Last updated on 2014.07.21
The good news: Only 4.7% of South Dakota's hourly workers are making minimum wage or less. That percentage is higher in Wyoming, Nebraska, and Iowa. Passing the initiated measure to raise the South Dakota minimum wage should thus not hurt too many employers.
The kinda bad news: That percentage is lower in Minnesota, North Dakota, and Montana.
The kinda worse news: The median wage in South Dakota, $12.78, is lower than the median wage in 31 states. Every state on our borders has a higher median wage.
The worst news: according to the ACCRA Cost of Living Index averages for 2013, South Dakota's cost of living isn't much different from North Dakota's or Minnesota's, and it's notably higher than Iowa's and Nebraska's. Factor in cost of living, and half of the hourly workers in each of our neighboring states have significantly more purchasing power than half of the hourly workers in South Dakota.
| cost of living 2013 | median wage | MW/COLI | |
| IA | 92.1 | $ 13.10 | $ 14.22 |
| MN | 101.9 | $ 14.31 | $ 14.04 |
| MT | 98.4 | $ 12.96 | $ 13.17 |
| ND | 99.9 | $ 14.59 | $ 14.60 |
| NE | 89.5 | $ 13.02 | $ 14.55 |
| SD | 99.6 | $ 12.78 | $ 12.83 |
| WY | 96.7 | $ 14.24 | $ 14.73 |
What's that again, Bruce Yakley, about why you're having such a hard time hiring workers in Mitchell?
Kind of puts a pin into the argument that it is okay to pay teacher so little since South Dakota is a low cost of living state.
Not really, MJL. Cory uses a poor index for cost of living comparison. The ACCRA COLI derives its metrics from voluntary surveys sent to metropolitan areas (where Sioux Falls is considered small) across the nation, excluding rural areas. In their COLI for South Dakota, they say housing is 106.8% that of the nation. Does that sound right to you?
According to the US Census Bureau, the median value of a home in South Dakota is just under $130k, whereas the median value of a home in the US is $181k. The only way ACCRA could determine South Dakota's housing costs are above the US is if they only got a response from Sioux Falls.
Moreover, ACCRA doesn't weight their COLI based upon the percentage of your budget each metric (Grocery, housing, utilities, transportation, health, misc.). Housing and healthcare should be weighted more heavily since they consume larger shares of our wallet, etc.
Does that mean we shouldn't invest more in education? No... this isn't the lens we should be using since it doesn't accurately reflect our region.
So does anyone offer a more reliable COLI?
Wayne B., more relevant to teacher salaries would be a median home price comparison between SD and the surrounding states. I've been searching the U.S. Census Bureau site and can't find state rankings. Could you direct us to the USCB data that you're citing?
John, use the Census QuickFacts. They'll get you median housing values, household income, etc.
ND: $123,900
NE: $126,700
SD: $129,800
MN: $194,300
WY: $184,400
MT: $183,000
US: $181,400
Cory, I'm afraid I haven't found a COLI table that is satisfactory. I apologize for not being helpful in that regard.
There's a working paper about improving the ACCRA COLI by Keith Phillips & Christina Daly, but they don't produce a new table, just explain how to correct some of the biases.
Wayne B. and Cory, I'm finding ACCRA to be a widely-used source of COLI comparisons in the country. I'm not enough of a statistician to comment on your criticism of ACCRA's methodology, Wayne, but scanning the internet I'd say it has a following of highly regarded users. Wikipedia notes that its "index is widely used by economists, researchers and corporations to measure relative cost of living." The U.S Census bureau cites ACCRA as a source in its cost-of-living index in 2010: http://www.census.gov/compendia/statab/2012/tables/12s0728.pdf Given a following like that, I'd say Cory's use of ACCRA data is reasonable enough and provides a useful reflection of cost-of-living comparisons.
John, I will acknowledge that Wayne's no slouch on statistical analysis. (Good debate education helps that along!) And even if the ACCRA numbers are widely used (which is one reason I like to return to them consistently), lots of people can be wrong.
John, the index is indeed widely used, but we need to recognize the limit of its utility. Because ACCRA's numbers are generated from voluntary surveys of cities, it creates an aggregation bias for states. The only participants from SD were Pierre, Sioux Falls, and Rapid City, communities with much higher property values than other communities. We need representation from the other 2/3rds of the state.
ACCRA's database of over 300 cities is helpful for comparing Sioux Falls to Bozeman or Minneapolis, but it's not designed to tell us the difference among Dupree, Plentywood, and Canby, let alone the differences among SD, MT, and MN due to small sample sizes.
I retract my other objection about weighting - according to their methodology, ACCRA numbers do weight by consumer expenditure per category (so housing & healthcare would have a greater weight because they're a greater share of our household budget). Mea Culpa
However, that makes the aggregation bias that much worse for states that have few participating cities in the ACCRA survey. Look at the median household values for Pierre ($150,748) Rapid City (151,100) and Sioux Falls ($153,400) vs the median for the state. ACCRA is getting a poor snapshot of what it's like to live in a state with such a rural population, and trying to generalize it across the state.
Cory's comparisons are probably fine if we want to talk about a Sioux Falls teacher, but we need to realize we cannot correlate that argument to the person from Chester.
Wayne and Cory, common sense tells me a metric comparing population centers to population centers is valid enough in this case. My piece in The Constant Commoner on this last December compared housing prices in Sioux Falls, Watertown, Pierre, Rapid City, and Custer County to prices in Gillette, Sheridan, Casper and Cheyenne. They were within a percentage point or two of each other--with Cheyenne being the exception. It was notably lower. Common sense and experience tell me that a similar comparison between rural enclaves in the respective states will yield similar results. I'm not one to argue statistics, but I am one to stand by my conclusion that if ACCRA's data is good enough for the Census Bureau, it's good enough for me. If Wayne B. or anybody else wants to produce data and methodology that draws conclusions significantly different from ACCRA's I'll consider it from the viewpoint of a reasonably informed layman. Until then, I can only go by what's out there from the only credible sources I have available to me.
John,
Common sense leads you astray, here. ACCRA should not be used as a ~state~ comparison tool because of the self selection and aggregation biases built into its methodology. The way ACCRA is meant to be used is by city to city comparison within its database, and even then is has some issues (that is explicitly how the Census Bureau uses ACCRA).
Here's the thing - we know empirically the ACCRA index for South Dakota is biased high because the three communities participating in the survey are the ones with the highest cost of living in the state (save perhaps Dakota Dunes). It'd be like taking a survey of car ownership for a town, but only getting results back from doctors, lawyers, and CEOs - you'll get the Audi, the BMW, and the Lexus, but you'll miss the Chevy, Ford, & Honda owners who didn't bother to respond to the survey.
I cannot tell you at a glance which of our neighbors are also biased, and in which direction, or by how much.
On a state level, median housing value may be the best surrogate for easily accessible data, since housing tends to occupy the largest percent of ones budget. If we could get a few other data points (healthcare expenditures), that'd be even better.
in any event, for consistency sake, we shouldn't be comingling averages (COLI) with medians, since they are two different ways of looking at data.
I'm sorry I don't have a better answer or a ready go-to alternative. You can play the music for the saxophone with a bassoon, but it isn't going to be a good fit.
Thanks Wayne. I do appreciate the time and thought that you've put into this conversation. You might want to check out The Constant Commoner over on the right to see where I went with this thing. Your well-taken reservations about the value of the data notwithstanding, I stand by my conclusion that South Dakota's reputation as a low cost-of-living state is a myth. And if you don't mind my pressing this just a bit more, what's your opinion/impression of South Dakota's place on a cost-of-living scale?
I'll do that John.
My impression of South Dakota is that our housing is much more affordable. My wife's family lives out east, and pays twice as much in property taxes for less house than I have. They pay more for groceries. They pay more to license & register their vehicles. My wife's mother is a nurse manager. I checked, and she's not paid that much more than one would be paid in Sioux Falls.
Heck, even in Minnesota, I couldn't get as much house for the money as I have in Sioux Falls.
My house payments takes up only 1/5 of my budget. I managed to work my way through undergrad & grad school at USD without student debt. I'm able to put funds away for kids' college, my retirement, and still purchase the fun things in life like kayaks, fancy shotguns, and more fishing tackle than I can conceivably use. From where I stand, South Dakota is a great place to get ahead.
But even the plural of anecdotes do not data make.
The data shows our housing is below the national median (SD $129,800 vs US $181,400). But so are our wages (SD $49,091 vs US $53,046)
Our housing is 71.5% that of the US median
Our wages are 92.5% that of the US median
The difference between those two price points tells me, broadly speaking, we have a great opportunity to get ahead with financial discipline - we can take advantage of cheaper housing with wages that aren't significantly off from the US median.
Our poverty rate is 1.1% points lower than the US poverty level.
South Dakota isn't a rosy, utopian low cost of living state, but it's not the toilet some folks make it out to be.
My biggest gripe is we don't actually teach students how to manage their money. My dad was taught how to do his own taxes in school. He was taught how to manage a budget. We got maybe 3 hours of home budgeting, and none of it in home economics class.
We don't teach the basic daily skills needed to get ahead. We certainly don't teach discipline. I had to learn all that outside of school. Thank goodness my father taught me the ins & outs of finances.
SD's
I can only speak for myself, but I'm way further ahead living in MN than if I had stayed in SD. My job in the healthcare field has been very stable, and I've had 3% annual cost of living raises, very affordable health insurance and a traditional pension. Since I live in a medical town, we didn't take that much of a hit in the recession. The wages where I work very competitive IF one has an education. The unions here don't have the weight they once did, so menial low wage jobs are plentiful. Again, education is a key factor, and will get you in the door to a prospective company with decent wages if you work at it.
Wayne B., thanks for the tutorial and the up-frontness. Sounds like we can agree that, as you put it, SD isn't the "utopian low cost of living state" that seems to be the characterization I so often hear from those who justify our low wages. I just think top-down economic development efforts from those who think a low-wage status for our state is a plus are misguided. Building on your last remarks, I think putting more emphasis on education and teaching practical skills would be a much smarter and better investment of state money and resources. As far as data I'm mining to build my case at The Constant Commoner, it looks like ACCRA research is the movie that everybody's watching, for better or worse. For now I have to stick with it. Hope to chat with you again.