Where do Americans earn the highest effective incomes—that is, the highest incomes once you adjust for the local cost of living? Joel Kotkin and Mark Schill ran the numbers, and this is what they found:
In first place is Houston, where the average annual wage in 2011 was $59,838, eighth highest in the nation. What puts Houston at the top of the list is the region's relatively low cost of living, which includes such things as consumer prices and services, utilities and transportation costs and, most importantly, housing prices: The ratio of the median home price to median annual household income in Houston is only 2.9, remarkably low for such a dynamic urban region; in San Francisco a house goes for 6.7 times the median local household income….
Most of the rest of the top 10 are relatively buoyant economies with relatively low costs of living. These include Dallas-Fort Worth (fifth), Charlotte, N.C. (sixth), Cincinnati (seventh), Austin, Texas (eighth), and Columbus, Ohio (10th). These areas all also have housing affordability rates below 3.0 except for Austin, which clocks in at 3.5. Similar situations down the list include such mid-sized cities as Nashville, (11th), St.Louis (12th), Pittsburgh, (13th), Denver (15th) and New Orleans (16th).
One major surprise is the metro area in third place: Detroit-Warren-Livonia, Mich. This can be explained by the relatively high wages paid in the resurgent auto industry and, as we have reported earlier, a huge surge in well-paying STEM (science, technology, engineering and math-related) jobs. Combine this with some of the most affordable housing in the nation and sizable reductions in unemployment—down 5% in Michigan over the past two years, the largest such drop in the nation. This longtime sad sack region has reason to feel hopeful.
The only expensive areas where incomes were high enough to overcome the steep prices and vault the cities into the top 10 were Silicon Valley (in second place) and Seattle (in ninth). Boston came in 32nd, San Francisco landed at 39th, New York finished 41st, and Los Angeles is 46th.
