3/12/2001

KUFM / KGPR

T. M. Power

 

Low Pay and Income in the Mountain West:

If It’s Not Industrial Structure, What Is It?

 

            Timber and mining interests and their allies in government never tire of asserting that average pay and income are low in Montana because environmentalists have succeeded in locking up the state’s natural resources, blocking the types of commercial developments that would have created high paying jobs for thousands of Montanans. 

It is easy enough to show that that this is simply not the case. The facts, for instance, clearly show that it is not environmental regulations that have reduced employment in natural resource industries but low commodity prices on national and international markets and technological change that has systematically displaced workers. Equally important, pay has plummeted as much in high paid jobs as in average jobs and more than in low paid jobs.  Our low pay is due to low pay across the board, not an inadequate number of higher paying jobs.

But that still leaves open the question of why pay in Montana is so much lower than the national average, in fact lower than in any other state in the Union?  An answer to this question is suggested by some other characteristics of Montana that make it stand out in the national rankings.  Although Governor Racicot  once asserted that being “the last best place”  should have nothing to do with being “dead last economically”, that may not be true.

Consider some of the other ways in which Montana is unusual among the other 50 states.  Until  Missoula was officially labeled a “metropolitan statistical area” by the federal Office of Management and Budget in 1997, Montana had a smaller percentage of its population living in metropolitan areas than any other state in the Union.  Even the metropolitan areas Montana does have, Billings, Great Falls, and Missoula, are very small compared to most of the nation’s cities.  96 percent of the nation’s metro areas are larger than Missoula and Great Falls.  80 percent of the metro areas are larger than Billings.  The median American lives in a city of 3.7 million, 25 times the size of Montana’s largest city.  Montana’s entire population does not even come to a million. The city where the median American lives has over four times as many people as the entire state of Montana.

The reason for emphasizing this is that dense urban settlements, in general, are economically more productive.  Transportation and communication costs are lower.  There are more specialized businesses available to provide other businesses with goods and services.  The labor pool is larger and more diverse.  Entrepreneurial opportunities are greater. Etc.  Of course, that is the reason that so much of the nation’s economic activity and population are concentrated in the large urban belts on the East Coast, Great Lakes region, and West Coast and now along Colorado’s front range and Utah’s Wasatch Front. 

If one calculates the spatial density of economic activity in the various states by looking at the number of workers per square mile (but discounting the vast rural areas in which very little economic activity takes place), Montana also turns out to be special.  In a recent economic study, Montana had the lowest economic density of all the states.[1]  As economic theory suggests, this very low economic density was matched by one of the lowest labor productivities among all the states.

To Montana residents none of this is likely to come as a surprise.  We pride ourselves on being a huge sprawling, spectacularly beautiful state; a rural state with urban areas of small and liveable size.  Many of us reside here because of that rural character and those small cities and towns.  The statistics confirm what the title “last best place” suggests: We are a refuge from the congested metropolitan sprawl that has swallowed up much of the rest of the nation.  We are a throw back to a previous era of rural and small town lifestyles.

But those statistics tell us something else.  Economic productivity rises with the density of settlement and the size of cities.  That is why businesses in large cities can afford to pay workers higher wages.  But those higher wages are not pure gravy to workers in large urban areas.  The dense settlement causes the cost of living, especially the cost of housing, to rise.  Congestion, pollution, and social problems such as crime are also more severe.  It is these very real costs that explain why the entire nation’s population does not live in one huge densely settled urban area.  We all balance our tolerance for various urban ills against the higher pay available there and make a residential choice.

These economic facts make the public policy implications of the relatively low pay in Montana very unclear.  If, as our current governor and her industrial allies believe, our low pay represents serious economic deprivation for the citizens of Montana, these economic relationships suggest a clear solution:  The Governor could call out the Montana National Guard and order it to round up all Montana citizens and herd them into, say, the Billings area.  If our soldiers were completely successful at this, Montana would then have a city of about a million.  The average pay and income associated with a city of that size is almost exactly equal to the national average.  We would have attained the implicit objective of those who cry out for the state government to do something to boost our pay to national levels.

Whether that would make us better off, of course, is another question.  All of us could have chosen to live in a city of a million or more.  There are, after all, almost 80 of them scattered across the nation.  But we did not.  I am sure that most of the residents of Billings would not welcome a 600 percent increase in population and most of the rest of us would also resist efforts to move us there.  That resistance would suggest that, despite the higher pay, we do not believe that our well-being would be improved by such a move.

We are left, then, with the question of whether it is possible to both enjoy a rural and small city lifestyle and big city wages, which is what the national averages we always compare ourselves to represent.  The economic data suggest that we cannot.  Markets and technology simply do not work that way.  Instead we have to make choices and tradeoffs.  We give up some pay in return for higher quality living conditions or we accept a significantly degraded social and natural environment in return for higher pay.  We cannot have our cake and eat it too, despite what some of our political leaders suggest.


[1] Alaska, Lousiana, West Virginia, and Wyoming were not included in the study.  Separate calculations suggest that Wyoming has a lower economic density that Montana.