12/7/98

KUFM / KGPR

T. M. Power

Is the Coeur d’Alene Area a Model for Montana Economic Development?

Recent news stories across the state reported on the efforts by Coeur d’Alene, ID, to attract "good" jobs to that area through a variety of recruiting programs. The director of that "Jobs Plus" effort briefed Montana legislators on the success of that effort and what Montana would have to do to repeat that success.

There are obvious reasons to look to the Coeur d’Alene area as a model of economic development. Since the mid-1980s the Coeur d’Alene area economy has added almost 25,000 new jobs, almost doubling employment. During the same period, it added $4,000 per year to the purchasing power of average incomes.

That is impressive and worth noting. What is even more impressive is that Montana’s large urban areas have been doing even better in terms of pay per job and average income. Montana has also been creating lots of new jobs, 120,000, since the mid-1980s and during the 90’s average incomes in our metro areas have risen almost 50 percent faster than in Coeur d’Alene and 30 percent faster than the nation.

All is not rosy in Coeur d’Alene. Since the late 1970s real pay per job there declined about 20 percent or $5,000 per job. This left Coeur d’Alene with average pay levels that are 28 percent below the national averages. Average pay in Montana’s metro areas is almost $1,600 per job above that in Coeur d’Alene although our pay, too, is substantially below the national average, just not as far below. Since the late 1970s, the percentage decline in average pay in Coeur d’Alene was almost identical to that experienced in Montana’s large cities.

Even though the Coeur d’Alene area economy actually lags behind Montana’s metro economies, we talk as if the Montana economy is in collapse and that we can makes things better by imitating Coeur d’Alene. This strange phenomenon tells us something important about the irrationality of the public dialogue about Montana’s economic performance.

Clearly either the model economy being held up to us, Coeur d’Alene, is actually a failing economy and all of its apparent economic vitality and affluence is just an illusion or neither Coeur d’Alene nor Montana are failing economies and we are just looking at the Montana economy in the wrong way when we focus on average income figures.

Consider the decade long expansion that both Montana and North Idaho have been going through. That expansion began just about the time that pay per job reached its low point in both areas. That is, large numbers of people began migrating into these areas and outmigration from these areas declined just when pay per job and average incomes relative to the nation reached their lowest points. If average pay is a good indicator of economic performance and well-being, how can we explain this movement of people and economic activity towards low pay areas, areas we have taken to describing as failing economies?

One answer, of course, is that these politically popular average income figures do not really measure overall economic well-being. The 30,000 people who, on net, moved into the Coeur d’Alene area during the 90s and the 70,000 existing residents who did not move out obviously were not discouraged by the low average pay. When they considered the whole set of characteristics associated with the area including the quality of life, cost of living, economic opportunities, as well as the level of pay, they found the total package to be more valuable to them than what was available elsewhere. They were willing to accept the lower pay in exchange for the other valued characteristics associated with living in North Idaho. They did not judge themselves to be worse off as a result of that choice. So why do we make a political sport out of second guessing their judgment?

What does this phenomenon of low pay coinciding with population and economic expansion tell us about appropriate economic development policy? First, overall well-being is tied to the combination of money income and the locally specific qualities of the social environment, public services, and natural landscape.

State and local government probably can do little about the level of money income earned. Governments are not very good at picking the commercial businesses that will be winners or losers in our communities. They are not very good at handing out subsidies to profit-making businesses. They are not trained or elected to be economic commissars.

On the other hand, state and local governments can heavily influence the quality of life. They can enhance the quality of our public services, especially education. They can efficiently maintain the quality of our basic infrastructure. They can protect air and water quality, wildlife, and recreation opportunities. They can seek to mitigate the damage done to the social and natural environments by ongoing growth. All of these are traditional roles for state and local governments; all of them also contribute directly to overall well-being and local economic vitality.

Focusing on protecting and enhancing local quality of life is part of a "can’t loose" strategy since it directly benefits local residents. Focusing on subsidizing selected private businesses amounts, at best, to the government buying lottery tickets and, at worst, pouring tax payers’ money down a rat hole.