9/27/98

KUFM / KGPR

T. M. Power

The Meaning of Montana’s Low Annual Pay per Job

One of the more dramatic statistics on the Montana economy is that Montana ranks dead last among the 50 states in terms of average annual pay. In 1996 pay per job was $20,700 in Montana, almost a third (31 percent) or $9,200 below the national average. In addition, the gap between Montana and the rest of the nation has increased since the early 1970s. In 1973 Montana was only 4 percent below the national average. This dramatic difference in an economic measure that is often used to judge economic well-being in the state is increasingly cited as evidence that despite a decade of economic growth in Montana and low levels of unemployment, the Montana economy is actually seriously deteriorating or even failing. Contradicting this negative interpretation of economic conditions in Montana is the attractiveness of the state to inmigrants and return migrants during the 1990s despite the low pay per job. That inmigration suggests that economic conditions in Montana are not inferior to what can be found elsewhere in the nation, otherwise why are people moving here? Something positive must be offsetting the negative story implied by the low pay per job.

Pay per job may not tell us exactly what we want to know about economic well-being in Montana. Pay per hour can be high even when pay per job is low if many jobs are part-time or seasonal. Pay per worker can be high even when pay per job is low if workers hold more than one part-time job. Montana jobs and Montana workers are unusual in both these regards.

The low level of pay per job in Montana is largely explained by the fact that a larger proportion of Montanans work part time or hold seasonal jobs than is true in the nation. When pay in Montana is evaluated in terms of earnings per hour, it appears to be only about 10 to 12 percent below national averages rather than the 30 percent suggested by the annual pay per job data. Montana jobs involve fewer hours per week and fewer weeks per year. This reduced time per job is partially offset by a larger percentage of Montanans holding multiple jobs. This means that annual pay per worker is higher than the low pay per job that is so often cited.

Montana’s low pay per job is not unusual in the region. Of the lowest ranked 15 states in terms of pay per job in 1996, Montana was immediately preceded by South and North Dakota. Wyoming, New Mexico, Idaho, and Utah were also in that lowest tier. That is, Montana is ringed by states with this same economic characteristic. The low pay per job in Utah and Idaho despite their rapid industrialization over the last 15 years indicates that adding more manufacturing, even high tech manufacturing, jobs does not necessarily eliminate low annual pay per job.

Another unique feature of Montana is that Montana has fewer people living in metropolitan areas than any other state. The national average pay per job, on the other hand, is largely dictated by the vast majority of the nation’s population who live in metropolitan areas. If Montana is compared to the nation’s other nonmetropolitan areas, its pay per job is only slightly (less than 5 percent) below the national average. It has been within five percent of the nonmetropolitan average for the last 25 years. So where we stand depends upon who you compare us to.

Is this confusing? Then add two additional twists. Lower hours of work per week and weeks of work per year, while reducing income also increase the time people have to pursue other important objectives. That is why national data indicates that most reduced work hours are voluntarily chosen by students, parents with young children, farm families seeking to diversify their sources of income, etc. Trading reduced income for more time to pursue other values does not necessarily leave workers and families worse off although, of course, involuntary part-time work can reduce economic well-being.

Finally, even if we look at pay in Montana in terms of pay per hour, we are paid about 10 percent less compared to the nation. So wy do people move here? One answer to that is obvious. If the higher quality of life and / or lower cost of living off-set that Montana wage "discount," then we are not worse off. We have just made a different set of tradeoffs or choices than those who choose to live in Los Angeles, New York, or Denver. It is not clear we have to be rescued from the choices we have made by ineffective and misdirected public policy.