9/13/99

KUFM / KGPR

T. M. Power

The economic characteristics that most disturb Montana residents are low average pay and income. When compared with the other states, Montana comes in last or near last. That stark fact leaves even the most optimistic among us with the feeling that something in the Montana economy must be seriously wrong.

One way to understand why pay and incomes are so low is to look both at other areas with similarly low pay as well as areas with quite high pay and see what some of the distinguishing characteristics are. When that is done, one characteristic that stands out dramatically is the role played by the size of the urban area in which people reside. If you arrange the places where people live according to city size, you find that the larger the city, the higher the average pay and income. If one compares those living in cities smaller than 50,000 or living in rural areas with those who live in the nation’s largest cities, one finds that average pay in the largest cities, those with 3 million residents or more, is over $15,000 higher per worker and average income is almost $10,000 more per person. For a two-worker household that is $30,000 per year in additional pay or for a four-person household, $40,000 per year in additional income. For people living in cities the size of Billings, Missoula, and Great Falls, the gap relative to the nation’s largest cities is almost as great.

There is a systematic income ladder as one moves from small city to larger city to still larger to the largest of our cities. Even for those workers living in cities of 1.5 to 3 million people, there is still a $5,000 per year pay gap relative to the largest of our cities.

When you look at where people live in Montana, Wyoming, and Idaho, to name the other relatively low pay and income states in our neighborhood, one sees a dramatic difference compared to the nation as a whole. In these three states the percentage of the population living outside of metro areas is three to four times what it is in the nation as a whole. In the nation, only about 20 percent of the population lives outside of large cities. In Montana that figure was 77 percent until Missoula was classified as a metro area last year. In Wyoming it is 70 percent and in Idaho it is 62 percent.

If we combine the lowest paid living situations in the nation, the non-metro and the small metro areas, 100 percent of the Montana and Wyoming populations falls into that category. Two-thirds of the Idaho population, and 50 percent of the New Mexico population also fall into that low paid class of living situations. Only 24 percent of the nation’s population lives in towns this small.

Alternatively, one can look at the states in the Mountain West whose average pay and income are much closer to the national average than ours. Colorado, Arizona, and Nevada fall into that category. Those are also the Mountain West states that have the largest percentage of their populations living in large cities. All three states have below average shares of their populations living in non-metro areas. Nevada, at the extreme, has only 6.5 percent of its population living outside of large cities; Montana until last year had 77 percent.

The lesson is clear. If we want high pay and incomes, in general, we have to have large cities, very large cities. To cut the pay and income gap in half, we would have to have our population living in cities of 750,000 or more! That means that the entire Montana population would have to live in one large city. Let see what politician can get elected proposing that particular economic development strategy for Montana!

This may sound like doom and gloom. We can’t eliminate our substantial economic disadvantage unless we urbanize the way the rest of the nation has. But who wants that? Before getting depressed, however, one has to ask how disadvantaged we actually are. If the extra $15,000 per job and extra $11,000 per person is a real advantage of living in the nation’s largest cities, and the loss of that is the penalty for living in non-metro or small cities as Montanans do, one would expect that the rich largest cities would be systematically gaining an increasing share of the nation’s population while the poorer non-metro areas would have a steadily shrinking share. But that is not the case. The distribution of the nation’s population across cities of different sizes has been remarkably steady for at least 30 years. During the 70s and 90s the non-metro areas actually gained a larger share while the largest cities saw their share shrink slightly during the 90s. The same is true of high income states: During the 1990s, the highest income states, like Connecticut, New Jersey, and New York, had net outmigration while some of the lowest income states like Montana, Idaho, and Utah had net inmigration. It appears that people voting with their feet clearly indicate that they do not believe that the higher incomes in the larger urban belts represent real advantages in economic well-being. That high pay and income associated with the largest urban areas has not served as a magnet drawing workers and families to it.

That suggests that we in Montana may not be weird or stupid after all. Our decisions to live in small cities or rural areas despite the low pay may not represent an unusual and perverse masochistic streak. Tens of millions of other Americans have made the same economic tradeoffs we have and are satisfied enough with the results that they and we have stayed put in a particular settlement pattern that has lasted for at least three decades.