2/15/99

KUFM / KGPR

T. M. Power

What Is It Worth to Bring Back the Past?

When the Chief of the U.S. Forest Service announced the temporary closing of Montana’s Rocky Mountain Front to new hard-rock mining claims, the Montana Mining Association lambasted him for ignoring the need for economic development and jobs in Montana. The $40,000 jobs that mining provides were offered as an antidote to the current low pay in Montana. If we could return to the days when mining and logging dominated the Western Montana economy, all, apparently, would be well.

This is some surface plausibility to the argument that our pay and incomes are low because we have lost so many of our high paying jobs. Between 1978 and 1988, Montana did lose about ten thousand jobs in mining, metal smelting, wood products, and railroads. Those jobs were among the highest paying jobs in the Montana economy. During that same time period, average annual pay per job fell by $6,500 in real terms. It is easy to conclude that one cause the other. That conclusion can be tested by simply using a little arithmetic.

First, consider what would have happened if we had lost none of these 10,000 high paying jobs. That just requires us to average those 10,000 jobs in with the approximately 400,000 other jobs and see what would happen to average pay. The answer? Average pay per job would have been only 1.4 percentage points higher. Losing none of those high paid natural resource jobs would have offset only $400 of the $6,500 decline in average pay. We would have experienced 94 percent of the decline anyway, and we would still have ranked near the bottom in the nation.

That arithmetic exercise involves freezing the number of high paid natural resource jobs at their peak 1978 levels. Someone might object that the rest of the economy expanded after that time and if the natural resource sectors had expanded with the rest of the economy, there would have been many more high paying jobs. The impact of such a proportional expansion of the natural resource sectors can also be tested. This involves freezing the share of employment in these high wage jobs at peak 1978 levels and asking what would have happened to average pay. If we had been successful at freezing the economic structure of employment where it was in 1978, 90 percent of the decline in average pay would still have taken place and Montana, again, would still be among the lowest ranked states. The reason for this is that during the 1980s pay per job declined in all industries, including the natural resource industries. In fact, the decline in pay was greater in the natural resource sectors. The chief problem was not the loss of jobs in high paying natural resource sectors but that real pay was falling across the board.

Alternatively, we could ask how many more of these high wage jobs the economy would have had to generate to keep our average pay from declining. This, too, is just a matter of arithmetic. The answer is that we would have had to have added 253,000 mining, metal smelting, wood products, etc. jobs instead of losing 10,000 of them. If we had done that, these natural resource jobs would have gone from making up about 9 percent of our jobs to making up 60 percent of our jobs, a percentage unrivaled by any other state in the union or any nation of the world. Natural resource employment would have had to have increased almost eight fold. I will leave to your common sense the evaluation of the the likelihood of this happening and to your imagination and nightmares the impact of an eight fold increase in clearcutting, open pit mining, and smelting.

Clearly, despite what the conventional wisdom suggests, it was not the decline in employment in the natural resource sectors that was responsible for the decline in average pay in Montana. What then was the cause? Part of the answer is simple. As Pogo said in the 1950s, "We have met the enemy and they is us!" Between 1979 and 1988 there was absolutely no growth in non-farm wage and salary employment in Montana. Between 1979 and 1985, however, our population grew by 33,000. Population expanded significantly, even though jobs did not. Merely as a result of arithmetic, average incomes had to decline. The growing workforce amidst a stagnant job market also put significant downward pressure on wages. Montanans survived by creating self-employment jobs for themselves or taking part-time jobs, but at very low annual pay.

Were we nuts? If lots of us had left Montana, much of this would have been avoided. But for a variety of not very mysterious reasons, we choose to stay despite the limited employment opportunities and the falling pay levels. During the 1990s, despite the low pay levels, rather than leaving, people on net, 100,000 of them, moved in. That certainly helped maintain the downward pressure on pay and incomes.

The question we how face is whether the legislature can and should save us from the decisions we made? We all, of course, would like to be paid more, say, for instance, as much as those living in the nation’s largest metropolitan areas. Equally obvious, however, is the fact that we are not willing to live in those areas. In those circumstances, it is unlikely that the state government can legislate big city pay for those of us who have chosen a small city or rural lifestyle.