The best and worst places to live if you only care about money

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Charleston, S.C., has one of the highest material standards of living in the U.S. for college graduates. / Getty Images

Natchez, Miss., is a town of about 15,000 people nestled on the Mississippi River. It's pretty enough to be a popular wedding destination. It's racially diverse. It's got a college campus, multiple art galleries, good steakhouses and Southern eateries, a brewery and a decent nightlife. Natchez's tourism agency says the town offers "a taste of true southern hospitality" and "a visit to Natchez feels like coming home."

But Natchez may hold even more appeal for the roughly 60% of American adults who have not graduated from college. A fascinating new study by Stanford University economist Rebecca Diamond and University of California, Berkeley economist Enrico Moretti finds that Natchez and its surrounding area offer one of the highest standards of living in the U.S. for workers without college degrees.

The conventional wisdom has long been that most workers — no matter their education or skills — should move to big metropolitan areas with lucrative, globally competitive industries, where they can get in on the action and climb the economic ladder. It's true that big cities offer every class of worker a bigger paycheck, whether they're populating spreadsheets at an office or flipping burgers at McDonald's. But there is, of course, another side to the equation: cost of living. Whether a place offers a good financial deal is like an arm-wrestling match between the income you can earn there and its cost of living.

"What we didn't know before our project is, where did you get the most bang for the buck?" says Moretti. "There's a race between your salary and local prices. Are you better off in a place that offers a higher salary but everything costs more? Or are you better off in a place that offers you lower salaries but everything is cheaper?"

Diamond and Moretti have spent four years putting together and crunching an enormous data set that dives into the day-to-day finances of 3 million American households. These households are spread out across the country, from concrete jungles on the coasts, to small towns in the heartland, to everywhere in between. Diamond and Moretti got information on these households' bank account deposits and withdrawals, as well as their credit and debit card spending. This allowed them to see how much people earn, how much they spend and what they buy. "We can see essentially every transaction that a household makes in the course of a year," Moretti says.

With their treasure trove of data, Diamond and Moretti constructed a cost-of-living index that paints a vivid picture of prices and typical consumption patterns throughout the United States. Unsurprisingly, the most expensive area in the country is the commuting zone around San Jose, Calif., aka Silicon Valley. The most affordable area in the U.S. is the commuting zone around Natchez, Mississippi. Combining this index with data on people's incomes, Diamond and Moretti were able to compare and contrast the material standards of living across the U.S., not just in each place, but for different types of workers.

There's obviously much more to the value of living in a place than simply the size of your paycheck minus the cost of stuff you buy. Like the cultural scene, the opportunities for your kids, the crime rate, the quality of schools and bars, the proximity to hiking trails or surfing spots and so on. So it's worth stressing that when we refer to "standard of living," we're talking only about average income minus taxes and expenses. This cold calculation misses a lot of the intangible and priceless stuff that can make a place cool. Also, this data is from 2014, and a lot might have changed since then, especially with the coronavirus pandemic.

Nonetheless, Diamond and Moretti worked over four years to create a never-before-seen snapshot of Americans' finances. And we were curious: If you are, generally speaking, a nonremote worker who wants to live in an area that offers the best balance between average income possibilities and cost of living, what are the best and worst places in the U.S.?

Workers with a college degree

It's no secret that "superstar" cities such as New York and San Francisco have an obscene cost of living. Housing is way more expensive. So are things like haircuts, energy, coffee, restaurant meals and groceries.

Nonetheless, according to Diamond and Moretti's data, the average salary of college graduates in places like New York and San Francisco more than makes up the difference.

"The big, overall takeaway for college graduates is that expensive cities like New York and San Francisco remain a pretty good deal," Moretti says. Sure, they're obnoxiously expensive. But educated workers have jobs that are so good that their incomes are more than enough to offset higher expenses. "San Francisco, for example, is in the top 20% in terms of standard of living across all locations." New York is not far behind.

Overall, Diamond and Moretti find that the standard of living for college graduates across the U.S. varies much less than it does for other workers. The jobs they get basically offer a cushy cost-of-living adjustment, so on average, college graduates are able to afford a relatively similar lifestyle no matter where they live in the United States.

That said, there are still some significant differences in standard of living. The five places — technically, "commuting zones," so these places and the areas around them — with the highest standard of living for college graduates:

• McAllen, Texas
• Houston, Texas
• Huntington, West Virginia
• Beaumont, Texas
• Charleston, South Carolina

The five places with the lowest standard of living for college graduates:

• Medford, Oregon
• Provo, Utah
• Salem, Oregon
• Olympia, Washington
• Asheville, North Carolina

Workers with only a high school diploma

"For the less-educated households, the picture is quite different," Moretti says. While they still do get paid more in places with a higher cost of living, their incomes do not adjust as strongly as they do for college-educated folks. So living in these areas, if they are not getting outside help from family or the government, makes them financially worse off. "Expensive cities offer a significantly lower standard of living compared to more affordable communities," Moretti says.

The five places with the highest standard of living for those with only a high school diploma:

• Gallup, New Mexico
• Summersville, West Virginia
• Natchez, Mississippi 
• Graham, Texas
• Marquette, Michigan 

The five places with the lowest standard of living for those with only a high school diploma:

• Asheville, North Carolina
• San Diego, California
• Manhattan, Kansas
• Medford, Oregon
• Jacksonville, North Carolina

Workers without a high school diploma

While there's a wide dispersion in the standard of living for those with a high school diploma but no college degree, there's an even wider dispersion for workers without a high school diploma.

"The differences in standard of living across places are very large for high school dropouts in particular," Moretti says. "A family, headed by a high school dropout, who moves from the most expensive city in the U.S. to the most affordable one would gain 26% in terms of consumption. There's a significant improvement in what they can afford to buy."

The five places with the highest standard of living for those who didn't finish high school:

• Summersville, West Virginia
• Paris, Texas
• Gallup, New Mexico
• Galesburg, Illinois
• Cadillac, Michigan

The five places with the lowest standard of living for those who didn't finish high school:

• San Diego, California
• Cheyenne, Wyoming
• Los Angeles, California
• Miami, Florida
• Asheville, North Carolina

The bigger picture

It's worth highlighting that some of the most expensive places in the country, like San Francisco and New York, are not at the bottom of any of these lists for having a low standard of living, even for those without a high school diploma. We asked Moretti about this, and he said the reason is simple: They may be more expensive, but they also offer higher salaries than any of the places that fare worse in their data.

That said, Moretti says expensive cities like New York and San Francisco are still low on the list for those who didn't finish college and those who didn't finish high school. They offer a pretty low standard of living for these classes of people relative to most of the country.

As a result of this project, Moretti says, he has come to believe that big, expensive cities offer significantly lower standards of living than he previously believed. Yes, they remain beacons of opportunity for brainiacs, as well as those with fancy pedigrees or good connections. "But my thinking has evolved on less-educated workers," he says. "For them, expensive cities seem to be much less of a good deal than it looks like when you look simply at the higher incomes they earn there."

So why aren't we seeing a massive exodus from extremely expensive cities? I mean, we have been. Over the last few decades, college-educated workers have flowed into expensive cities and non-college-educated workers have flowed out. Former working-class neighborhoods have filled up with young professionals. Those who remain are often grandfathered into rent-controlled apartments, live in public housing or are getting assistance from their families. The market isn't yelling at these people as loudly to leave. And, of course, there are a bunch of nonfinancial reasons to stay where they grew up and have friends and family.

Moretti says it's also possible that many people just don't know that leaving to work and live somewhere else could offer a much better financial deal. "It wasn't even clear to us before we started this project which places offer the best deals for different kinds of workers," Moretti says.

So, you heard it here, folks. Some of you might think about leaving Asheville or San Diego and heading to Natchez.

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