Some of the most expensive major cities in the US — like San Francisco and Washington — also offer the best living standards for mid- and lower-income households, according to a new study of metro areas by the Ludwig Institute for Shared Economic Prosperity.
Higher prices in those places are more than offset by the higher wages on offer, according to the institute’s analysis, which ranks the 50 biggest US metro areas based on the economic well-being of middle- and working-class residents. San Jose in California comes out on top.
The gauge is based on metrics that include the costs of basic goods and services — and how much they’ve gone up over the past two decades — as well as wages and broad measures of employment. One key finding is that the best-performing cities typically have a more equal mix of jobs across the pay spectrum.
“Across the nation we are seeing both ends of the spectrum — communities where middle- and working-class families are faring well and others where financial survival remains a struggle,” said Gene Ludwig, head of the institute and a former US comptroller of the currency.
The report tracks price changes for essential items like housing, food, and childcare, and compares that with the median weekly incomes of all members of the workforce — including those in part-time employment, who are excluded from many wage measures, or seeking work.
‘Falling Behind’
Overall, 60% of Americans struggle to meet basic needs, according to the report. That likely reflects sharp increases in the price of necessities, especially housing, during the inflationary wave of the pandemic period.
An analysis by the US Senate Joint Economic Committee found it costs about $11,400 a year more on average for a US family in October 2023 to maintain the same standard of living that they had in January 2021.
But in places like San Jose and San Francisco, two of the most expensive metro areas, higher wages have buffered against those rising costs. One measure the Ludwig researchers looked at is how much cash a median earner has left over after purchasing necessities each month.
“A lot of cities are actually negative with that,” said Philip Cornell, a member of the research team. “If you’re a median earner in Los Angeles and you’re just trying to meet your basic needs, you’re falling behind. Whereas in San Jose, the median earner is doing better.”
The San Jose area ranked first among 50 metros in leftover income, and fourth in the change in spending power for the city’s residents compared with 2005. On that measure, Seattle was one of the worst performers, showing that living standards there aren’t keeping up with prices.
New York City is among the large metro areas where middle- and working-class families are faring worst, according to the Ludwig gauge. Other high-cost cities like Los Angeles also came out near the bottom of the rankings.
One thing that many of the worst-ranked cities have in common is a unusually high share of low-paying jobs.
In Las Vegas, almost two-thirds of workers are in low-wage occupations and in Miami the figure is 56%, according to the report. By comparison, the typical national figure is around 35%, and some of the best-performing cities on Ludwig’s ranking — like Austin and Baltimore — have a lower reading than that.