5/10/99

KUFM / KGPR

T. M. Power

Being Kicked Out of Last Place

It is simply outrageous! The state of Maine is trying to claim a distinction that Montana’s politicians have been boisterously claiming for our own state. Given our small population and relatively isolated location, Montana cannot often claim a unique position within the nation. But over the last year, our political and business leaders have insistently claimed that Montana is number one in the nation in terms of certain economic characteristics, namely number one at the bottom of the economic barrel in terms of average income and pay!

These political and business leaders appear to have been slow learners. Montana’s slide downward in terms of these economic statistics took place 15 years ago. It is also puzzling why all the new folks and businesses that clutter our cities moved into Montana during the 90s if this was the worst economic environment in which to live in the entire nation. But let’s set those quibbles aside. Here we were uniquely located at the bottom of the economic barrel and along comes another state, one about as far away from Montana as you can get, claiming that no, it is not Montana or Mississippi that is at the bottom of the barrel but Maine.

Worse yet, looking down Maine’s calculation of the state’s rankings, Montana does not even appear among the poorest ten states! We have been kicked out of even that elite status.

When I quickly scanned a 1998 list of state average incomes, I was startled to see that every man, woman, and child in Maine has $3,000 more to spend each year than their counterparts in Montana. Clearly the Maine advocates must be cheating in their pursuit of distinction for their state.

A closer look at the Maine calculations indicate that it has tried to adjust average incomes for differences in state costs of living. One of the concerns that motivated the Maine study was that housing costs in Maine, in particular, and New England, in general, seemed quite high relative to the incomes people were earning. Since the dominant source of regional variation in the cost of living is variation in the cost of housing, it seems reasonable to try to take this particular characteristic of the local economic environment into account.

When this was done, Maine went from 15^th from the bottom with an average income $3,000 below the national average to the very bottom with an average income $5,500 below the national average. Cost of living in Maine was estimated to be almost 13 percent above the national average largely because of high housing costs.

Montana’s housing costs and cost of living were estimated to be below the national average. That is what led Montana to be ejected even from the poorest ten elite status, leaving Maine to rule over the bottom of the economic barrel.

This was not the first economic study to try to adjust average income figures for cost of living. A report released earlier this year on the "pay gap" in the Pacific Northwest states also adjusted for cost of living and found that Montana’s cost of living was significantly below that in either Washington or Oregon, especially below that in the Portland and Puget Sound metro areas.

It is interesting to look at the states that surround Montana when these crude cost of living adjustments are made to average incomes. Idaho, Utah, New Mexico, Arizona, and Oregon have lower average incomes than Montana. North Dakota and Washington are pretty close to Montana. Surprisingly, California is the state just above Montana in the rankings! If Montana residents are terribly poor, most of the West’s population keeps us company! Most of these fellow terribly poor states also have been gaining population as people vote with their feet as to where they think their well-being will be highest. Clearly they know something that our political and business leaders do not.

I am not about to vouch for these calculations although they come from a Massachusetts university think tank. The data were for 1995 and the cost of living adjustments, while plausible, are quite crude. That is not their fault. The fact is that the government does not collect data on regional differences in cost of living even though that is one crucial determinant of local economic well-being.

This effort at more carefully measuring the real purchasing power of citizens in different parts of the nation, should remind us, however, that the economic statistics with which various interest groups have been trying to frighten us tell only part of the economic story. We all actually know better. We continue to live here despite being told that we should have left for the much greener pastures that can be found every where else in the nation.