More discretionary income in Chattanooga

More discretionary income in Chattanooga

Despite lower pay, cheaper costs allow Chattanooga workers to keep more of what they earn

October 8th, 2017 by Dave Flessner in Business Around the Region

Workers in Chattanooga, on average, were paid nearly $3,240 less than the typical American doing the same job last year, according to the Bureau of Labor Statistics.

But a new study suggests that Chattanoogans still fared better than most Americans in discretionary income due to the lower taxes and cost of living in Tennessee.

"Chattanooga ranks in the top echelon of cities when it comes to enabling workers to keep more of what they earn," said Michael Pao, co-founder of Trove Technologies Inc., who crunched available figures for wage, housing, food and other costs across the country to compare different cities. "Even though pay levels are lower than the U.S. average in Chattanooga, we found that the city ranked quite favorably in discretionary income, which reflects the amount of income people take home after critical expenses."

Salaries in Chattanooga are 7.6 percent lower than the average city in the United States. But housing expenses average 24.6 percent less than the U.S. average for a comparable two-bedroom apartment shared with a roommate. The study found non-housing expenses averaged 11.8 percent less than the U.S. average in Chattanooga.

Top states for discretionary income

1. Michigan

2. Texas

3. Ohio

4. Tennessee

5. North Dakota

Source: Trove

When all the essential costs and taxes are paid by the typical Chattanooga worker, he or she is left with a discretionary income to spend on non-essential items of $6,158 a year, according to Pao's calculations.

Pao discovered that Tennessee was the best state in the Southeast and the fourth best state in the country for discretionary income, even though the wages paid to worker are generally below average. Without a state income tax and with cheaper housing, utilities, food and other essential services, an earned dollar goes farther in Tennessee than in most states, Pao said.

Nashville ranked as the fourth best major city for discretionary income in a particular field, behind only three top-ranked Texas cities — Austin, San Antonio and Dallas — for cities where your income and work give you more discretionary income.

Among all major U.S. cities, Chattanooga ranked 11th best for discretionary income.

Chattanooga income profile

* Average salary: $42,620

* Estimated taxes: $8,188

* Basic expenses: $28,272

* Disretionary income: $6,158

Cleveland, Tenn. income profile

* Average salary: $39,025

* Estimated taxes: $7,327

* Basic expenses: $27,027

* Discretionary income: $4,670

Source: Trove Technologies Inc. analysis, based upon 2016 incomes from the Bureau of Labor Statistics, tax figures from The Tax Foundation, and basic expenses assuming a person lives in a two-bedroom apartment with a roommate and cost of living expenses are based upon figures compiled by the Council for Community and Economic Research.

Cleveland, Tenn., was ranked in the Trove study as the best small city in the Southeast for discretionary income, even though its average salary is nearly 15 percent below the national average. Basic expenses for living in a two-bedroom apartment in Cleveland are nearly 5 percent cheaper than in Chattanooga, according to the Trove calculations.

Housing costs offered the biggest advantage for Chattanooga, but local rental rates are still rising. A study released last week by Apartment List found that rents in Chattanooga grew by 2.9 percent in the past year, outstripping the gains in wages for most workers.

Rising rents have been especially challenging for many low-income Chattanoogans, who are forced to shoulder higher lease payments and often are not earning any more money on the job.

"We are still seeing just as many people coming to us for assistance because their expenses are often rising much more than their paychecks, and they are not necessarily benefiting by all the talk about an improving economy," said Rebecca Welchel, executive director at Metropolitan Ministries in Chattanooga.

The latest Apartment List report shows that the median two-bedroom apartment rent of $900 in Chattanooga is still well below the U.S. average rent of $1,160 for a two-bedroom unit.

The income and wealth of cities overall may still favor bigger cities where a larger share of workers are employed in better paying jobs. Pao said he hopes to expand the indicators of income, wealth and expenses to offer even richer data in the future for different types of families and workers. But Pao said the Trove Discretionary Income Study is the first of its kind to incorporate data that reflect regional differences in salaries, cost of living, and taxes to most accurately reveal the take-home pay of American workers across 778 occupations.

"Wages may be higher in many cities, but often times the higher costs of housing and cost of living more than make up for that so, even with higher pay workers, many have less discretionary income in some cities," he said.

Contact Dave Flessner at dflessner@timesfree or at 757-6340