Monday, April 21, 2014

Daugaard Is Begging Young People To Stay in South Dakota

Governor Daugaard turns to the editorials of the state's newspapers to try and beg young people to stay in South Dakota.  His main arguments (stop me if you have heard this one before), low unemployment and low taxes.  Exactly what every 20-something is primarily focused on right now.   He seems to also be aware of the main counter to this plea: But the wages in South Dakota are so low.  His response; adjusted per capita income.  
Now some people will say, “There may a low tax burden and low cost of living, but I won’t get paid as much if I live in South Dakota.” Actually, when it comes to per capita personal income, we fare pretty well. Nationally, we rank in the top half and we do better than states like Texas, Florida and Wisconsin. 
And, if you adjust the per capita personal income to consider the low cost of living, we are the fifth best in the nation. If you adjust for lack of income taxes, we rank second in the nation.
If this seems a bit convoluted to you, it is because it probably is.  Per Capita income is based on adding in all the income earned and then dividing it by the number of people.  The problem with that focus is that a few very wealthy can skew it.  If farms are doing well, then that will have an impact on per capita income.  If there are several wealthy individuals moving here for a tax shelter, then per capita income would go up.  None of that would be a real benefit for people still trying to survive on $8 an hour.

Bernie Hunhoff explains all of this back in 2011 when he debunked the myth of everything is cheaper in South Dakota.  He wrote in South Dakota Magazine:
But between you and me, I just haven't noticed that K-mart prices its lawn chairs and cranberry juice any cheaper in South Dakota than the rest of the country. It's well-documented that housing costs are on par with all but the high-cost areas of the USA, unless you live in one of those cool little West River towns like Fairfax or Bonesteel where the fishing is great and you can still get a decent old house for $12,875. Our energy prices were once lower, but they are catching up with the rest of the nation....
Wages are considerably lower in South Dakota. We generally rank around 50th in that category, so people working for wages are likely being squeezed here. Business owners, farmers and ranchers may or may not feel the same pressures, depending on their industries and their luck.
When you start to do a side by side comparisons of the mean annual wages offered in South Dakota for fields and compare that with neighboring states like Minnesota and Iowa and North Dakota as offered through the Bureau of Labor and Statistics May 2013, you may get a clearer picture.  I decided to look at some of the broad fields that employee a lot of blue collar workers (since they are the ones most likely to be paid hourly).

South Dakota Construction and Extraction Occupations- $34,420
Minnesota Construction and Extraction Occupations- $51,690
Iowa Construction and Extraction Occupations- $41,240
North Dakota Construction and Extractions Occupations- $47,650

South Dakota Production Occupations- $30,800
Minnesota Production Occupations- $35,790
Iowa Production Occupations- $33,440
North Dakota Production Occupations- $38,340

South Dakota Office and Administrative Support Services- $28,080
Minnesota Office and Administrative Support Services- $36,180
Iowa Office and Administrative Support Services- $32,200
North Dakota Office and Administrative Support Services- $32,700

The income tax rate for a single person in Minnesota for income listed above fall into 7.01% of income earned over $24,000 (These are rounded figures.)  When you figure in income taxes, I still come ahead in Minnesota.  In Iowa, the rate is 6.8%.  In North Dakota the 2014 rate was 1.51% for most and up to 2.82%.  I guess you can make the call if no income taxes is enough to offset the low wages.


  1. A two-step process would recruit and retain SD workers:

    1. Pay them well - in fact put aside all the silly per-capita statistical clouding and be able to say that if you do job X, SD will pay you at least as well as any surrounding state will. Mike, you do a nice job of making the actual comparisons any real worker will make: his or her wages in SD compared to other states - not some abstract state average.

    2. Sustain and fund the programs that will be valued: schools, social services, infrastructure. Have a reasonable tax base that promotes the long-term health of those expectations. Low tax means low service - people are aware of that.