A great deal of concern has been voiced recently regarding wages for registered nurses (RNs) in South Dakota. A recent article argued that South Dakota’s RNs are drastically underpaid relative to the nation as a whole. The article pointed out that average annual wages for an RN in South Dakota were $57,010 in 2017; compared to $57,930 in Iowa and $62,210 in Nebraska, for example.
So why do RNs earn less in South Dakota? A full explanation might be too much, but a couple simple factors like taxes and the overall cost of living can explain much of the disparity.
Let’s start with taxes. The article points out that nationally, the highest average pay for an RN was found in California, $102,700 per year in 2017. An RN in California earning $102,700 would pay an estimated $6,591 in state income taxes, 9.3% of their annual income. They would also have to pay sales and use tax rates between 7.25% and 10.25%, depending on location. In contrast, an RN in South Dakota pays no state income tax and faces a state and local sales tax rate between 4.5% and 6.5%.
The second point of consideration is the general cost of living. Housing in South Dakota, though not necessarily in Rapid City, is generally less expensive than in many parts of the country. Food, transportation, and health care also tend to be less expensive in South Dakota than they are in other states. As a result of these regionally price disparities, a dollar goes farther in South Dakota than in many other areas of the country.
So how do RN wages stack up once we look at the actual purchasing power of RN wages by taking taxes and the cost of living into account? South Dakota jumps from 51st in the nation to 34th in the nation for RN pay. In fact, the purchasing power of the average RN wage is South Dakota ($53,005) was actually higher than the purchasing power of average RN wages in both Nebraska ($52,629) and Iowa ($49,531).
The same pattern shows up when looking at states with even higher average wages for RNs. In California, the purchasing power of the estimated $102,700 in RN wages drops to $63,269. That means that the original $45,690 disparity in wages between RNs in California and South Dakota drops to only $10,264 after taking taxes and the costs of living into account.
And RNs in Minnesota take a big hit as well once we look at purchasing power rather than just average wages. The average annual wage for an RN in Minnesota during 2017 was $77,540 but the purchasing power of that wage was only $58,528. The result, a $20,530 disparity in wages between RNs in Minnesota and South Dakota drops to only $5,523 after taking taxes and the costs of living into account.