I return to the South Dakota Board of Regents Occupational Wages Dashboard and find South Dakota doesn’t pay the worst wages in the nation. In general, workers in Arkansas and Mississippi get paid even less:
Our neighboring states offer wage advantages ranging from 5% in Montana to 28% in Minnesota. The national average salary is 24% higher than South Dakota’s.
Updating a comparison I ran in December 2014, factoring in state and local tax rates and the most recent cost-of-living data, South Dakota falls even further behind:
| All Occupations | ||||||
| State | Average annual pay | State+local tax rate | Salary in pocket after state+local tax | Cost of living (2016 Q1) | Adjusted post-tax salary power | Additional purchasing power from working here instead of SD |
| IA | $41,840 | 12.75% | $36,505 | 91.6 | $39,853 | $5,283 |
| MN | $49,740 | 11.59% | $43,975 | 99.3 | $44,285 | $9,715 |
| MT | $40,620 | 6.92% | $37,809 | 101.6 | $37,214 | $2,644 |
| ND | $45,660 | 10.33% | $40,943 | 97.4 | $42,036 | $7,466 |
| NE | $42,630 | 13.85% | $36,726 | 90.8 | $40,447 | $5,877 |
| SD | $38,820 | 9.79% | $35,020 | 101.3 | $34,570 | $0 |
| WY | $45,850 | 7.45% | $42,434 | 92 | $46,124 | $11,554 |
The purchasing power of the state average pay after state and local taxes is 8% higher in Montana and 28% higher in Minnesota. The purchasing power of the national average pay after state and local taxes is 25% better than South Dakota’s.
In Minnesota, North Dakota, and Wyoming, saving that extra purchasing power is enough to pay for a house (at each state’s current average housing price) in less than 30 years.
Is anyone really surprised here? SDs sister state is Mississippi, the two have so much in common. Racism, poverty wages, last in everything – the list goes on and on.
Obamonomics just hasn’t set in yet in SD. It’s coming soon, it’s right around the corner.
South Dakotans can make up for low wages by working two or more jobs, right Grudz? I’m sure Talley’s is hiring.
You get to work two jobs to get to the salary of one job in SD, how special. It should be their slogan.
This isn’t surprising in the slightest. For some reason our politicians are always interested in speaking of economic development and they are quick to pass out tax incentives to bring companies here, but they fail to acknowledge why it is difficult to find employees.
You can have 10,000 open jobs, but if they all pay 20% less than the national average you aren’t going to fill them with qualified, engaged candidates.
Now to make things even interesting Cory should shade the bars red or blue depending upon who has had political control in each state over the past 40 years. I don’t want to give any spoilers, but there is a definitive difference.
According to the most recent US Census, four of the poorest counties in the US are located in South Dakota. Buffalo County is recorded with the poorest in the US with 56.9% of its population living in poverty. Following is Shannon County (the second poorest), Ziebach county is the fourth poorest, and Todd County the fifth poorest. South Dakota should really be proud of this record of accomplishment.
Here’s my new pitch to Dennis Daugaard for a multi-million dollar taxpayer-funded ad campaign: “If you’re below average come to South Dakota! It’s better than dying on Mars. Just don’t spank your monkey while driving.” That will be $2.5 million, Dennis. You’re welcome.
And yet South Dakota businesses will cry to the governor that they can’t find enough workers and in response Governor Daugaard will come up with schemes to find more workers that don’t address the underlying problem and are ultimately unsuccessful.
When will the businesses of South Dakota and our leaders ever learn the laws of supply and demand? If there is a shortage of something increase the price you are willing to pay for it and you will get more of it.
That’s what I’m here for, Nick. No charge to you.
I think we’re missing the most important thing here: we’re not 50th or 51st? We are 49th! Happy days are here again!
Good point Darin. Not only are we ahead of Mississippi we also beat Arkansas.
Besides the blue state/red state comparison, in all of Cory’s free time, I would like to see what I’m calling an the educational value quotient by state. This would be determined for each state based upon the difference between the average salary in a state versus the average teacher salary in the state. The greater the positive advantage for teacher salary over average worker salary suggests a given state values education more highly than a state that pays teachers closer to the average or less than the average worker salary.
In 2015, SD’s score would be low–$38,820 average worker salary versus around $41,500 for teachers is a mere $2,680 advantage or 6.9%. Compare Iowa which had an average worker salary of $41,840 versus its average teacher salary of around $56,000 (if memory serves) for an education advantage of $14,160 or 33.8%.
It will be interesting to compare South Dakota numbers for 2016 or 2017 when the teacher pay increase kicks in fully.
What do you folks feel would improve SD’s average pay? Less corruption? A greater minimum wage?
Darin, your comment about we are 49th instead of 50th or 51st reminds me of the old cold war days with the Soviet Union.
The U.S. and the USSR agreed to settle the issue of who had the best race car by having a head to head race. The U.S. car finished a full lap ahead of the the USSR vehicle. The headline in the U.S. papers read “American racer trounces Russian racer” The Soviet papers reported “Soviet racer finishes 2nd while American racer finishes next to last.”
http://www.startribune.com/final-ruling-on-minneapolis-minimum-wage-could-have-far-reaching-effect/391562491/
If this is upheld, Minneapolis will get to vote on a 15hr/min wage law in Nov. Power to the people, Hennepin county voters would vote it in.
Interesting information from all of you. However, you neglect the biggest obstacle for economic development – The state legislature, with a super majority of Republicans. They are so anti every thing for progress. We are becoming a retirement state and no incentive to do better or bring in people who can work. Thank you SD Legislature and State Government.
Yep, that is what the “South” in South Dakota is really all about…. We are merely the “Mississippi of the North”….You name it… With race issues, wages, taxation, and/or wealth disparity, South Dakota has historically paralleled here up north in the Great Plains the worst of what can be found also in the Deep South…. And even when we address an issue, like teacher pay in our state, we tend to do it on the backs of the poor and working poor through the further legitimizing and dependency upon a regressive tax system with no respect and/or acknowledgement for the reality of low wages and untaxed wealth in this state….
lots of good comments. In the past we would regularly hear that we have a lower cost of living to balance it out. That seems to just not be true from this information. I met someone from Pennsylvania about ten years ago who lived in a rural area with low cost of living and did construction in Philadelphia a couple hours drive away where the wages were high. So seeing someone with both lower cost of living and higher wages made the excuse that low costs made it even did not work for me anymore.
It is also hard to put a number on the idea that if someone else pays more that they get better workers and their kids get a better education and the houses are put together with higher standards etc. so they get other benefits that we never see a clear measure of. We can assume that our people have our good values but those other areas are not just a bunch of bums. Three hundred firemen lost their lives in the twin towers after they were told to get out because it was not safe because they had that much dedication to their job. How often does that happen here? Probably some times that we do not hear about but to assume we are just better is presumptuous.
Hi Cory,
To be meaningful, shouldn’t wage-comparison also take into account cost-of-living comparison? $200k gets a lot more house in SD than it does in top-ranked DC.
Kind regards,
David
Old guy– That is solid propaganda, even better than ” die on Mars or live in South Dakota. ”
Another saying from the good old USSR: we pretend to work and they pretend to pay us.
“You get what you pay for,” is just liberal propaganda perpetrated by George Soros and the Socialist-Communist-Marxist-Leninist-Maoist-Stalinist global Clinton Foundation machine.
David, I did cost of living—see column five in the chart.
“David, I did cost of living—see column five in the chart.”
Hi Cory,
My apologies! Sorry for the rebuke. I skimmed and missed the second chart entirely.
Kind regards,
David
The second chart shows that cost of living as an excuse for South Dakota’s low wages is dead.
David, Roger,
The Cost of Living table comes from a voluntary survey of cities, coming out of the Missouri Dept of Economic Development. Last I checked, only Pierre & Sioux Falls participated in the survey. Both sites are our most expensive communities in which to live.
Wyoming’s only participating community is Laramie. We don’t even get to see what Cheyenne looks like.
Montana’s only participating community is Bozeman.
So it’s not a good tool for determining STATE cost of living. It’s respectable for determining city to city comparisons, though.
Cory, I’d also pick nits with intermingling median tax rate and average salary. From a statistics standpoint, they’re very, very different.
Consider this dataset:
1,1,1,2,2,2,8,10,10,10
Average 4.7
Median: 2
See how dramatically different they can be? It’s not a big deal if we assume a standard bell curve; then median and average should be pretty close. But rarely are things that clean. So it’s best to be consistent. You’re taking average salary and applying what the middle household paid for taxes.
Perhaps you could find median household income to compare against median taxes. I still haven’t found a quality source for state cost of living comparison.
Hi Wayne,
Good insight. I had a hunch there was something going on with MO economy table… it lists housing prices in SD as being higher than 36 other states. (54% higher than Georgia? Dead even with New Hampshire?)
Tracing the links, it looks like Cory’s CoL info comes from here… which states “all places that participated during the 2015 Cost of Living Index survey period”. I find only SF, RC, and Pierre in the drop-down box.
This chart that takes data from the US Census Bureau and American Community Survey lists SD last amongst our neighbors in housing costs (for 2014). The MO economic list had us higher than all our neighbors.
Anyway, Cory, what’s your plan of action? Are you expecting all business owners to read this article and voluntarily give their employees a $2,000/year raise just so that we can look better on the charts? Also, shouldn’t the teacher pay increase raise our rank a notch or two once those incomes are factored in?
Kind regards,
David
Thanks for the Compare50 link. That’s helpful. There’s some pretty compelling argumentation that cost of housing/rent is the strongest determinant of cost of living, so good enough for our blog debates.
It’s odd that the C2ER dataset includes cities which other city comparison tools which use the same Missouri data exclude. C2ER includes Cheyenne, so now we have two communities for all of Wyoming. C2ER includes Missoula & Kalispell, but still no Billings.
Wayne, I’ve heard the complaint about the C2ER data before, but where then can I find a more comprehensive cost-of-living index that gets data from everywhere, including every state’s Redfield and Roscoe? And why is it so wrong to look at data from our state’s largest city and our state capital?
David, interesting question about the impact of the teacher pay raise. Given a workforce of about 9,400 teachers out of 465,000 total workers, assuming an average pay raise for teachers in this school year of $6,500, and assuming an average pay raise of 2% for everyone else in the state (pure speculation—I invite evidence-based numbers), adding that teacher pay raise to the last five months of this year for that 2% of the workforce results in an average pay raise workforce-wide of 2.1%, up to $39,635, $39 more than would have resulted from 2% for everyone, including teachers.
When I multiply the other states at the bottom of the list by 2%, I find we stay between Arkansas and West Virginia at third lowest.
Cory,
Looks like the compare 50 website does a better job for consistency sake.
The reason why you can’t use the C2ER is because you’re using vastly different datapoints to draw conclusions.
You’re saying South Dakota’s average salary is X, but using the cost of living adjustment for the 2-3 most expensive places to live. If you want to be consistent, you need to pull and aggregate incomes from those specific towns listed in the C2ER dataset and go with that.
For instance, the median household income in Sioux Falls is $51,158 in 2013. For Rapid City it was just shy of $45,000. For Pierre, $54,453.
The Median household income for South Dakota was just shy of $49,000.
Two of those communities were substantially above the median household income.
It’d be nice to aggregate those communities, but it’ll take some legwork. We’re not talking averages, we’re talking the middle household’s income. So we need to weight by population to create an aggregate.
If you want to keep using C2ER, then the only way to legitimately compare states is to draw conclusions ONLY about the enumerated communities participating, and not mixing data that includes the whole state. You can’t make accurate conclusions; quite the contrary. You’ll be creating some very bad conclusions.
Compare50 looks to be using more internally consistent metrics – median household income and median housing cost.
The fact that housing makes up less than 17% of the median household’s income in South Dakota makes us better than all our neighbors save North Dakota. That means our lower incomes really can go farther.
If we’re going to work with Compare50’s data from US Census and American Community Survey, then click on the Cost of Living link. They show SD cost of living higher than every adjoining state except for Montana. You may be able to get a house cheap in Mobridge, but you’re going to burn up 200 miles of gasoline every time you want to shop at Walmart or OfficeMax or Menards or go to the hospital for a serious procedure.
David, if there is any plan, maybe it lies in economic development programs that would target higher-paying industries. Or maybe we should just let the market clear its own needs.
More from Compare50:
—SD has second-lowest real Gross State Product per worker in region (only Montana is lower).
—SD has second-lowest labor share of real GSP, just over 50% while MN is at 60%. Wyoming’s is lower than ours but catching up.
—SD has second-lowest per capita GSP (only Wyoming worse).
The real question here is, “could South Dakota do better?” and the answer is an obvious huge, “YES.”
I think it’s pert near un-American to be complacent with where SD is. America is about always getting better at what we do, improving efficiency and maximizing return on investments. It’s about all legal entities, including states, competing with each other to get the most out of the American system. SD is a proven weak competitor, and it’s people have got to ask themselves, “is this really what we want in the long haul?”
As Adam says, we can do better. Instead of coming up with all these Rube Goldberg economic development and workforce recruitment schemes, we could just acknowledge market realities and pay our workers more. Look how well high wages recruited workforce in the Bakken.
Recruiting workers isn’t complicated: pay them a boatload a money. If you’re not willing or able to pay them that boatload of money, then you’re always going to be competing for labor from a disadvantage, trying to make excuses and cover the fundamental fact that you don’t think your workers are worth as that other state thinks they are.
Besides paying workers more in general, we also need to strengthen our educational system and develop home-grown entrepreneurs that develop businesses here that pay more than average wages for SD. SD’s race to the bottom in wages and our business recruitment efforts to try to attract out of state businesses to relocate here has largely been ineffective. I would much rather invest in the education of SD kids from pre-k to Phd so that those kids can develop businesses here and choose to stay here. Our most precious resource in SD is our kids and we have to invest in their future.
This labor day, instead of honoring the dying unions who have wrecked much of the economy, we should celebrate the management and ownership of businesses who feed and clothe so many of our people.
Unions are dead, workers who work harder get ahead faster.
Grudz, we honor workers by honoring their right to organize and help each other resist the predations of management. The rich and powerful need no honors.
Unions have not wrecked the economy. Unions helped workers enjoy more prosperity and liberty. The rich and powerful caused the Great Recession with their speculation.
Darin, I agree: investing in education is the best action our Legislature can take to promote higher wages in South Dakota.