10 Cities With the Highest and Lowest Real Incomes

Des Moines residents are earning big and spending little. In McAllen, Texas, it's a different story.

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Beverly Hills, Manhattan, Silicon Valley ...Des Moines?

Other places may be famous for their wealthy celebrities, business tycoons, and tech entrepreneurs, but Des Moines, Iowa, is--at least by one measure--the richest metropolitan area in America. According to a U.S. News analysis of data for large U.S. metropolitan areas (pop. 500,000 or larger), the Hawkeye State capital has the highest median income in the nation relative to the cost of living. It is followed closely by the metro areas of Washington, D.C.; Worcester, Mass.; Houston; and Ogden, Utah. On the other end of the spectrum are the metro areas surrounding McAllen, Texas; New York City; and Fresno, Calif. [See a slide show of the cities with the lowest real incomes and cities with the highest real incomes.]

The adjusted incomes were computed using median household incomes and the cost of living index, or COLI, as measured by the Council for Community Economic Research, an organization that works to improve data availability and quality in community and economic research. The index takes into account prices on a variety of basic goods and services, including groceries, housing, utilities, healthcare, and transportation, as well as common expenses like movie tickets and newspapers. A city with a COLI of 100.0 has spending levels on those items roughly equivalent to the national average, as calculated by the Bureau of Labor Statistics. A city with a high COLI, then, has high prices for things like housing and food, and a low COLI likewise denotes a relatively inexpensive city. These disparate costs of living can mean that a salary in one city has a far different value than the same amount of money in another city. In other words, a worker making roughly $63,000 in expensive New York City has an adjusted income of around $35,000, whereas a worker earning $63,000 in the more affordable Worcester, Mass., has an adjusted income of nearly twice that--just over $61,000.

Below are the 10 metropolitan areas with the highest adjusted median household incomes, as computed from 2009 median household income and cost of living data.

Metro Area COLI 2009 Median Household Income 2009 Adjusted Median Income 
Des Moines, Iowa 90.6 $56,576 $62,446
Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va. 138.6 85,168 61,449
Worcester, Mass. 103.7 63,360 61,099
Houston-Sugar Land-Baytown, Texas 89.3 54,146 60,634
Ogden-Clearfield, Utah* 100 60,208 60,208
Colorado Springs, Colo. 92.3 55,176 59,779
Dallas-Plano-Irving, Texas 92.1 54,539 59,217
Madison, Wisc.* 96.2 56,709 58,949
Atlanta-Sandy Springs-Marietta, Ga. 94.2 55,464 58,879
Raleigh-Cary, N.C. 101.3 59,316 58,555

Below are the 10 metropolitan areas with the lowest adjusted median household incomes.

Metro Area COLI 2009 Median Household Income 2009 Adjusted Median Income 
McAllen-Edinburg-Mission, Texas 87.2 30,460 34,931
New York-White Plains-Wayne, N.Y.-N.J. 177.8 62,887 35,370
Modesto, Calif.* 136.6 48,716 35,663
Fresno, Calif. 120.1 45,661 38,019
El Paso, Texas 89.7 36,146 40,297
Honolulu, Hawaii 166.3 67,744 40,736
Springfield, Mass.* 119.8 49,177 41,049
Los Angeles-Long Beach-Glendale, Calif. 141.6 58,525 41,331
Miami-Miami Beach-Kendall, Fla. 109.8 45,946 41,845
Scranton--Wilkes-Barre, Pa.* 98.1 41,823 42,633

According to Dean Frutiger, project manager for the Cost of LIving Index at the Council for Community and Economic Research, there are some regional patterns to the cost of living. "Generally speaking, the top 10 least expensive cities"--that is, those with the lowest COLIs--"are in Texas, and the top 10 most expensive are in the New York area or California," says Frutiger. Indeed, San Francisco, San Jose, Santa Ana, and three New York City boroughs are among the 10 cities with the highest costs of living for 2009.

The question, then, is whether wages in those cities are keeping pace. Washington, D.C., has one of the highest costs of living in the country, but its median wage of $85,168 more than compensates for those expenses. Conversely, places like McAllen and El Paso, Texas, have costs of living below the national average, but also suffer from low incomes.

Residents of some of the cities with the highest incomes also enjoy other economic benefits. Des Moines, Washington, D.C., and Madison, for example, weathered the recession relatively well, with unemployment rates of 6.1 percent or lower in recent months. Meanwhile, California and Florida, which account for 4 of the 10 cities with the lowest adjusted incomes, also have some of the toughest housing markets in the country, with home prices plummeting and a large inventory of foreclosed homes. Of course, the economic picture is neither uniformly bleak nor rosy in many cities. Honolulu, for example, has a low unemployment rate of 4.6 percent, and New York's 7.7 percent unemployment rate is also well below the national average of 9.0 percent.

Housing is the largest component of a city's COLI, accounting for roughly 30 percent of a city's composite score. According to Nathaniel Baum-Snow, Stephen Robert Professor of Economics at Brown University, housing prices can vary widely from city to city due to simple supply and demand. He uses New York City as an example of a place where it's difficult to increase the supply of housing. "There's a lot of regulation on new construction [in New York City] that makes it costly to build new housing," says Baum-Snow. He also points out that land can come at a greater premium in some places than others: "It's always more expensive to repurpose land than to build on virgin land that was just a cornfield before," he says. In other words, increasing the supply of housing in a dense metro area like New York City or Los Angeles is more difficult than building new housing around Ogden, Utah, or Des Moines.

Baum-Snow also adds that places like New York City and Honolulu have high costs of living in part because people are willing to pay top-dollar to live there for non-economic reasons, like the excitement of the Big Apple or the gorgeous weather.

It is important to note that COLI figures have limitations. The COLI is not a precise arithmetical figure; that is, a city with an index of 120 may not have prices that are exactly 20 percent higher than those in a city with a COLI of 100. Likewise, median household income figures are estimates. Therefore, the resultant adjusted median income figures are also approximations. For example, the adjusted median income of $58,555 in the Raleigh-Cary, N.C., is $14 higher than that in the Omaha, Neb., metro area, but that difference is negligible.


Methodology: The above rankings include metropolitan areas with populations of 500,000 or greater, according to the U.S. Census Bureau's 2009 American Community Survey. Median household income figures also reflect the 2009 American Community Survey. COLI data is from the Council for Community and Economic Research's 2009 ACCRA Cost of Living Index. For any given multiple-city metro area, the COLI for the largest city was used. For example, for the Atlanta-Sandy Springs-Marietta metro area in Georgia, the COLI for Atlanta was used. ACCRA Section 1 COLI data was used whenever possible. For metropolitan areas not listed in Section 1, Section 2 data was used. For metro areas not listed in either section, the COLI figure from the nearest available metropolitan area was used. For example, Ogden-Clearfield, Utah, was reflected in neither ACCRA's Section 1 nor Section 2 listings. Therefore, the cost of living index for Salt Lake City, Utah, was used to adjust nearby Ogden's median income. Those cities for which a nearby COLI was used are marked in the above lists with an asterisk. To adjust incomes, the median income figure from the Census Bureau was divided by the COLI figure, then multiplied by 100.