I’m puzzling over the seeming disconnect between South Dakota’s alleged population growth and its stagnant economy.
Governor Kristi Noem has claimed that lots of (good white Christian) people are moving to South Dakota for (good white Christian) Freedom. Immigration expands the labor pool and eases inflationary pressure. The pandemic squeeze on inflation was one of the factors that made inflation worse:
When the economy started to open back up, he said there was a huge demand for workers in industries that typically rely on immigration, like service, hospitality and child care. But the pool of immigrant workers was suddenly a lot smaller.
The number of legal immigrants coming to the U.S. was cut in half between 2019 and 2020, according to Julia Gelatt with the Migration Policy Institute.
“The sharp drop in immigration was a big contributing factor to the tight labor markets we saw,” she said.
And that gap in the labor market led to wage growth, said Giovanni Peri at the University of California Davis. That, in turn, contributed to another of the pandemic’s big economic stories: inflation.
“But the recent rebound of immigrants started helping on that front,” Peri said [Savannah Maher, “Immigration Is Slowly Increasing After a Stark Pandemic Drop,” Marketplace, 2023.04.10].
If people are moving to South Dakota, we should see our labor force booming. But according to local financier think tank the Dakota Institute, South Dakota’s employment growth lagged well behind the national rate in 2022 (2.4% SD, 4.2% US), and the Dakota Institute is predicting South Dakota’s chronic labor shortage will continue through 2023. What gives—aren’t Noem’s new recruits seeking jobs along with their Freedom?
New residents ought to at least be buying more stuff and creating more opportunities for workers to make money. According to the Bureau of Labor Statistics, South Dakota just missed the top ten for growth in average weekly wages in Quarter 3 of 2022. But South Dakota’s average weekly wage remains the fifth-lowest in the nation—$1,052, 78.9% of the national average weekly wage of $1,334 and 78.2% of Minnesota’s $1,346. Only Oklahoma, Arkansas, West Virginia, and Mississippi are paying workers less.
Maybe that persistent low pay helps explain South Dakota’s GDP shrinkage throughout 2022: it’s tough to compete for a slice of national economic growth when you don’t pay workers competitive wages.
South Dakota’s dismal economic figures suggest a couple competing conclusions: either folks aren’t moving to South Dakota as much as Governor Noem claims, or the folks who are moving here somehow aren’t generating a lot of healthy economic activity that trickles down to growth for all of South Dakota.