Making a Living in Rhode Island
In 2013, Rhode Island was ranked as one of the worst places to make a living, landing at 48 out of 50 states in an annual study conducted by personal finance website MoneyRates. In the years since, Rhode Island’s ranking has risen steadily to 36 on the list, showing the greatest improvement among New England states from 2013 to 2017.1 Yet, like most other states in the region, it continues to lag behind the rest of the country as a good place to make a living. This means that families in Rhode Island may struggle to get and keep well-paying jobs in a state where taxes and cost of living are comparatively higher than in other states.
This research explores the forces that affect the quality of life of Rhode Island’s workers and the state’s ability to attract a strong workforce. It considers issues that factor into the “Making a Living” rankings, such as wages, unemployment, cost of living, and tax rates, as well as related topics like business climate, income inequality, and minimum wage. The research also examines occupations and industries where Rhode Island salaries are highly competitive with other states. All these economic elements are part of a larger landscape that impacts employee and business decisions as well as overall economic outcomes for Rhode Island.
Making a Living
Fig. 1 Rhode Island’s Rankings in MoneyRate’s Annual “Making a Living” Index
Source: Data for 2015-2017 from MoneyRates.com.1 Data for 2013-2014 from Richard Barrington.2
Fig. 2 Best States to Make a Living, From MoneyRate’s Annual Rankings
The MoneyRates analysis of the best places to make a living looks at each state’s average income, unemployment rate, cost of living, tax rates, and workplace safety record.1 Rhode Island’s low rankings are primarily driven by the high cost of living and (historically) high unemployment rate in the state.
Rhode Island had one of the highest unemployment rates in the country in the wake of the Great Recession, although it has improved significantly in recent years, dropping below 4.5% in 2017.3 Salaries are strong, but not necessarily enough to make up for the state’s high cost of living. Rhode Island’s median income in 2017 was ranked among the top 10 states in the country, but so was its cost of living.1 In effect, residents of Rhode Island are paying a “cost of living” tax that reduces the true value of their wages and harms their ability to make a living.
Income and employment levels across states and industries may be influenced by several factors such as labor supply and demand, cost of living, corporate structures, union influence, and government policies. Furthermore, wages are only one factor that impacts whether somewhere is a good place to make a living. According to Richard Barrington, the creator of the MoneyRates rankings, other important issues include real estate costs, labor supply, geographic footprint (e.g., population density, migration patterns, and level of industrialization), work environments and safety regulations, and all the other factors that people consider when they decide whether to take a given job.2
Fig. 3 Best States for Business, From CNBC’s Annual Rankings
Rhode Island also consistently ranks poorly on lists of the best states to do business, and a weak business climate can negatively impact workers and wages.5 The state recently moved up a few spots in CNBC’s list of “Top States for Business,” from 50th in 2016 to 45th in 2017.4 Rhode Island’s scores improved in the areas of workforce, economy, business friendliness, and access to capital, while its infrastructure and quality of life scores declined. A better climate for doing business could spur economic growth and support more competitive wages for workers,5 which could in turn improve profitability for businesses by attracting better employees.6
Business Insider’s 2018 rankings of state economies put Rhode Island in 9th place,7 up from 33rd in 2016,8 which may reflect positive growth and a stronger outlook for the state. However, the Business Insider rankings only weigh economic factors related to job growth, wages, GDP, and unemployment. In contrast, the MoneyRates and CNBC rankings consider numerous other important metrics that may more negatively influence Rhode Island’s capacity for making a living and doing business, such as quality of life, infrastructure, cost of doing business, technology and innovation, business friendliness, access to capital, and cost of living.
INEQUALITY AND MINIMUM WAGE
Economic opportunity and equal access to good-paying jobs also play a role in determining whether a state is a good place to make a living. On these issues, Rhode Island ranks toward the middle of the pack. According to U.S. News rankings, the state places 36th when it comes to income equality (as measured by the Gini Index, a common standard for measuring inequality).9 Looking at income, employment, and education gaps across race, gender, and disability status, Rhode Island ranks 30th.10 The state’s minimum wage of $10.10 is higher than many other parts of the country and comparable to neighbors like Connecticut (also $10.10) and Massachusetts ($11.00).11
While these rankings are important to consider, factors such as income inequality, gender and race pay gaps, and minimum wage policies have a complex relationship to worker well-being and earnings. Economists and researchers have differing viewpoints on the impact of public policy on these issues and economic outcomes.12 For example, there is disagreement about the relationship between minimum wage laws and employment levels.
Fig. 4 Occupations For Which Rhode Island Has the Highest Salary in the Country
Source: Rasmussen College.13
Fig. 5 High-Paying Occupations (>$95,000) For Which Rhode Island Has Highly Competitive Salaries
Source: Rasmussen College.13
There are many occupations that pay particularly well in Rhode Island compared to other states. Rasmussen College’s Salary by State database contains the average salaries for a variety of occupations, as well as salaries adjusted for cost of living.13 For about one-third of the 815 occupations in the database, Rhode Island was among the top 10 states in terms of the actual salary or the salary adjusted for cost of living. This is not surprising given that Rhode Island has relatively high salaries in general, ranking 11 nationwide in terms of median income.1
Overall, the list of occupations where Rhode Island has highly competitive salaries represents a mix of administrative, education, health, service, business, and technical fields. An occupation may have a comparatively high salary in Rhode Island because it reflects a valued skill in the state or a scarcity in the field. Higher salaries may also be associated with the top businesses and industries in a state.(a)
(a) The occupational rankings from Rasmussen can be skewed if there is a lack of data available for other states, and the rankings don’t consider different volumes of workers. Further research would need to determine whether Rhode Island’s salary in a specific occupation has any larger implications for an industry or the state’s overall business competitiveness.
According to the Rasmussen College data, Rhode Island has among the highest salaries in the country for chief executives.13 Compensation data from Guidestar also show that Rhode Island non-profits pay their senior executives a higher than national average salary at organizations of certain sizes (with budgets below $5 million and between $25 and $50 million).14 Given the state’s inequality rankings, policymakers and business and nonprofit leaders may want to consider policies that prevent excessively high executive pay from becoming a burden on lower-income workers. However, the potential for executives to earn high incomes can also drive economic growth. It can be challenging for states to strike a balance between fueling innovation and expansion while fostering equality and creating a better quality of life for all residents.
IMPROVING THE LIVES OF RHODE ISLANDERS
While Rhode Island has high salaries and offers competitive wages in many occupations, it also has a high cost of living and other issues that may leave families struggling to make a living. The state also faces challenges around inequality and a poor climate for attracting business.
There are a number of policies that may help mitigate these issues by targeting workers or employers. To improve workers’ quality of life and quality of work, the state might consider programs that help employees gain skills, further their education, offer assistance for childcare and transportation, supplement low incomes through financial incentives, or build assets for future economic stability.15 Policies that can influence employer behavior include raising workplace standards, enforcing labor laws, funding career pathways programs, and offering employer incentives for hiring and training.16 The state may also want to consider policies to mitigate inequality and moderate executive pay.
In addition to exploring the potential impact of workforce policies and programs, further research might examine how issues such as unions, minimum wage, right-to-work laws, workplace flexibility policies, and health insurance coverage affect workers in Rhode Island, in comparison to other states.17 More detailed research showing state-by-state wage comparisons by occupation and industry could help uncover where Rhode Island is more or less competitive within New England and the Northeast region. With the right policies and programs in place, Rhode Island can continue to climb in the rankings and become a better place to make a living for all residents.
1. Barrington, Richard. (2017). “Best States to Make a Living.” MoneyRates.com. The 2017 rankings are based on cost of living data from the Council for Community and Economic Research, state tax rates from the Tax Foundation, and unemployment, workplace safety, and median annual wage data from the U.S. Bureau of Labor Statistics. Prior years’ rankings going back to 2011 are also available on the MoneyRates website.
2. Barrington, Richard. (2017b). Personal communication. November 6.
3. Mehrotra, Neil. (2016). “Rhode Island Unemployment: Is There Labor Market Mismatch?” Providence, RI: The College and University Research Collaborative.
4. CNBC. (2017). “America's Top States for Business 2017,” July 11. The CNBC rankings incorporate more than 60 measures of business climate.
5. Mohan, Ramesh. (2016). “Good for Business: How States Can Be More Business Friendly.” Providence, RI: The College and University Research Collaborative.
6. Weisul, Kimberly. (2014). “How Paying Employees More Can Make You More Profitable.” Inc., January 17.
7. Kiersz, Andy. (2018). “Every US state economy ranked from worst to best.” Business Insider, March 15.
8. Kiersz, Andy. (2016). “Ranked: The economies of all 50 US states and Washington, DC, from worst to best.” Business Insider, January 11.
9. U.S. News. (2018). “Economic Opportunity Rankings.”
10. U.S. News. (2018). “Equality Rankings.”
11. National Conference of State Legislatures. (2018). “State Minimum Wages: 2018 Minimum Wage by State.”
12. Hallock, Kevin F. (2012). Pay: why people earn what they earn and what you can do now to make more. New York: Cambridge University Press. Jovicic, Sonja. (2016). “Wage inequality, skill inequality, and employment: evidence and policy lessons from PIAAC.“ Journal of European Labor Studies. 5: 21.
13. Rasmussen College (n.d.) “Salary by State: Where Can You Really Earn the Most? [dataset],” Bloomington, MN. Their data on salaries comes from May 2016 wage estimates from the U.S. Bureau of Labor Statistics. Their cost-of-living adjustments are based on the 2015 regional price parity measures from the U.S. Bureau of Economic Analysis.
14. GuideStar. (2016). “Nonprofit Compensation Report, 16th Edition.”
15. Kazis, Richard. (2001). “Opportunity and Advancement for Low-Wage Workers.” In Richard Kazis and Marc S. Miller (eds.). Low-Wage Workers in the New Economy. Washington, D.C.: Urban Institute Press.
16. Osterman P. (2001). “Employers in the Low-Wage/Low-Skill Labor Market.” In Richard Kazis and Marc S. Miller (eds.). Low-Wage Workers in the New Economy. Washington, D.C.: Urban Institute Press.
17. Mishel, Lawrence & Ross Eisenbrey. (2015). “How to Raise Wages: Policies That Work and Policies That Don’t.” Washington, D.C.: Economic Policy Institute.
Type of Research