The Underlying Issues Creating Income Inequality And Poverty In Arkansas
There are so many positives about the state of Arkansas. However, the financial well-being of its residents isn’t one of them. So today, I want to address this question: why is Arkansas so poor?
I didn’t grow up poor, but both of my parents did. Neither of them went to college, but with hard work, determination, and living on a tight budget, they climbed up to solid middle-class Americans. Then, as kids, my brother and I had what we needed, but not much more.
As a result, I’m curious about why Arkansas is so poor. Let’s hit the topic head-on to examine why this state remains one of the poorest in America.
Why Is Arkansas So Poor?
Arkansas faces many challenges that impact the financial well-being of its residents. First, the state has a below-average school system, residents suffer from poor health, and sales taxes take a significant bite out of a small budget. Furthermore, low wages, below-average household incomes, and an excessive poverty rate all combine to make Arkansas one of the poorest places in the country.
What’s behind these problems? Read on to explore these issues with me in greater detail.
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
1. Arkansas Is Poor Because Of Its Subpar School System
The first reason Arkansas is a poor state is the educational system. So, you may regret moving to Arkansas with school-age children.
According to U.S. News and World Report, the state ranks near the bottom third of all U.S. states for its public education quality. Students specifically struggle with college readiness and low math and reading scores.
Furthermore, studies demonstrate a strong correlation between education level and income. Unfortunately for residents, the connection between education and wages has grown as our economy favors high-skilled services over manual labor.
Why is Arkansas a poor state? Please stick with me for the second reason it is.
2. Arkansas Residents Have Little Money Because Of Below-Average Household Incomes
Arkansas is poor because people do not make much money here.
According to World Population Review, Arkansas has the fourth-lowest median income in the U.S. The state ranks ahead of only Mississippi, West Virginia, and Louisiana. Furthermore, families here earn nearly 25% less than the median income nationwide.
Low wages limit Arkansans’ ability to afford necessities. They struggle to create savings and get ahead financially. Ultimately, the lack of income limits financial stability and economic prosperity.
3. Low Population Density Hinders Business Formation And Earnings For Companies And Residents In Arkansas
Arkansas is poor because of hurdles created by the sparse population. Residents are spread thinly across small towns and rural areas.
First, with one of the lowest population densities nationally, the state offers companies a limited customer base and employment talent pool.
Furthermore, fewer potential customers make earning sustainable revenue difficult, especially outside major cities like Little Rock.
Finally, companies need more hiring options, particularly for roles requiring specialized skills. Those high-demand skills the state’s education system needs to provide more of.
These factors combine to limit business investment and the higher-paying jobs that come with it.
4. Arkansas Residents Have Limited Earnings Capacity Because Of Poor Health
Arkansas is a poor state due to less-than-desirable health habits and not the best healthcare outcomes. These issues negatively impact residents’ earning potential.
Good health is essential for sustaining long work hours and competing in the job market. However, the state ranks near last among U.S. states for healthcare results.
High mortality rates, low life expectancy, and widespread chronic illness contribute to the poor showing. Furthermore, these factors can make Arkansas unsafe for families.
Additionally, nearly 40% of Arkansans are obese, partly fueled by sedentary lifestyles and high-fat diets.
Poor health habits and inadequate medical care lead to declining health. As a result, many residents cannot work consistently. Inconsistent work directly reduces wages and drains family budgets.
5. The State’s Sales Tax Takes A Higher Share From Low-Income Households
Residents here pay more than 9% sales tax on their purchases. Thus, Arkansas is among the five states with the highest sales tax burden in the country.
Retail sales taxes burden low-income households more than higher-income families. The tax rate also diminishes Arkansas’ attractiveness as a retirement destination.
As a household’s income rises, the relative sales tax burden decreases. Consequently, sales taxes are known as a regressive tax. That’s a fancy way of saying they take up more of low-income families’ limited earnings.
Is Arkansas poor? Yes, let me explain why with this next point.
6. Arkansas Has A High Poverty Rate
How poor is Arkansas? The state’s poverty rate is one of the highest in the country, at more than 15%
Growing up in poverty reduces kids’ educational, social, and emotional development. Thus, children of poverty-stricken homes have poor results in school and lesser workforce potential.
Okay. That concludes my discussion. Please allow me to wrap up with some final thoughts.
More reading: How Missouri compares with Arkansas
Why Arkansas Is A Poor State
The six reasons Arkansas is so poor include the following:
- Subpar education system
- Below-average household incomes
- Low population density
- Poor health and healthcare outcomes
- High sales taxes
- Excessive poverty rate
These educational, health, tax, and income factors trap many Arkansans in economic hardship, making the state one of the poorest in the country.
Author Bio, Disclosure, & Disclaimer: Please join me (Tom) as I try to achieve my goals, find my next place to live, and make the most of my money. However, I am not a licensed investment adviser, financial counselor, real estate agent, or tax professional. Instead, I’m a 50-something-year-old, early retired CPA, finance professional, and business school teacher with 40+ years of DIY dividend investing experience. I’m here only to share my thoughts about essential topics for success. As a result, nothing published on this site should be considered individual investment, financial, tax, or real estate advice. This site’s only purpose is general information & entertainment. Thus, neither I nor Dividends Diversify can be held liable for losses suffered by any party because of the information published on this website. Finally, all written content is the property of Dividends Diversify LLC. Unauthorized publication elsewhere is strictly prohibited.