Even Without Income Tax, Low Wages Make South Dakota 8th Worst Place to Make Living

In our continuing effort to burst Governor Dennis Daugaard’s hogwash bubble, USA Today notes that South Dakota has no income tax and still ranks us as the eighth worst state in which to make a living:

South Dakota has several positive factors, but still ranks as the No. 8 worst state to make a living. It has no state income tax, low unemployment, and relatively safe work environments. However, low unemployment does not appear to be translating into higher wages. The average income is only $37,300, the second lowest in the nation (Mississippi is the worst at $36,750). Furthermore, the cost of living index comes in at 101.3, the best on this list, but fairly average compared to the rest of the U.S. [Eric McWhinnie, “10 Worst States in America to Make a Living in 2015,” USA Today: The Cheat Sheet, 2015.07.05]

The original source of this analysis, MoneyRates.com, also wonders why low unemployment is not translating into higher wages. Low labor supply and high demand ought to translate into higher wages, right? Apparently something is broken in the feedback loop: in South Dakota, lower wages appear to be creating low labor supply, and we’re determined to try every other trick we can think of (e.g., free tuition for teachers and skilled workers, cute videos comparing our wages and oxygen levels to Mars) other than the obvious free-market solution of higher wages.

Statistics continue to defy the anecdotes and assumptions tossed off by South Dakota’s economic development cheerleaders about our purportedly lower cost of living. As reported here regularly, South Dakota’s cost of living remains a tick above the national average:

Cost of living by state, ACCRA data, graphic by Missouri Economic Research and Information Center, downloaded 2015.07.06
Cost of living by state, ACCRA data, graphic by Missouri Economic Research and Information Center, downloaded 2015.07.06

In the seven-state region, only Montana had a higher cost of living in the first quarter of 2015. Life is a touch cheaper in Minnesota and notably cheaper in Iowa, Nebraska, and Wyoming.


12 Responses to Even Without Income Tax, Low Wages Make South Dakota 8th Worst Place to Make Living

  1. Porter Lansing

    Is it feasible that income is low because the conservative spine that supports the state economy attracts few businesses who care about their employees well being? Is it feasible that unemployment is low because if you want a good paying job you get the heck out of the state? As an outsider, these are just observations.

  2. Paul Seamans

    Once again South Dakota is duking it out with Mississippi for last place. I wonder if down in their region that people call Mississippi the South Dakota of the south?

  3. mike from iowa

    Life must be dirt cheap in Chicago with all them gun-related homicides every week.

  4. Porter, I support the hypothesis that South Dakota’s politics and GOED marketing ploys tend to attract a certain kind of business owner and business philosophy. I’m also intrigued by the idea that departing workers could contribute to the low unemployment rate. I’ve never heard out-migration and unemployment discussed in the same article. Any scholarship on that topic?

  5. Unemployment is low because we do not count the dire straights on the reservations. Count the income there as well as the unemployment and presto changeo, we beat Mississippi for the glory of being number 50! Actually, then we become Puerto Rico!! What a pride we now have!

  6. Porter Lansing

    @Mr. Heidelberger,
    No research into the theory by me, as of yet. And as Dianna E. Anderson put so well, “A group of anecdotes doesn’t create data.”
    The numbers of my classmates from ’71 who live in Minnesota and Colorado are vast and they left for assorted reasons but to list them by importance, getting a good job is tops. Among those who’ve stayed (attorney’s not withstanding) have they done so because they’ve got a great job? Have the state’s paltry population increases over the last 45 years made unemployment numbers a valid indicator of anything related to the economy? It’s just a gut feeling, Cory.

  7. Porter Lansing

    e.g. “If I was laid off in a state with no real safety net and getting a little grocery or rent help brought scorn and gossip from the neighbors, I’d move to Minnesota where at least there’s some compassion for a situation I had no responsibility in creating. If I was asked to come back to work by the employer, I’d probably stay in MN. Being low income is hard enough without being the brunt of “barroom ridicule”.” Thus the unemployment rate of the state would be low but it’s opportunity for economic growth would also be low. Businesses don’t move into a state to punish their workers. Should they be forced into a temporary lay-off phase they want their people to at least subsist until they can be rehired.

  8. You can be broke anywhere……..

  9. Roger Cornelius

    Paul,

    Our competition with Mississippi at being the top or bottom of most state rankings is the reason I call South Dakota, Upper Mississippi.

  10. Paul Seamans

    Roger C., I like that, Upper Mississippi and Lower Mississippi, so as not to cause confusion in all these rankings where our states are side by side. Do you suppose this name change has any chance of passing?

  11. Roger Cornelius

    Damn straight Paul, let’s get a Change.Org petition going to change South Dakota’s name to Upper Mississippi, it’ll give the SDGOP a massive coronary.

  12. Deb Geelsdottir

    That’s funny, Roger and Paul.

    I wonder if there’s a type of Stockholm Syndrome going on in SD? Also with the tea baggers for the uber wealthy they worship, like the guy with that dead animal on his head and all the bankrupt casinos?