Ohioans don’t have to stretch quite as far as residents of most other states to make financial ends meet, because in the Buckeye State $100 buys about $112 worth of goods, according to a new report from the Tax Foundation.
Using price data from the U.S. Bureau of Economic Analysis, the Tax Foundation calculated the purchasing power of a C-note for the same goods in each state and found that someone buying $100 worth of groceries in Ohio could pick up a carton of ice cream or six-pack of beer not on their shopping list and still get change back.
By comparison, someone with the same shopping list in Washington, D.C., would have to spend about $115 just to purchase the original items on the list.
Ohio was one of 35 states where $100 buys more than $100 worth of goods, and among 15 states where a $100 buys more than $110 worth of goods, according to the nonprofit’s study.
The states where $100 is worth the most are Mississippi ($115.21); Arkansas ($114.29); South Dakota ($114.16); Alabama ($114.03); and West Virginia ($113.12).
By contrast, $100 is worth the least in the District of Columbia ($84.96); Hawaii ($86.06); New York ($86.73); New Jersey ($87.34); and California ($89.05).
Regional price differences mean real purchasing power is 24 percent greater in Ohio than it is in the District of Columbia, which means someone with $50,000 in after-tax income in the Buckeye State would have to have after-tax earnings of $62,000 in the nation’s capital to afford the same overall standard of living.
“Adjusting incomes for price level can substantially change our perceptions of which states are truly poor or rich,” the study’s authors wrote. “This has substantial implications for public policy, which is often progressive with respect to income.”
The study shows that price and income relationships can vary by region, but generally states with higher incomes have higher prices. Consequently, since the same amount of cash can buy comparatively more in a lower-priced states than high-priced states, many policies, such as minimum wage, should be decided by the states and not the federal government, the authors argue.
Bill Even, a Miami University economics professor, said the cost-of-living differences across states is one argument in favor of allowing the minimum wage to differ across states instead of having a uniform federal minimum wage — as proposed by the Obama administration — which would go much further in some states than others.
“The purchasing power of any given value of the minimum wage would vary substantially across states and the job loss would vary substantially,” said Even, referring the fact that employers in high-wage states would be better able to absorb a federal wage hike without laying off employees than those in low-wage states.
“If the $15 minimum wage that was passed in Seattle was adopted in Ohio, there would be a larger fraction of workers impacted in Ohio and a larger fraction would lose jobs.”
The federal government last increased the federal minimum wage in 2007, from $5.15 per hour to the current $7.25 per hour, which applies in 31 states. Another 29 states and the District of Columbia have wages above the federal rate. Ohio’s rate is $8.10 an hour.
President Obama continues to call for raising the federal minimum wage to $10.10 an hour.
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