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Business & Economics

South Dakota has second highest labor force participation rate in country

Hiring sign in Lead SD.JPG
SDPB
A help-wanted sign at a business in Lead.

South Dakota has the second-highest labor force participation rate in the country but still has a major gap between the number of open jobs and people looking for work.

"The inversion is new. Like to have that many more job openings than people looking for work is an unusual situation," said Mike Allgrunn, a professor at the University of South Dakota who specializes in labor economics.

He says the high labor force partipcation rate means most open jobs will need to be filled by new residents.

"Strong labor force participation rates in South Dakota are something that has historically been the case. We also have a large number of our people working multiple jobs," Allgrunn said. "This idea of a strong work ethic in South Dakota is something that holds up in labor statistics. By not closing down during the pandemic, I think we had more people stay attached to the labor force during that time."

The labor force participation rate is the percentage of people 16 years or older that are working or actively looking for work. It excludes people in the military and institutions (prisons, mental health hospitals, nursing homes, etc.).

 A chart explaining who is in the "labor force."
U.S. Bureau of Labor Statistics
A chart explaining who is in the "labor force."

South Dakota has a 68.6% participation rate, according to seasonally adjusted November data from the Federal Reserve.

Washington, D.C., has the nation's highest rate at 70.5%. South Dakota is followed by North Dakota and Nebraska, which are tied at 68.4%

The national average is 61.8%.

Unemployment, open jobs

South Dakota and New Hampshire are tied at 2.7% for the fifth lowest unemployment rate — the percentage of people who want to work but don't have a job.

Nebraska has the lowest rate of 1.8% followed by Utah, Oklahoma, and a tie between Vermont and Idaho.

The national average is 4.2%.

The low unemployment rate — which represents 12,800 interested South Dakota workers — has made it difficult to fill the 47,003 open jobs in the state.

Allgrunn said this gap is caused by businesses staying open during the pandemic and trying to expand as the demand for goods and services increases.

People not in the labor force include retirees, college students, stay-at-home parents, people who lack job skills, and parents who would like to work but can't afford child care.

Allgrunn said the labor force participation rate could increase by ramping up job training, encouraging students to work part-time, and encouraging young people to join technical trades that don't require college degrees.

But Allgrunn said most open positions will need to be filled by new residents who move to South Dakota.

Wages, income

South Dakotans had an average annual pay of $49,165 in 2020, an 8.9% increase from 2019, according to the latest South Dakota Workforce Report. Per capita personal income increased $3,461, or 6.4%.

"High demand, low supply is always what causes the price to go up and that's what we're seeing here: high demand for workers and a supply that can't quite keep up," Allgrunn said.

Allgrunn said wage hikes are also influenced by inflation.

South Dakota's wages and income remain lower than other states due to its lower cost of living, he said.

"When I got my job at the University of South Dakota they offered me half as much as places on the East Coast but I took it," Allgrunn said. "It was like tens of thousands of dollars difference. But you look at cost of living and you realize it's more comparable than you think."

Allgrunn said most companies can pay higher wages since their prices are increasing. He says smaller, locally owned business are more likely to struggle.