Daugaard Recycling Cost-of-Living Fantasies over Low Wage Reality

Governor Dennis Daugaard showed signs this winter that he was abandoning the fantasy that South Dakota’s mythical low cost of living made up for South Dakota’s low wages. He explicitly repudiated that fantasy on teacher pay in his State of the State Address when he called for enactment of his teacher pay-raise plan. His worker recruitment campaign announced in February omitted talk of cost of living in favor of a quality-of-life pitch.

But now Governor Daugaard is back to justifying low wages with cost-of-living math:

Now some people will say, “South Dakota may have a low tax burden and low cost of living, but I won’t get paid as much if I live there.” Actually when it comes to per capita personal income, we fare pretty well. Nationally, we rank in the top half. And, if you adjust the per capita personal income to add cost of living and taxes, we rank fifth in the nation [Governor Dennis Daugaard, “A Message to the Classes of 2016,” 2016.04.29].

Sharpen your spreadsheets—here we go!

Yes, South Dakota’s per capita personal income in 2014 was 23rd in the nation, 98.3% of the national average. In 2015, our per capita income dropped 0.6%, dropping our rank to 25th and our percentage of the national average to 94%.

Our median income is down 2.5% since the Great Recession, reflecting a national trend of wealth concentration at the top and erosion of the middle class.

As for cost of living, I’ll give you six arguments that I thought the Governor had conceded:

  1. In 2015, C2ER calculated that South Dakota’s cost of living was 2.5% higher than the national average and higher than every state in our adjoining septa-state region except Montana. C2ER uses data from Sioux Falls and Pierre, so Governor Daugaard should know if he’s buying his own groceries at Red Owl—er, Dakotamart.
  2. The Governor’s Office of Economic Development contends on the basis of Bureau of Economic Analysis data that our cost of living is 87.6% of the national average.
  3. The South Dakota Department of Labor’s holiday card showed that a sample of 38 professions in South Dakota pay 86% of the national average.
  4. Yes, our state and local taxes are low, but, strangely, perhaps because we are heavily dependent on other states for economic activity, we pay an inordinate amount of money in taxes to other states.
  5. Our average wages don’t provide workers with as big a cushion over the basic living wage as do average wages in most other states, including Minnesota.
  6. USA Today noted last July the strange failure of our low unemployment to translate into higher wages and reported that South Dakota is the eighth hardest state in which to make a living.

The Governor and I can go rounds all day trying to out-math each other on wages, taxes, cost of living, and other factors that make South Dakota a better or worse place to live than anywhere else (even no numbers would keep him or me from staying here, because we love South Dakota). But the hard fact for most South Dakota workers is that they have to put in more hours to get the same pay as their friends in other states.


16 Responses to Daugaard Recycling Cost-of-Living Fantasies over Low Wage Reality

  1. Dallis Basel

    Hence South Dakota work ethic.

  2. bearcreekbat

    I was surprised at the Governor’s claim of a 2.5% unemployment rate in SD. Perhaps someone should send him a copy of Cory’s analysis on Madville Times:

    http://madvilletimes.com/2014/09/real-south-dakota-unemployment-rate-including-indians-over-14/

    I haven’t seen any evidence that our neighbors on South Dakota reservations finally are being counted to reached the 2.5% rate claimed by the governor.

  3. Daurgaardnomics is what I call it.

  4. Work harder. Work more. Be more productive. That is the key to earning more.

  5. SDPR just reported 39,000 children in rural areas in SD do not know where their next meal will come from. these are some of the highest malnutrition statistics in the nation.

  6. Richard Schriever

    When I moved to Los Angeles for grad school. everyone warned me that the cost of living was double that in SD and to be prepared for the shock. Yep, when I started to look for a place to live – shock. Equally as shocking though, was that when I got hired for a job (the SAME job I had been doing in SD) I was paid almost 3 X as much. The end result was that I ended up with more to 2X as much in my pocket after paying my living costs. See how that works?

    Here (1988 $s):
    SD wage – $5/hr -> $1,000/month
    SD rent – $280/month
    SD – after paying rent = $720

    CA wage – $15/hr -> $3,000/month
    CA rent – $600/month
    CA after paying rent = $$2,400

    CA costs for food, clothes, basics – about the same. Gas, insurance, entertainment – bit higher, not 2X.

    BTW – this isn’t economics (hard) – it’s simple 3rd or 4th grade math (easy).

  7. 2.5%? Good point, Bear: the rate I see reported for March is 2.9%:

    https://www.sdvlmi.com/vosnet/analyzer/results.aspx?session=labforce

  8. Plus, our Labor Department is reporting the highest rate in SD is in Oglala Lakota County, at 8.2%. Pine Ridge officially has lower unemployment that Puerto Rico, Yakima, Fresno, and Yuma. Do you believe that?

  9. Like Richard, I was shocked also when I moved from Colorado to South Dakota when it came to wages here. Basically, the wages I could get here for the same job, was what I was making in Colorado – IN THE EARLY 90’s !!!

    Oh Grudz, your theory isn’t even close to being based in reality.

  10. And how’s your cost of living, Dana?

  11. Yea once again the governor ignored the Native American high unemployment rate. Once any person has maxed out on their unemployment benefits they drop off the statistics.

  12. Jake Cummings

    Cory, the links to the four locations you mentioned are seasonally-adjusted unemployment, whereas Oglala Lakota’s LMIC rate is non-seasonally adjusted so that could have some bearing on the comparison.

    Also, wouldn’t it be ironic if the unemployment rate-labor force participation debate that conservatives employed (e.g., http://www.huffingtonpost.com/2013/07/19/unemployment-rate-wrong_n_3619152.html) to counter the Obama Administration’s focus on reduced unemployment numbers were used here in SD?

  13. Jake Cummings

    I apologize — jumped the gun and misspoke before. Only the first link is seasonally-adjusted.

  14. Ironic indeed. The idea that 91.8% of the Oglala Lakota County workforce has work seems ridiculous.

  15. On a recent trip to northwest Arkansas I was really shocked to see the mansions I could get there for the price of my home here. The scenery there is comparable to the Black Hills, and the weather is much better. So is their economy (lots of Fortune 500 companies). And their college football (Razorbacks). No payday lenders. No video lottery casinos on every corner.

    But then Minneapolis is very nice too, with lots of amenities and the added benefit of fewer GOP party members.

  16. Darin Larson

    This might be tangential to the discussion here, but that has never stopped me before.

    One of the arguments that I have heard against a state income tax in SD is the claim that people don’t earn enough income here to make it workable. Obviously that argument is bogus since we have routinely been in the middle of all states in terms of income per capita.

    Reduce sales tax rates, take the sales tax off food entirely, reduce property taxes, and cover those reductions in tax burden with a state income tax at a low rate. There would be no additional net taxes to our citizenry in this scenario. Those on fixed incomes, the poor, and low paid wage earners would benefit. Highly paid individuals would pay a little more. Our tax system would not be so regressive. Everyone would have skin in the game, as everyone would still be subject to sales taxes. Property owners would still have skin in the game and incentive to maximize the use of their property. High income earners would pay less sales tax on their boats etc. encouraging consumer purchases and economic activity. High income earners would pay more income taxes as their income rises which they should be willing to do as they have benefitted from our American capitalistic system and entrepreneurial freedom.

    Let’s stop trying to be the low wage, least cost work force state. Let’s invest in education and high tech 21st century technology industries. Let’s stop pandering to out of state businesses with giveaways and trying to lure business from other states. Let’s educate budding entrepreneurs here and they will be more than likely to stay and build their business here.

    End rant.