11/23/98

KUFM /KGPR

T. M. Power

Is Montana Really at the Bottom of the National Economic Heap?

There seems to be a wide consensus that something has to be done to "fix" a badly damaged and deteriorating Montana economy. The Governor has outlined his economic development plans which some influential Democrats have attacked as insufficient given the depths of the economic problems the state faces.

The factual basis for this consensus on the failure of our economy is various measures of average income in Montana compared to the rest of the nation. The most often cited is per capita income. In 1948, we are told, the state ranked number ten in the country. Today we are almost at the bottom of the heap, competing with the lowest five states in the Union. In dollar terms, we are told, these statistics indicate that we are 20 percent worse off than the typical American. Every man, women, and child in the state has $5,200 less per year to work with. For a family of four this is a loss of almost $21,000 . That, we are told, is the massive hunk of change that is being picked from our collective pockets by our lagging economy. No wonder political leaders are trying to rally support to reinvigorate the Montana economy.

But just a minute here…if these numbers are right, why do people continue to move here? Maybe these numbers do not tells us what we are told they do.

The reference point that is being used is the national economy. 80 percent of the nation’s population live in large metropolitan areas. About 50 percent of the national population live in the top two dozen metropolitan areas. In size these areas are bracketed by the New York-New Jersey metro region with 20 million people and the Milwaukee metro area with 1.6 million. One could fit 13 Billings in the Milwaukee area and a 160 Billings-sized cities in the New York region. It seems clear that it would be a serious error to compare Missoula or Great Falls or Billings, not to mention Montana as a whole including rural Eastern Montana, to these large, densely settled metropolitan areas. Yet that is exactly what we do when we compare Montana’s average income with that of the nation as a whole since it is these large metro regions that dominate the national average.

Such a comparison is an error for two reasons. First, Montana cannot hope to have an economy like New York or LA or Milwaukee. That is grossly unrealistic. Second, even if we could be like these metro areas, do we want to be? There are characteristics associated with those large metro areas that cannot be separated from their dense urban natures: high cost of living, congestion, crime, etc. Part of the higher income that metro residents receive is compensation for them putting up with those drawbacks. We can’t have all of that additional income unless we are willing to accept all of those problems.

If we want to compare ourselves with the rest of the nation, there is an easy way to do so. We can compare Montana’s small metropolitan areas, Billings, Great Falls, and Missoula, with similarly small metropolitan areas around the nation. If, for instance, we look at all metro areas with a population less that 400,000, a population that is three times that of Billings and five times that of Missoula or Great Falls, one would think that we would be more likely to be in the ballpark than if we compare our cities to New York or LA. Similarly, we could then look at the rest of the state, the non-metropolitan part of the state, and compare that to the rest of non-metropolitan America. Those types of comparisons would appear to make a lot more sense.

If we compare Montana to the rest of the nation in these terms, there is nothing to suggest that our economy is failing or that we individually and collectively are making major economic sacrifices to live here. When Montana’s metro cities are compared to other cities of less that 400,000, our average incomes are almost exactly the same. If, more appropriately, we compare ourselves to other American cities of less than 150,000,we have an income advantage of over five percent. Similarly, if we compare our nonmetro regions to the nation’s nonmetro regions, our average incomes are almost identical to those of the nation. Again, there is no evidence that our economy is failing. It is performing in exactly the same way that comparable areas of the nation are performing.

What about the decline in our rank relative to other states? Well, we are in familiar company: Utah, Idaho, Arizona, Wyoming, Alaska, Nevada, California, New Mexico, and Hawaii all slid significantly in the national rankings since 1970, despite the massive industrialization and growth in all of these states. Obviously, a vigorous, expanding, economy does not necessarily generate higher average incomes.

If we hope to do anything practical about the Montana economy, at the very least we have to put it in the proper perspective. Being an LA dreamer is dysfunctional if you live in Montana. Let’s compare apples to apples and oranges to oranges. When that is done, we may see many interesting things that suggest ways to improve well-being in Montana. But one thing we will not see is a failed economy or unusually low incomes.