2/26/01
KUFM / KGPR
T. M. Power
Natural Resource
Jobs and Average Pay in Montana: No Connection?
In Helena, the Legislature and Governor’s Office are hard at work gutting Montana’s premier environmental laws: the Montana Environmental Policy Act, the Major Facility Siting Act, and most central of all, the right to a clean and healthful environment guaranteed by Montana’s Constitution. The explanation offered for this wholesale attack on the environmental legal structure that has been in place for thirty years is that these laws have suffocated our natural resource industries, causing employment in mining and logging, for instance, to decline. This, in turn, they insist, is what explains the low pay that characterizes Montana. To reinvigorate the Montana economy, we have to reinvigorate the natural resource sectors, and to do that we have to abandon the environmental protections we unwisely put in place thirty years ago.
It is not clear what the factual basis is for linking environmental protection, natural resource industry decline, and declines in relative pay and income. A recent study of pay in Montana by the Minneapolis Federal Reserve Bank challenges all of these assumptions and specifically rejects the conclusion that Montana’s low pay is associated with declines in the natural resource industries.[1]
The Federal Reserve Bank approached the issue in a direct and logical way. It asked what would have happened to pay in Montana if we had kept the same economic structure we had all the way back in 1969 when copper mining and smelting were still a big part of our economy and National Forest timber harvests were at peak levels. It froze the state’s industrial structure as it was in 1969 but let the overall economy expand as it actually did and allowed pay in various industries to also adjust as it actually did. Freezing the structure of employment at the 1969 golden age would have meant that instead of losing 1,200 mining jobs, we would have gained 5,000. Instead of losing 3,600 metal smelting jobs, we would have gained 3,600. Instead of losing 1,800 wood products jobs, we would have gained 7,000. In 1998 we would have had 22,000 more high paying jobs in these natural resource sectors than we actually did. That would be quite a bonanza. I doubt that even the most optimistic pipe-dreamers in Helena expect to be able to do that through their attacks on the environment.
What did the Federal Reserve find would have happened to pay in Montana if we had magically been able to avoid the declines in employment in our natural resource industries and converted them instead into major expansions? They found that almost 90 percent of the gap in pay per worker that developed in Montana would have been experienced anyway. The gap between Montana and the rest of the nation increased by $5,800 per worker between 1978 and 1998 (after adjusting for inflation). If we had been able to freeze our economy in its golden age, the gap would have increased $5,100 per worker anyway despite hypothetically adding 22,000 high paid natural resource jobs.
On the other hand, if, instead of freezing our industrial structure at some imagined past golden age, we watched it as it actually evolved to its present structure, but we magically arranged for Montana workers in each industry to be paid what workers, on average, get paid in those industries elsewhere in the nation, 90 percent of the pay gap between Montana and the rest of the nation would disappear.
Clearly the problem lies not in the type of jobs we have in Montana but the level of pay in all of the jobs that we have. Getting more high paid jobs will not close the gap for the simple reason that “high pay” in Montana is considerably below “high pay” elsewhere in the nation. We all get paid less, those of us in the high paid sectors as well as those of us in the low paid sectors. In fact, as pay increases, the gap in pay also increases. Even if political leaders in Helena had special connections with fairy godmothers and could recreate the mythical golden age of natural resource industry dominance in Montana, this would do almost nothing to Montana’s pay gap.
This should not surprise anyone. We are surrounded by states that have paid much less attention to environmental protection than Montana has and have tried to vigorously support their natural resource industries. But they all saw their relative rankings in terms of average income tumble just as it did in Montana. Wyoming, known for its tough guy dismissal of sissy concerns with environmental protection and single-minded focus on natural resource industries, led the nation in its drop in the state rankings, falling 28 places between 1978 and 1998, almost twice as large a decline as Montana’s. North Dakota also tumbled further than Montana. Idaho, where natural resource industry supporters have ruled unchallenged for a decade or more, had an experience similar to Montana’s: Its state ranking fell from the low 30s to the mid-40s. Alaska, another committed natural resource state with limited environmental sensibilities also fell as much as Montana in the rankings. Obviously favoring the natural resource sectors and sacrificing the state’s natural environment to their profits not only is not an effective strategy to avoid relative economic declines, but that strategy seems to be associated with the states that declined the most. Good luck to us all as our leaders adopt a strategy of demonstrated failure.
[1] “Putting a Finger on the Grand (Income) Canyon,” The Region, 14(4):14, published quarterly by the Federal Reserve Bank of Minneapolis, December 2000, p. 15 and p. 40: “Montana: a shoting gallery of disparity ducks.”