fail to keep up with costs

Interestingly, the $12.50-per-hour minimum that D.C. proposed would just barely cover its living wage for a family of four with two minimum-wage workers. But in general, even areas that already offer premiums to the federal minimum wage don't require enough additional wages to offset the higher costs of living. Still, with limited resources to finance moves to less expensive locales and with many urban areas having higher-paying jobs than less costly areas, low-income residents often have little choice but to make the best of a tough situation where they already are.