California’s better-paid workers received the nation’s largest wage bump above typical compensation.
In honor of the Labor Day weekend, my trusty spreadsheet delved into some curious federal statistics that track the pay ladder, so to speak, across the 50 states. The latest edition of the report tracks pay for key segments of the workforce in May 2024.
The figures reveal a key pay boost that enables many Californians to afford a costly lifestyle. Yet that same cash flow also inflates the price of many California goods and services – most notably, housing.
Let me explain, starting with the annual pay for the typical worker using the median wage. That’s the midpoint between what the top-paid workers earn and the half who earn less.
California ranked No. 9 among the states at $56,900. That’s 18% above the 50-state median of $48,400. That’s not very impressive pay, considering the Golden State’s expensive living.
Top pay? Massachusetts at $62,300, Washington state at $61,600, and Alaska at $59,400. Lowest? Mississippi at $39,100, Arkansas at $41,000, and West Virginia at $43,300.
Additionally, California’s economic rival, Texas, ranked No. 30 at $47,500. Another competitor, Florida, ranked No. 35 at $46,900.
The upper half
To have a shot at personal economic viability in the Golden State, your paycheck could be in the ballpark of what statisticians call the “75th percentile” – or the median of the top half of wages.
California’s 75th-percentile income of $96,300 was 29% higher than the nation’s $74,400 and ranked No. 4 among the 50 states.
Where are the biggest paychecks for this pay grade? Massachusetts at $99,900, Washington state at $99,500, and New York at $96,400. Lowest? Mississippi at $58,900, Arkansas at $60,400, and South Dakota at $62,100.
Texas ranked 23rd at $75,600. Florida was No. 28, at $73,300.
Secret sauce
Focus on the gap between the median wage and the loftier 75th percentile.
Think of this spread as the premium pay given to high-skill jobs, highly coveted industries, or top-performing workers. It’s the secret sauce to balance the cost of living for numerous Californians.
This pay bump for California workers – the gap between the median ($56,900) and the 75th percentile ($96,300) – amounts to a 69% bonus. That’s the largest among the states and easily surpassed the 54% bump across all 50 states.
Just behind California were Maryland, New York and New Jersey, all with premium pay at 65%. The smallest gaps were in South Dakota at 36%, followed by Iowa and Kentucky at 40%.
Texas ranked 10th-biggest at 59%. Florida was No. 17 at 56%.
Mixed message
You can cheer California’s premium pay as one measurement of the state’s economic opportunity.
At the same time, it serves as an example of how income inequality makes California a challenging place for many people to thrive.
Ponder how this wage gap creates pricing pressures. Think about the size of a mortgage a worker could theoretically obtain.
For example, the median-wage worker in California who’d spend 30% of their salary on a house payment with a 6.5% mortgage rate could borrow $223,000. However, a 75-percentile paycheck gets a Californian a $377,000 loan.
Yes, both wage levels fall short of what’s needed for the common home purchase. In early 2024, the median-priced single-family home in the Golden State cost $814,000, according to the California Association of Realtors. The typical condo ran $655,000.
Well, is it any surprise that the Realtors’ “affordability” math showed just 17% of all California households could qualify to buy a single-family house? And only 24% for condos?
These gaps help explain why two-income families are the norm in California – with 1.34 jobs per household, the fifth-highest among states. Housing statewide is also densely populated, with 2.95 people per household, ranking No. 4 nationally.
Additionally, the wage gap is behind the choice of many individuals to live in inland areas or outside major job hubs. That’s where the cost of living, especially housing, can be slightly less stressful.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com