In South Dakota, top income earners have more buying power and poorer people can do less with their money. That’s according to recent data released by the Center on Budget and Policy Priorities and the Economic Policy Institute; however, adjusted Census data brings South Dakota’s poverty rate down.
When economic discussions arise, the poverty line becomes a key factor in examining the difference between the rich and the poor. The poverty line is an absolute, standard dollar amount that acts a threshold to label certain households impoverished.
"It was established decades ago. The methodology was based on several times the cost of food for a family," Joy Smolnisky with the South Dakota Budget and Policy Project says. "It didn’t look into the details. It just kind of picked a number and said,‘okay, this looks like poverty,’ and then we’ve adjusted that for inflation ever since."
Smolnisky says the poverty line becomes an arbitrary number, because cost of living varies significantly across the country. Now the Census Bureau has a new rubric called a supplemental poverty measure. It addresses that question of how the poverty line applies nationwide. It weighs factors like cost of housing, the price of transportation to work, and the cost of healthcare and child care. The new measure additionally considers benefit programs people utilize.
"So if I’m getting food stamps, that really is considered a type of income under this supplemental measure, because it makes a huge difference in whether I can meet my daily needs," Smolnisky says. "It also looks at how much I pay in taxes or if I get an earned income tax credit back, because that affects how much money I have to meet my daily needs. "
The supplemental poverty measure uses all of those factors to establish whether the money a household brings in is enough to cover its basic needs. That determines poverty. The adjustment means South Dakota’s numbers look a little better than without the cost-of-living considerations. The state’s rate before looked to be at about 14 percent. Adjust it for key factors, and that number is eleven percent.
"So more than one in ten in South Dakota do not have adequate income or in-kind stuff like food stamps to meet basic expenses," Smolnisky says. "Is this a problem in a society when ten percent of your households can’t meet those basic supports? That’s a question we would want to answer for ourselves."
Smolnisky says the new perspective on poverty offers policymakers a helpful tool. She says putting a magnifying glass on struggling households reveals which segments of the population can’t make it work in this economy and what – if anything – people should do about it.
"Do we need to do economic development that’s geographically targeted to where these households are at so that they have work opportunities? Do we need to do skills development that provides educational opportunity or skills training that targets households that aren’t able to be self-sufficient?" Smolnisky asks. "We can think about if we ought to or how we could change fiscal policy and change social policy."
"We’re looking to provide them with better opportunities that have higher compensation or better benefits with health insurance or retirement or what have you that they can use to benefit themselves and their families," Commissioner Pat Costello of the Governor’s Office of Economic Development says.
Costello is tasked with stoking South Dakota’s economy. He says encouraging existing businesses and new companies to establish more jobs is the office’s primary interest.
"On a job creation standpoint, we’re looking for jobs that pay better-than-average wages across the state," Costello says. "So in some communities, in our larger communities, that might be more of a $12-$13 or $14-$15 an hour job versus maybe in some more rural areas a $10 to $11 job, and that’s strictly market-driven."
Costello says South Dakota’s different communities accommodate different wages, but he says his office strategizes to bring high-quality work opportunities to all regions.
"If we continually provide incentivize companies that are paying better-than-average wages and as unemployment continues to decline and employers are forced to compete for their workforce, the wages will go up," Costello says. "So that’s in essence what we’re looking to allow those market forces to sort out, but we don’t want to just raise the cost of doing business in the state of South Dakota. We’re looking at trying to change the actual DNA of the job structures in South Dakota by incentivizing those industries that provide better paying jobs for our citizens."
Despite adjustments for cost of living, the Census Bureau’s measurement shows South Dakota’s poverty rate still hovers above all its neighboring states save Montana. Iowa, Nebraska, Minnesota, North Dakota and Wyoming all have fewer people who don’t have enough money for their basic needs.
A variety of factors contributes to that disparity and some remain undiscovered. For example, the latest report doesn’t break down socio-economic factors most applicable to South Dakota – namely poverty as seen on multiple Native American reservations. So more data is needed before economic experts can point to exactly why this state has higher poverty rates than others in the region.
Joy Smolnisky with the South Dakota Budget and Policy Project says the latest numbers still offer insight into the economic challenges facing South Dakota without advocating a particular agenda.
"These numbers help us gain an unbiased picture of what economic realities look like in South Dakota. In that way, we as citizens can say, ‘Okay, are there policy decisions that need to be made? Let me look at the statistical realities. Let me consider the options, and then I can make a decision that supports my value structure,'" Smolnisky says.
Smolnisky says people can’t act as informed and engaged citizens if they lack solid information about their state’s economy and their community’s budget hurdles.
Listen to a more in-depth examination of the latest poverty information and income disparity numbers during Wednesday's edition of Dakota Midday. The program airs live at 12 p.m. CT/11 a.m. MT on SDPB Radio.