Which States Have the Lowest Average Income?

Some people are lucky enough to have a job that’s not tied to a location, but many move across state borders in hopes of finding more rewarding opportunities. Other wage earners relocate to be nearer family or friends, for school, or just for a welcome change. Regardless of the reason, the decision to settle down somewhere new can affect your financial prospects.

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Using data supplied by the University of New Mexico’s Bureau of Business and Economic Research, we zeroed in on the 10 states with the lowest average per capita income in 2012. We then searched for additional data that would provide useful context. (Try this comparison calculator to get an idea of the cost of living in select metropolitan areas.)

Unemployment rates by state for 2012, courtesy of the federal Bureau of Labor Statistics, are indicative of the health of the local labor market. The estimated annual cost of owning a car, with figures supplied by Bankrate that include relevant taxes, fees, repairs costs, and gasoline prices for 2012 and average insurance rates for the 2006-2010 period, suggests how far a dollar will go in a given state. For tax rates we turned to the Tax Foundation, which reports the combined burden of state and local levies in 2010.

The 10 states listed below are rank ordered, starting with the lowest average per capita 2012 income. The average 2012 unemployment rate, the estimated annual cost of owning a car, and the combined state and local tax burden are also noted, each followed by a number in parentheses indicating the state’s relative position among the 50 states, from highest to lowest.

Per Capita Income: $33,073
Average Unemployment Rate: 9.2 percent (6)
Annual Cost to Own a Car: $3,428 (15)
Percentage of Income Paid to State and Local Governments: 8.69 percent (37)

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Average per capita annual income in Mississippi was the lowest in the U.S. and the unemployment rate was among the highest in 2012, as was the estimated cost of car ownership. The tax burden, though, consigned the state to just above the bottom quarter.

Per Capita Income: $33,749
Average Unemployment Rate: 7.1 percent (27)
Annual Cost to Own a Car: $2,792 (42)
Percentage of Income Paid to State and Local Governments: 9.37 percent (25)

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There’s more to Idaho than potatoes. In fact, there are beautiful areas to explore and it’s easy to do so considering the relatively low cost of owning a car. Average per capita income, though, put the state second to last.

Per Capita Income: $34,266
Average Unemployment Rate: 9.1 percent (7)
Annual Cost to Own a Car: $3,219 (26)
Percentage of Income Paid to State and Local Governments: 8.37 percent (41)

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South Carolina had one of the highest average unemployment rates in 2012 as well as the third lowest average per capita income. The cost of owning a car was a few dollars off the national average while the local tax burden was comparatively low.

Per Capita Income: $34,477
Average Unemployment Rate: 7.3 percent (22)
Annual Cost to Own a Car: $3,293 (21)
Percentage of Income Paid to State and Local Governments: 9.71 percent (19)
Residents of West Virginia enjoy some of the cheapest energy costs in the country due to the state’s abundance of natural resources. Still, the state ranked very low on average per capita income but better than more than half the states on unemployment, tax burden, and the cost of car ownership.

Per Capita Income: $34,601
Average Unemployment Rate: 5.7 percent (40)
Annual Cost to Own a Car: $3,101 (30)
Percentage of Income Paid to State and Local Governments: 9.29 percent (29)
Joblessness was not a big problem for Utah residents in 2012 (the unemployment rate never topped 6%) and the state and local tax burden was below the national average. The state’s average per capita income, though, was the fifth lowest in the country.

Per Capita Income: $34,266
Average Unemployment Rate: 7.3 percent (22)
Annual Cost to Own a Car: $3,321 (19)
Percentage of Income Paid to State and Local Governments: 10.03 percent (15)

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Arkansas considers itself “The Nature State” but the annual cost of owning a car -- useful for enjoying the surroundings -- placed it almost in the top third while average per capita income sent it to the bottom 12 percent. The unemployment rate, though, sat well below the national average.

Per Capita Income: $35,041
Average Unemployment Rate: 8.2 percent (17)
Annual Cost to Own a Car: $3,626 (7)
Percentage of Income Paid to State and Local Governments: 9.36 percent (26)
Kentucky is known for bluegrass, bourbon, fried chicken, and horse racing. The average unemployment rate during 2012 was among the top third in the country and average per capita income placed it among the bottom fifth. Local taxes were about average but it was costly to own a car.

Per Capita Income: $35,079
Average Unemployment Rate: 6.9 percent (30)
Annual Cost to Own a Car: $3,186 (28)
Percentage of Income Paid to State and Local Governments: 8.44 percent (39)
Home of Smokey the Bear, and perhaps a few extraterrestrials, New Mexico’s unique landscape draws the eye of many. The Santa Fe region is quite affluent but there is a lot of poverty in the state. The jobless rate was well below that of most states, however, as were the cost of car ownership and the local tax burden. 

Per Capita Income: $35,625
Average Unemployment Rate: 7.3 percent (22)
Annual Cost to Own a Car: $2,965 (34)
Percentage of Income Paid to State and Local Governments: 8.18 percent (43)
The heart of the south, Alabama offers visitors lovely beaches and a rich history. Average per capita income was fairly low in 2012, but so too was the tax burden and the cost of owning a car; joblessness was below the U.S. average.

Per Capita Income: $35,979
Average Unemployment Rate: 8.3 percent (16)
Annual Cost to Own a Car: $3,886 (6)
Percentage of Income Paid to State and Local Governments: 8.42 percent (40)

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Arizona residents are hit hard on a several fronts. The cost of car ownership planted the state near the top of the list, and the unemployment rate was higher than average. State and local taxes were relatively low, but so was average per capita income.