Teacher Salaries Adjusted For Cost of Living

by | Nov 9, 2015 | *Financial Awakenings, Weekly Column

teacher with students in a classroomSouth Dakota is tops in many things. We are consistently rated as among the best in the nation for business climate, trust law, clean air, low taxes, and the best cities to retire in. It annoys me, then, when we are last in something important, like teacher’s salaries.

But how do our lower cost of living and low state and local taxes affect our low salary ranking? Certainly salaries must buy more in the way of lifestyle in South Dakota than in states that have higher salaries but also higher taxes and living costs. I was willing to bet, when the annual salary of a South Dakota teacher was adjusted for cost of living and taxes, that we really wouldn’t have the lowest salaries in the nation.

To find out, I first consulted data from the National Education Association to get the most current average state salaries of teachers. South Dakota was dead last with a $40,641 average. It was no surprise that the highest salaries in the nation are paid by coastal states of New York with $76,865, Massachusetts with $71,620, Washington DC with $70,906, California with $70,887, and New Jersey with $70,367.

I adjusted all the average teacher salaries for state and local taxes using data from the Tax Foundation and for the cost of living using data from the Council for Community and Economic Research as presented by the Missouri Economic Research and Information Center. As I suspected, the amount of the salary isn’t as important as the amount people have left after paying all their taxes and living expenses.

While teachers in New York are the highest paid in the nation, when you factor in what they pay for living expenses and taxes, they fall to 22nd place with an adjusted salary of $50,022. The adjusted salaries drop the second-highest paid teachers of Massachusetts to 37th place with $45,939, while those in the District of Columbia fall from third to 42nd with a comparatively low $43,379.

Which teachers in the nation really make the most money? If you want the best lifestyle as a teacher, apply for positions in top-ranked Michigan where the adjusted salary is $61,020. The second-highest adjusted salaries are in Wyoming with $59,679, followed by Pennsylvania with $56,528, Ohio with $56,480, and Delaware with $55,211.

What state had the honor of coming in dead last? Hawaii. It ranks 20th for its average teacher salary of $55,757, which becomes a stunningly paltry $30,200 after adjustments. To my surprise, South Dakota’s adjusted average of $38, 644 only moved it from last place to second from last. Rounding out the bottom five are Maine with $39,216, New Mexico with $40,686, and West Virginia with $41,324.

Adjusting the average teacher salaries for various states’ cost of living and tax rates, however, does make a significant difference. For example, comparing only salaries shows the average South Dakota teacher makes $30,265 less than the average teacher in Washington DC. After adjusting for purchasing power, the South Dakota teacher earns just $4,735 less. While South Dakota teachers make $15,116 a year less than those in Hawaii, after adjusting for purchasing power South Dakota teachers make $8,444 more.

(To see the complete rankings with and without adjustments, click on the Teacher Salary Chart.)

While the results could be slightly skewed by comparing 2011 tax numbers (the latest I found) with 2015 salaries and living costs, my research it suggests two conclusions. One, while South Dakota certainly is in the bottom tier of teacher’s salaries, in terms of buying power we are nowhere close to being as far behind as it appears. Second, if you are a teacher in Washington DC, you might consider heading west to Michigan or Wyoming.

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