The US Bureau of Economic Analysis (BEA) recently released the 2012 Regional Price Parities (RPP). The RPPs are included in a report comparing per capita personal income by state. The RPPs are used so that meaningful comparisons of personal income levels in different states can be made. After factoring in RPPs, the report shows South Dakotans’ as having the fifth highest average real per capita personal income.
For 2012, South Dakota’s RPP was 88.2 (the national average is 100), which was the fifth lowest RPP in the nation. This means that the average cost of living is approximately 12% less expensive in South Dakota than the national average.
- Mississippi had the lowest RPP at 86.4
- Hawaii had the highest RPP at 118.2
From 2007 through 2011 South Dakota had the lowest RPP in the nation.
RPPs are calculated by taking surveys of actual prices paid for housing, food, utilities, transportation, etc. in all fifty states. Local prices are then compared to the national average with the difference reflected in percentage terms. That is, if the national average for gas & electric utilities is $100 a month, but only $95 in your state then your state’s RPP for utilities would be 95%. Finally, an overall RPP for a specific state is calculated by weighting the spending categories based on the average spending habits of middle income families: 30% housing, 15% food, 10% transportation, etc.
RPPs were created to be able to compare the purchasing power of individuals in different states. Businesses have found that RPPs are also a good measure of business operating costs in different states. The fact that South Dakota has one of the lowest RPPs in the nation is a tremendously effective selling point when recruiting an out of state business into South Dakota. The 2012 state RPPs are as follows:
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