The Nine Worst States to Get a Raise

Nothing is more central to the American dream than the idea of economic mobility — the ability to move up the economic ladder. This week, the Pew Economic Mobility Project, a non-profit, non-partisan research organization, released a report demonstrating that the American dream is alive and well, although it is much stronger in some states than in others.

Based on the Pew report, 24/7 Wall St. identified the nine states that are have the lowest economic mobility scores. Residents of these states were less likely to move to a higher income bracket and much more likely to drop to a lower one.

To determine economic mobility, Pew looked at the prime earnings period for a large group of residents in each state, specifically, the 10-year period between an individual’s late thirties and late forties. Pew used three economic mobility measures: absolute mobility, which measures an individual’s wage increase over time, and relative downward or upward mobility, which measure a person’s movement up and down the earnings ladder over time relative to their peers. According to the report, nine states exhibited worse than average scores in at least two of the three measures.

Nationwide, absolute mobility, increased 17%. In many of worst-off states, it was as low as 12%. Nationally, 34% of those studied went up the earnings ladder, while 28% fell down the ladder. In the worst-off states, as little as 27% were able to move up the income ladder, while as much as 40% slid down it.

In an interview with 24/7 Wall St., Diana Elliott, research manager of the economic mobility project, explained that finding the reasons behind the different scores in economic mobility among states was beyond the scope of the study. But “we do know, based on our national research, that there are particular drivers of mobility,” said Elliott.

One of the most important drivers is education, Erin Currier, project manager, explained. “Educational attainment is an extremely powerful driver of upward mobility from the bottom, and protects from downward mobility from the top and middle.” According to Currier, a four-year college degree “quadruples a person’s chances of making it all the way to the top of the income ladder if they start at the bottom.”

24/7 Wall St. reviewed high school graduation and college graduation rates to reflect the impact of education on professional success and income. All of the worst-off states have a relatively low portion of adults 25 or older with a high school diploma. Five of the six states with the lowest graduation rates among all 50 states are on this list.

According to Currier, poverty, particularly childhood poverty, has a major effect on a person’s mobility throughout life on a national level. “Growing up in a high-poverty neighborhood during childhood increases a person’s chances of downward mobility by 52 percent,” Currier said.

A review of regional data suggests that childhood poverty influences economic mobility by state as well. All nine of the states with the worst economic mobility were in the top third for poverty, and six were in the top 10. Eight of the 10 also had among the lowest median incomes in the country, including Mississippi, which has the lowest in the United States.

A final factor that appeared to have a strong correlation to economic mobility was labor force participation rate. The labor force rate reflects the total number of people working or actively seeking work. While the authors of the study did not discuss this trend, it suggests that a relatively high percentage of eligible workers are unable to work, possibly because jobs are inadequate or unavailable.

All but one of the states on the list were among the worst third for labor participation, and six of the nine were among the worst 10. Alabama, for example, has the second-worst labor participation rate in the country, with just 57.2% of eligible workers actively employed or searching for employment.

24/7 Wall St. examined Pew’s report, the Economic Mobility Project, which determines upward mobility, downward mobility and absolute mobility by state. Any state that was worse than the national average, after accounting for margin of error, in two of the three categories, made it on our list. 24/7 Wall St. also examined the percentage of 25-year-olds with high school and college educations, poverty rates, violent crime and median income from the Census Bureau. We also considered unemployment rates and labor force participation, provided by the Bureau of Labor Statistics.

9. Alabama
> Absolute mobility change: 12%
> Percent with upward mobility: 27%
> Percent with downward mobility: 32%

Alabama’s absolute upward mobility — the increase in wages for the residents surveyed — was approximately 12%. This is tied for the worst increase among all states, along with South Carolina, which is in the same region. Just 27% of those studied experienced substantial upward mobility, well below the national average of 34%. Alabama has the sixth-lowest rate of high school graduation in the country, as well as the fifth-lowest median household income at $40,474 and the sixth-highest poverty rate of 17.4%.

8. Florida
> Absolute mobility change: 15%
> Percent with upward mobility: 32%
> Percent with downward mobility: 31%

Florida’s unemployment rate has been one of the country’s highest in the past few years, and its current rate of 9% is no different. The state also suffers from one of the most distressed housing markets in the nation. Home values dropped at the third-largest rate from 2006 to 2010, and the state’s foreclosure rate is the fourth highest as of October 2011. It is slightly more likely that one will move up economically than down in the state. However, it is the state’s downward mobility that is significantly worse than the national average.

7. Kentucky
> Absolute mobility change: 13%
> Percent with upward mobility: 34%
> Percent with downward mobility: 35%

Kentucky is the northernmost state in the country in our list of states with the absolute worst economic mobility. Wages for those surveyed in the state increased just 13%, compared to the U.S. average of 17%. Relative to the southeast region, however, upward mobility is actually quite strong in the state, with 42% of those studied improving 10 percentiles or more. However, Kentucky also has among the worst downward mobility, at 35%, compared to a national average of 28%.

6. Louisiana
> Absolute mobility change: 13%
> Percent with upward mobility: 28%
> Percent with downward mobility: 36%

Louisiana is one of three states in which all three measures of economic mobility are significantly worse than the national averages. The state is one of the country’s poorest, with a poverty rate of 17.8% and a median household income that is nearly $8,000 less than the national average. Louisiana also has one of the lowest high school graduation rates in the country. In addition, the state’s rate of violent crime is among the country’s highest.

5. Mississippi
> Absolute mobility change: 17%
> Percent with upward mobility: 26%
> Percent with downward mobility: 36%

Mississippi’s absolute mobility was on par with the rest of the nation, with earnings increasing roughly 17% over 10 years. However, upward mobility is the lowest in the country, with just 26% breaking out of their earnings bracket compared to a national rate of 34%. Far more residents were moving the other way. About 36% of those earning above the median dropped 10 percentiles or more. Mississippi is by far the poorest state in the U.S., with 21.8% of households living below the poverty line. The state also has the third-lowest rate of educational attainment — just 81% of residents 25 or older have a high school diploma.

4. North Carolina
> Absolute mobility change: 14%
> Percent with upward mobility: 26%
> Percent with downward mobility: 28%

North Carolina is tied with Mississippi for having the lowest relative upward mobility rate in the country — eight percentage points below the national average. Its absolute mobility change is three percentage points lower than the national average. The state’s unemployment rate is particularly high, at 9.7%. It also has a relatively low high school graduation rate of 84.7%.

3. Oklahoma
> Absolute mobility change: 14%
> Percent with upward mobility: 30%
> Percent with downward mobility: 33%

Oklahoma is one of just three states in the country, along with Louisiana and South Carolina, that is among the worst for absolute mobility, upward mobility and downward mobility at the same time. Unemployment is extremely low in the state, at just 5.4%. At the same time, poverty is high, and median income is extremely low. A full 18.9% of the state’s population lacks health insurance.

2. South Carolina
> Absolute mobility change: 12%
> Percent with upward mobility: 26%
> Percent with downward mobility: 34%

Absolute mobility, relative upward mobility and relative downward mobility are all significantly worse in South Carolina than in the country as a whole. The state is relatively poor. It has the seventh-lowest median household income in the country and the eighth-highest poverty rate. South Carolina also has one of the highest unemployment rates, at 8.9%. On top of all this, the state has the sixth-lowest labor participation rate in the country, at 59.3%.

1. Texas
> Absolute mobility change: 15%
> Percent with upward mobility: 31%
> Percent with downward mobility: 30%

Texas is tied for California as the state with the worst education attainment in the country — just 80.7% of residents over 24 have high school diplomas. The state also has the ninth-highest poverty rate in the U.S. and the highest percentage of residents in the country without health insurance, at nearly one in four. Texas has an upward mobility score of just 31% compared to the national average of 34%.

-Michael B. Sauter, Charles B. Stockdale