SIOUX FALLS, S.D. (KELO) — Recently released U.S. Census data shows South Dakota saw a drop in median household income of 9.08% from 2021 to 2022, with that median falling from $73,890 to $67,180. This was the largest percentage drop in income in the nation for 2021-2022.
Note: The South Dakota Governor’s office reached out with concerns about the data source (The U.S. Census Bureau’s Current Population Survey) for this story on September 28, 2023. We’ve updated this story to include further explanation on the survey and another dataset from the U.S. Census Bureau. This explanation can be found at the bottom of this story.
In all, only nine states saw a drop in median household incomes during this time period.
- Indiana: -0.22%
- Pennsylvania: -0.57%
- South Carolina: -1.23%
- Illinois: -1.55%
- Kansas: -3.86%
- New Hampshire: -4.35%
- Vermont: -5.11%
- Idaho: -5.64%
- South Dakota: -9.08%
South Dakota is already a state with a low median household income, coming in 38th in the nation in 2022, ahead of only Tennessee, Florida, North Carolina, Oklahoma, South Carolina, Alabama, Louisiana, New Mexico, Kentucky, Arkansas, West Virginia and Mississippi.
Such a large percent drop raises a number of questions. KELOLAND News has reached out to the Governor’s Office of Economic Development (GOED) to ask what caused this decline, and how it effects South Dakota families.
We have not yet received a response.
A look back through time shows that such a drop is not the norm.
Casting back a decade from the reported time period, we find that from 2011-2012, the state saw a 4.56% increase in median household income.
If we look at the past decade as a whole, no state saw a drop in median household incomes overall, though some did see lower increases than others.
For instance, Oregon saw the largest increase in median household income in the past decade, rising 67.59% from 2012 to 2022. It was 11th in the nation in 2022.
On the opposite end of the spectrum we have West Virginia, which saw an increase of only 20.45% since 2012, and ranks 49th in median household income in 2022.
South Dakota is toward the bottom of this list, ranked 42nd in terms of the percent increase in median household income since 2012 at 35.99%.
The issue of falling incomes in South Dakota has not been a recent trend either. For those of you wondering what impact the pandemic may have had, a look back at data from 2019 to 2020 shows that South Dakota achieved a 9.22% increase in median household income in that year.
From 2020 to 2021, that increase was 5.27%. Then came the 9.08% decrease from 2021 to 2022.
Not only did South Dakota see a decrease in median household income, it also saw the gap between it and the states ranked lower shrink.
This is because of the 12 states with a lower median household income lower than South Dakota (Tennessee, Florida, North Carolina, Oklahoma, South Carolina, Alabama, Louisiana, New Mexico, Kentucky, Arkansas, West Virginia and Mississippi), only South Carolina did not see a rise in median household incomes.
One might say that South Dakotans have lower median incomes, but that this is offset by a low tax burden as well. The thing is however, that tax burden does not appear to be a major factor in this case.
South Dakota has one of the lower tax burdens in the nation for its residents, at 8.4% in 2022 according to taxfoundation.org. It is not the lowest, however. Alaska takes that title with a 4.6% tax burden.
Despite this low tax rate, Alaska does not fall into the bottom half of median household incomes. It ranked 9th in 2022 with a median household income of $89,740. It also saw a 10.61% increase from 2021 to 2022.
Wyoming has the 2nd lowest tax burden, at 7.5%. It is ranked 26th in median household income at $73,090, and saw an increase of 2.87% in 2022.
Meanwhile, high taxes don’t appear to be a detriment to median household incomes either.
The state with the highest tax burden in 2022 was New York at 15.9%. They ranked 21st in median household income at $75,910. They saw an increase of 4.10% from 2021 to 2022.
South Dakota’s neighbor, Minnesota ranked 39th in tax burden in 2022, well into the bottom half of the nation at 12.10%. Despite this, the state had the 7th highest median household income at $90,390. From 2021-2022, they saw a rise of 12.36% in median household income.
At a 12.10% tax burden, a Minnesota household making $90,390 would pay approximately $10,937.19 in taxes, leaving approximately $79,452.81 in earnings.
At a 8.4% tax burden, a household in South Dakota making $67,180 would pay approximately $5,643.12 in taxes, leaving approximately $61,536.88 in earnings.
We used the U.S. Census Bureau’s Current Population Survey Annual Social and Economic Supplement (CPS ASEC) in this story as it is the main source for income data. In general, the CPS ASEC is recommended for situations dealing with multi-year data.
This story, in addition to single-year data, also looked at ranges of data spanning up to a decade. The decision to use the CPS ASEC was made to ensure a cohesive and relevant data-set throughout.
These is another survey conducted by the Census Bureau; the American Community Survey (ACS) which is recommended only for 1-year estimates. The methodology between the two surveys is “substantially different” according to the Census.
The income sources measured by the two surveys also vary greatly, with the CPS ASEC being much more detailed. “The income questions in the ACS cover the major income sources, while the CPS ASEC income questions are much more detailed and provide more comprehensive coverage of all potential income sources,” reads the Census Bureau fact sheet contrasting the two.
In addition to these differences, the two surveys also use different criteria for time-frames. The CPS uses previous calendar year as a reference point, whereas the ACS uses the previous 12-months, using a rolling sample each month.
Because the CPS is conducted from February-March each year, its use of calendar year means that each year is the same with regards to time-frame. The ACS meanwhile is conducted continuously throughout the year, using a previous 12-months criteria, meaning some surveys may represent January-December data, while others in the same set may represent August-July data.
Due to these reasons, as well as the fact that the ACS would not be reliable in looking at changes to median household incomes over multiple years, we opted to rely on the CPS ASEC rather than cherry-picking incompatible data from two very different datasets.
The overall results are not vastly different in terms of state ranking for South Dakota, though the ACS does show a 5.4% increase in income as opposed to the 9.08% decrease shown by the CPS ASEC, likely due to the differences noted between the detail of the surveys. For example, the ACS survey asks only 8 questions, while the CPS is a “series of questions about more than 50 sources of income and up to 27 individual income values.”
Additionally, it is noted by the Census Bureau that the CPS is the survey used to to produce the official annual estimate of socioeconomic and demographic characteristics, “including income, health insurance coverage, school enrollment, marital status, and family structure.”
The CPS result for South Dakota’s median household income in 2022 ($67,180 (38th in the nation)) has a margin of error of 3,398, meaning it could be as high as $70,578 (34th in the nation) or as low as $63,782 (42nd in the nation).
The ACS result for South Dakota ($69,728 (29th in the nation)) has a margin of error of 2,258, meaning the median household income could be as high as $71,986 (25th in the nation) or as low as $67,470 (38th in the nation), which would put it one spot ahead of the official estimate for the median household income in South Dakota produced by the CPS.
