MONTANA PERSONAL FINANCE
-Oct. 26, 2017-
Montanans are typically short in finances. But if you live here, that fact likely doesn't bother you all that much. This report analyzes – overall – just how short our personal finances fall, and how each of us compares to others making it work here.
I. The Montana Tax is between $300 - $25,500 per year.
The Montana Tax – the difference in median Montana pay-per-job compared to National numbers – illustrates we do fall short. But frankly, for half of Montana the tax is not as great as expected. Yet, for the other half, its clear that Montanans leave a significant amount on the table every year by choosing to live here instead of elsewhere.
Montana median pay-per-job is less than $32,750 annually. If you are one of the approximately 275,000 Montanans whose salary falls within this bottom 50%, your lost earnings compared to National numbers ranges between $400 and $6,400 annually. Statewide, the difference between the 10th, 25th, and median percentile pay-per-job in Montana to national numbers is $400, $1,300, and $4,300 respectively. In Billings, pay-per-job is generally 5% higher than the statewide average.[1] While in Great Falls and Missoula, pay-per-job is generally 5% lower than the statewide average.[2]
Billings residents do better than the rest of the state, while Great Falls and Missoula lag slightly behind. But those earning below the median pay-per-job forgo only $400 - $6,400 annually. You would make substantially similar income elsewhere, so it is not a particularly difficult decision to choose to live in Montana. And if you didn't have a choice in moving to Montana, fortunately you won the birth lottery.
However, if your salary is above the median pay-per-job, every year you forgo significant earnings compared to the nation. If your salary falls within the top 50% of Montana wage earners, your lost earnings compared to National numbers range between $7,600 - $25,500 annually. Statewide, the difference between the 75th and 90th percentile pay-per-job is $9,700 and $21,700 respectively. Again, Billings outperforms statewide averages, with appoximately 5% higher pay-per-job numbers.[3] And Great Falls and Missoula underperform statewide averages, with approximately 5% lower pay-per-job numbers.[4]
This is caused by a variety of factors. First, Montana frankly lacks large numbers of high-paying jobs within each profession, and the earning potential for these professions is just lower in Montana. For example, 50% of attorneys outside Montana earn more than $120,000 a year, compared to roughly 14%-18% in Montana. Second, Montana lacks various specialized professions that support much higher salaries. For example, anesthesiology is consistently one of the highest earning professions nationally. Yet Montana does not employ enough for the Bureau of Labor and Statistics to even include the profession within its statewide salary calculation for Montana. Several of these factors are tied to the fact that whenever the value of the goods or services the profession produces is lower in Montana compared to elsewhere, the wages are necessarily lower. [5]
So. Montana attorneys are not, and only very few anesthesiologists are, cruising the highline in red sport cars.
II. Less than 3% of Montana professions pay an annual median salary greater than $80,000.
Although Montana's median pay-per-job is $32,750, there are obviously significant differences in median pay between jobs, and total employed per job. So it is helpful to understand how earning potential is unequally distributed across various job opportunities, and to realize how few professions pay great money, and how most of our income clusters around more conservative figures.
Montana's top 30 professions in terms of highest total employment collectively employ 200,000 workers. Yet only two of these professions (Registered Nurses and General and Operations Managers) have a median income greater than the bottom median income quintile (less than $55,500). Meanwhile, Montana's top 30 professions in terms of highest median income only employ approximately 12,500 workers. Yet only one of these professions (General and Operations Managers), has a greater total employed quintile than the bottom employment quintile (less than 3,208 total employed).
So. There are 30 professions in Montana that have a median income greater than $80,000. However only 12,500 Montanan's are employed in these positions. Meanwhile, there are 30 professions in Montana employing 200,000, yet 28 of those employ 185,000 and pay a median income less than $55,500.
In other words: you have a 40% chance of working a job with median income below $55,500, and less than a 3% chance of working a job with median income greater than $80,000.
III. More than half of Montana professions provide under $34,000 in wage growth, while only fifteen provide over $100,000.
Median income does not tell the entire story, as income can vary significantly within a profession. For example, approximately 70 financial advisors made less than $28,000 last year in Montana, while about 70 made at least $191,000, although the entire profession reports a surprisingly low $49,800 median annual income. This is the largest quintile spread in available data. Depending on your abilities and luck, you could made $163,200 more per year than your peers.
That is staggering.
Meanwhile, a gaming dealer in the 90th percentile makes approximately $19,530 a year, compared to a dealer earning in the 10th percentile making a mere $17,430. This is the smallest spread in available data. Again, staggering, but not as surprising.
Choosing the right profession and sticking with it pays off if the Profession allows for upward mobility. Some jobs in Montana just don't allow for that much wage growth. And that's fine if greater income is not your goal. As often stated, quality of life associated with a variety of Montana professions pays a large dividend that justifies more modest annual income. Just ask these folks.
IV. Less than 3% of Montana households earn more than $200,000 annually.
Wages obviously comprise the largest share of our annual total income. Yet we supplement our wages with additional sources of income: investments, trusts, retirement, spouses, working a third job, etc. The sum of all of these sources comprises our total income, which provides a detailed look at actual personal finance in Montana.
Montana wealth is greatly concentrated below an annual household income of $100,000. The data illustrates that 431,000 households reported an Adjusted Gross Income less than $100,000 in 2015. That is 87% of the tax-filing population. Additionally, 385,000 households - 77% of the tax-filing population - reported an AGI less than $75,000.
In contrast, just over 14,300 Montana households - only 3% of the tax-filing population - reported an AGI greater than $200,000. And this 3% paid more in taxes ($486,145,000), in 2015 than the 87% of the tax-filing population with AGI less than $100,000 combined ($420,757,000). Of this number, only 1,300 were from single return-filing Montanans, the remaining were joint or head of household filers.
To make it into Montanan's highest income bracket, you have a much better chance at getting there by finding a spouse with a well-paying job, than making it alone. And if you get there, your current average Federal income tax bill will be near $34,000, approximately 35 times larger than the average $975 that Montana's bottom 87% pay each year.
Frankly, you have a better chance at being a farmer in Montana, than in a household making more than $200,000 annually (19,290 Montana taxpayers reported income from farm sources, as opposed to 14,300 with income greater than $200,000).
If you happen to be both, then a ten-gallon hat tip to you.
V. Overall
You will earn $300 - $24,000 less annually by living in Montana compared to the National median. There is a more than 50% chance you will work in a profession where total wage growth is less than $34,000. And, you have a 3% chance of both working in a profession with greater median income than $85,000, and having a total annual adjusted gross income greater than $200,000.
But again, for these costs, you get to live here.
See here for additional analysis.
-Eric Dietrich & Zachary Rogala