Historically, the middle class has been the largest economic group in the U.S. and currently remains so. However, it is an economic group whose numbers have steadily declined year-over-year. More families are renting than buying homes in recent years and the number of families considered cost-burdened (paying more than 30% of their income for housing) has steadily increased – up to approximately 27% of the middle class in 2018. However, some states are better than others for middle class residents and we set out to uncover them.
In this study, we compared all 50 states and the District of Columbia across seven metrics. Specifically, we looked at the percentage of households in the middle class, median household income adjusted for cost of living, median home value, homeownership rate and the Gini index. We also considered four-year changes in both median household income and middle-class job growth. For details on our data sources and how we put all the information together to create our final rankings, read the Data and Methodology section below.
This is SmartAsset’s third study on the best states for the middle class. Check out the previous version here.
Key Findings
- Utah and Idaho remain first and second, respectively. Utah remains the state with the highest percentage of middle-class households and second-most equitable income distribution. Idaho also ranks well for its more equitable income distribution, along with its homeownership rate, four-year change in median household income and increase of middle-class jobs.
- Middle-class jobs are growing in most parts of the country. Nationally, jobs with average earnings between $30,000 and $70,000 increased by 19.29% from 2017 to 2021. These jobs grew in 47 states, with Arizona seeing the largest increase over the same time period (47.68%). Four places, however, have seen a decrease in these jobs, namely the District of Columbia (-14.41%), North Dakota (-7.16%), Vermont (-1.58%) and Washington (-0.85%).
1. Utah
Across all 50 states and the District of Columbia, Utah has the highest concentration of middle-class households (46.62%), defined in our study as households with an annual income between $60,000 and $149,999. Additionally, Utah’s Gini index – a measure of income inequality, where 0 indicates perfect equality and 1 indicates perfect inequality – is the second-lowest nationwide, at 0.42.
Utah ranks third-best for its median household income adjusted for cost of living, at about $81,500. In addition, from 2017 to 2021, the number of jobs earning an average salary of $30,000 to $70,000 increased by more than 33% (ranking third-best).
2. Idaho
Idaho shows consistency over time, remaining second-best overall in our study. From 2016 to 2020, the median household income in Idaho increased by 21.17%, the fifth-best rate overall. Additionally, the number of jobs earning a middle-class income ($30,000 to $70,000) increased by 31.20% which also ranks fifth-best in our study. The state's income distribution - measured by the Gini index - ties for third-best with an index of 0.44.
3. New Hampshire
Jumping three ranks from the No. 6 spot in 2020, New Hampshire also ranks in the top 10 states for four of seven metrics analyzed. These metrics include the percentage of middle-class households (44.10%), Gini index (0.44), homeownership rate (73.25%) and median household income adjusted for cost of living ($77,966).
New Hampshire falls farthest behind when it comes to median home value. Census Bureau data shows that the state's median home value is $297,800, the 15th-highest in our study.
4. Minnesota
The Land of 10,000 Lakes ranks fourth-best for its homeownership rate (73.88%), with a median home value of $263,300. Of all the households in the state, our estimates show that 43.10% of them belong to the middle class (ranking fifth-best).
Since 2016, the median household income has increased by 15.13% and when adjusted for the cost of living, the income value is $76,561,10th-best in our study. When measuring income inequality, Minnesota ties for the 11th-best Gini index of 0.45.
5. Colorado
Colorado ranks second-best its four-year increase middle-class jobs (39.08%) and eighth-best for its four-year change in the median household income (18.25%). After adjusting for cost of living, the median household income in Colorado is $75,447 (which ranks 12th-best). Additionally, 41.78% of households in this state are in the middle class (ranking 10th-best).
Colorado falls behind for our two housing-related metrics, with the homeownership rate (66.79%) ranking only 36th-best and the median home value ($415,700) ranking sixth-highest.
6. South Dakota
South Dakota ranks as the sixth-best state for the middle class, ranking in the top 15 states for three metrics. It has the 15th-highest homeownership rate (40.69%), sixth-best Gini index (0.44) and fourth-largest four-year increase in middle-class jobs (33.20%). For middle-class individuals looking to put down roots, homes in South Dakota are also relatively affordable. The median home value is 16th-lowest, at $188,900.
7. Iowa (Tie)
Across the seven metrics we considered, Iowa ranks particularly well for housing-related measures. It has the eighth-lowest median home value ($164,000) and ninth-highest homeownership rate (72.46%). Additionally, Iowa ties for the third-lowest Gini index in our study, at 0.44. The median household income adjusted for cost of living is $67,779, 24th-highest in our study.
7. Michigan (Tie)
In Michigan, more than 73% of households own their home, a top 10 rate in our study. The median home value is $179,500, or 13th-lowest across all 50 states and the District of Columbia. We estimate that almost 39% of households in Michigan are middle class, the 27th-highest rate. Finally, the number of middle-class jobs increased by 20.27% (ranking 13th-best) from 2017 to 2021.
9. Vermont
Vermont moves up this year, ranking 20th-best overall in the previous version of this study. This Northeastern state ranks eighth-best for two metrics: percentage of households in the middle class (42.03%) and homeownership rate (72.62%).
Between 2016 and 2020, the median household income in Vermont increased by 16.91% (which ranks 16th-best overall). However, as previously noted, the number of middle-class jobs has actually decreased by almost 2% from 2017 to 2021.
10. Indiana
Indiana rounds out our list of the top 10 states for the middle class jumping eight spots from No. 18 in our previous study edition. The median home value is $163,500 (seventh-lowest) and 40.14% of households are in the middle class (ranking 20th-best). The homeownership rate is 12th-highest, at 71.39%.
Indiana falls farthest behind when it comes to median household adjusted for cost of living. We found that the adjusted figure is $65,373, the 18th-lowest across all 50 states and the District of Columbia.
Data and Methodology
To find the best states for the middle class, SmartAsset looked at data for all 50 states and the District of Columbia. We compared them across seven metrics:
- Percentage of households in the middle class. This is the percentage of households with an annual income between $60,000 and $149,999. Data comes from the Census Bureau’s 1-year 2020 American Community Survey.
- Median home value. Data comes from the Census Bureau’s 1-year 2020 American Community Survey.
- Homeownership rate. This is the number of owner-occupied housing units divided by total occupied housing units. Data comes from the Census Bureau’s 1-year 2020 American Community Survey.
- Four-year change in median household income. This is the percentage change in median household incomes from 2016 to 2020. Data comes from the Census Bureau’s 1-year 2016 and 2020 American Community Surveys.
- Gini index. This is a statistical measure of income inequality. An index of 0 indicates perfect equality, and an index of 1 indicates perfect inequality. Data comes from the Census Bureau’s 5-year 2020 American Community Survey.
- Median household income adjusted for cost of living. Household income figures come from the Census Bureau’s 1-year 2020 American Community Survey and cost of living data is from the Bureau of Economic Analysis.
- Four-year middle-class job growth. This is the increase in employment for jobs with average earnings between $30,000 and $70,000. Data comes from the Bureau of Labor Statistics and is for 2017 and 2021.
We ranked each state in every metric, giving a full weight to all metrics. Using those rankings, we found each state’s average ranking and used the average to determine a final score. The state with the highest average ranking received a score of 100, ranking as the best state for the middle class. The state with the lowest average ranking received a score of 0, ranking as the worst state for the middle class.
Tips for Improving Your Financial Security
- Manage your budget. “Middle class people should try to budget their expenses the same way someone below the poverty line would. See how much you are going to need for entertainment, food, clothing, and savings each month,” said Shawn Laib, a personal finance expert with InsuranceProviders.com. With our free resources, you can learn about the 50/30/20 budget method and use our budget calculator to better understand your current spending and how you can maximize your savings.
- Hire an expert. “So in practical terms, what can someone who does find themselves with reliable income, upward mobility, a car and the ability to start a family do? If they don't have a retirement plan that is focused on long term investing, they must meet with a financial advisor ASAP,” said Gates Little, President of altLINE Sobanco. To get connect with an advisor today, use SmartAsset’s free tool, which matches you with experts in as little as five minutes.
Questions about our study? Contact press@smartasset.com.
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