While Alabama incomes lag behind other states, so do the prices we pay

Earlier this year, the U.S. Bureau of Economic Analysis released a new way of looking at income and prices across the United States.

Income levels vary from state to state; but so do prices paid by consumers. Consequently, an individual’s standard of living depends not only on the income he or she earns, but on the local cost of living.

Here in Alabama we’ve long known that our personal per capita income, $35,926 in 2012, trails the national average for per capita income, $43,735 in 2012. Alabama’s per capita income ranked No. 43 among U.S. states (District of Columbia also included). However, the impact of that lower income is partially offset by the lower prices we pay, according the BEA.

BEA calculates what are called “regional price parities” (RPPs), which are price levels expressed as a percentage of the overall national price level. BEA uses U.S. Census Bureau and other survey data to determine the average prices paid by consumers for a mix of goods and services consumed in each region.

When looking at the results, Alabama’s big advantage over higher-priced states is the price of housing. BEA calculated that rents in Alabama are 63 percent of the national average, a level that is equal to West Virginia’s price of housing and lower than all other states except Arkansas and Mississippi.

In contrast, housing costs in Hawaii are 159 percent of the national average. Hawaii is followed by the District of Columbia (157 percent), California (147 percent), Alaska (142 percent), New Jersey (136 percent), and New York (135 percent)

Prices also vary within the state. According to BEA calculations, prices in Huntsville’s Metropolitan Statistical Area are closest to the national average while those in smaller metros like Dothan, Anniston, Gadsden, and Florence are relatively lower.  Again, housing prices play the major role.


Table 1. Local Prices Expressed as a Percentage of National Price

MSA All items Rents
Huntsville 91% 73%
Birmingham-Hoover 90% 71%
Montgomery 90% 71%
Daphne-Fairhope-Foley 89% (NA)
Tuscaloosa 89% 68%
Mobile 88% 64%
Auburn-Opelika 87% 77%
Decatur 87% 56%
Dothan 85% 56%
Anniston-Oxford-Jacksonville 85% 53%
Gadsden 85% 51%
Florence-Muscle Shoals 85% 50%


Using Regional Prices Parities and also adjusting for inflation since 2008, BEA recalculated personal income levels across the states. With the adjustments for cost of living, Alabama’s rank for per capita income rose to No. 36.

Table 2. Comparison of Per Capita income : US States

Making the same adjustment on income figures within the state of Alabama produces real per capita income levels for the state’s Metropolitan Statistical Areas listed in Table 3. The Table also lists real per capita income in U.S. Metropolitan Areas and for those areas outside of MSAs for comparison.


Table 3. Per Capita Income Adjusted for Local Cost of Living

MSA Real Per Capita Personal Income
Birmingham-Hoover  $44,038
Huntsville  $43,243
Daphne-Fairhope-Foley  $41,103
Dothan  $39,975
Montgomery  $39,916
Tuscaloosa  $37,335
Florence-Muscle Shoals  $37,331
Anniston-Oxford-Jacksonville  $36,782
Gadsden  $36,647
Decatur  $36,162
Mobile  $35,256
Auburn-Opelika  $32,992
United States (Nonmetropolitan Portion) $38,125
United States (Metropolitan Portion) $45,188