9/14/98

KUFM / KGPR

T. M. Power

Do Low Earnings-per-Job Make Us Poor in Montana?

One of the more dramatically negative statistics on the Montana economy is the low annual pay per job. According to this statistic we are at the very bottom of the national heap, 31 percent below the national average. Literally interpreted that statistic seems to say that Montanans are giving up almost a third of the income enjoyed in other parts of the country, almost $10,000 per year, after year after year. If that were the case, one would assume that Montanans would be fleeing to other states to avoid this economic curse. But they are not. In fact, during the 1990s, the flow of migrants has been in the opposite direction, from the higher paying states of the union into Montana. Either Montanans and the people the state attracts are economic and geographic morons who do not know how to find Denver, Portland, or Los Angeles, or there is something more to this story about Montana’s economic inferiority that the annual pay per job statistic does not tell us.

It is important to realize that annual pay per job is not the same as either annual earnings per worker or pay per hour. A significant number of people work more than one job and many jobs are not full time jobs. In fact, if we look at pay per hour in Montana, the state is not at the bottom of the barrel. In terms of dollars per hour, Montana is only about ten percent below the national average, not the 31 percent below that the annual pay figures suggest. Thus two-thirds of the gap in annual pay is tied to Montana workers working fewer hours on each job than is true nationally.

Statistics on hours of work per week indicate that Montanans work about 7 percent fewer hours per week than workers nationally. We also have a larger percentage of our workers who hold multiple jobs than any other state but Minnesota with whom we are tied at a point 60 percent above the national average. This, of course, is not a very comforting explanation if Montanans are being forced into multiple jobs by low pay or if workers want full-time jobs but cannot find them and therefore have to accept lower annual pay or hold multiple jobs. Either would represent an economy that was not responding well to citizens’ needs.

That could be the case, but national survey data suggests that if Montana workers are like workers elsewhere in the nation, it is not primary dire economic circumstances that explain the fewer hours that Montanans work on many of their jobs. In the national data, only five percent of part-time workers indicated that they were working part-time because they could not find full-time work. In contrast, twenty percent cited family or personal obligations for working part-time. Almost twenty-five percent were in school. Another ten percent were partially retired. That is, part-time work was chosen because it allowed the workers to combine labor market activity with other important objectives. Similarly with multiple jobholders. Data from the Current Population Survey indicate that it is relatively well-paid, highly educated persons who have more than one job. Teachers, police and firefighters, physicians assistants, and artists / performers are the occupations in which workers are most likely to have second jobs. In addition, farm family members are likely to work a job in addition to their work on the farm. As a worker’s earnings increase there is almost no decline in the likelihood that he or she will be a multiple jobholder. That suggests that it is not primarily low earnings that drives multiple jobholding.

Montana also has a much higher percentage of non-farm self-employed workers than is true nationally. Almost a quarter of our jobs are self-employment jobs, a level 44 percent above the national average. The annual earnings on these self-employment jobs is very low, only about $15,000 per year, suggesting that they are not full-time jobs.

When the average annual pay per job is calculated, all of the part-time jobs are included in the average along with their lower annual earnings. The result is the quite low statistic that is regularly cited to show the degree to which the Montana economy is failing.

Even if we focus on pay per hour to avoid the uncertainty as to whether the part-time work and multiple jobs are voluntary or not, we still experience a deficit relative to the national average of about ten percent. Why do Montanans, old timers as well as recent inmigrants put up with this? There are two possible economic explanations. Both involve possible characteristics of living in Montana that compensate people for the lower money income. One is the possibility that the cost of living is lower in Montana than in the nation’s large metro areas. Those living in Montana counties where the cost of housing has skyrocketed during the 1990s will scoff at this. But when the declines in housing costs during the 1980s are combined with the rises during the 1990s, statewide housing prices have increased slower in Montana than in the nation as a whole. In addition, there have been rapidly rising housing costs elsewhere in the West that make Western Montana’s experience look less extreme.

The other explanation for the lower pay is that there is a higher perceived quality of life in Montana that workers are willing to sacrifice a certain amount of income to keep access to. The lower money pay is supplemented by a "second paycheck" of valuable amenities which in combination leaves workers with a satisfactory level of well-being relative to what is available elsewhere in the nation.

We can argue about exactly what the explanation is, but it is clear from the migration data that Montanans’ economic well-being is not thirty percent below the national average. If it were, hordes of us would have our pickup trucks packed with all of our belongings and we would be on the road to almost any major metropolitan city in the nation to revel in those very high metro wages.

After you, please! I think I will take the time to think that move through a little more carefully first.