Looking at Montana as Two Separate States

In most discussions of the Montana economy, the state is treated as a single economy that is plagued by common problems that can be solved if appropriate policies are adopted in Helena or Washington DC. When we seek to describe those economic problems we also, understandably, use statistics that average across the entire state.

Given the dramatic differences between the economies and economic trajectories between Eastern and Western Montana, that probably is a serious mistake.

Consider the following division of the state into two large, continguous pieces. One stretches along the Rocky Mountains from the area south and west of Billings and then turns north following the continental divide to the Canadian border. The other is the Great Plains region stretching east from the Rocky Mountains to the Dakota borders. This eastern piece contains something less than two-thirds of Montana’s land base. But the western third is not some small sliver of the national geography. It is about the same size as Wisconsin or Florida or New York. It would be smack dab in the middle of all 50 states in terms of size. Eastern Montana, on the other hand, would just miss being among the top ten states in terms of size. It would be about the same size as Oregon or Colorado, larger than Idaho, Utah, or the Dakotas.

The economic trajectories of these two state-sized regions were dramatically different in the 1990s. In terms of population growth Western Montana as a separate state would have just missed being included in the ten fastest growing states. It would have been clustered with Washington, Oregon, and New Mexico around the tenth position in a top ten dominated by the other Western states. In contrast, as a separate state, Eastern Montana would have been dead last in terms of population growth, having seen an actual population decline.

One issue emphasized by those who want to “jumpstart” the Montana economy is job creation. During the 1990s Western Montana, as a separate state, would have ranked in the top six states in terms of the rate of job creation. We would have joined the other Mountain West states, Nevada, Utah, Arizona, Colorado and Idaho in the top six states, all of whom saw jobs expand by more than a third during the 1990s. Eastern Montana, on the other hand, would have been in the bottom ten states ranked by the rate of job creation.

If we use the rate of growth of payrolls or rate of growth of aggregate income, Western Montana was also among the top performers among the states, ranking 10^th and 15^th respectively. Eastern Montana, on the other hand, would have ranked near dead last among the states in terms of pay and income growth. Only one or two states would have separated it from the bottom.

Clearly the Western Montana economy was not stagnating during the 1990s: jobs were being created at a very high rate and the total dollars generated by the Western county economies were expanding briskly. On the other hand the Eastern Montana economy was stagnating. Before crediting state public economic policy with either the growth in the west or the stagnation and decline in the east, it is useful to look at the performance of the economies of neighboring counties in other states. On the US Census Bureau’s colored maps showing county growth in all three thousand of the nation’s counties, Montana falls into two broad regional patterns. Rural Great Plains counties stretching from Easter Montana and the Dakotas into Texas saw stagnation or decline. Mountain West counties, on the other hand, from Western Montana and Idaho to New Mexico and Arizona, saw very rapidly growing economies. It seems clear that state policies have little of nothing to do with these economic performances. Strong regional forces are leading to similar results on each side of the Rocky Mountains from Canada to Mexico.

There is another lesson to be found in this thought experiment dividing the state into two pieces. That division does little about the relative economic density of Montana. Both Eastern and Western Montana considered as separate states have extremely low densities because we have no large metropolitan areas and so many of us choose to live in rural areas. Eastern Montana would be second only to Alaska in terms of workers per square mile. Western Montana, however, would be in the elite group of the five least dense states, beating out only Wyoming, the Dakotas, and Alaska.

That has implications in terms of pay and income. Despite the rapid growth in job creation and in aggregate payrolls and income in Western Montana, average pay and income remained quite low in Western Montana. A rapidly growing economy, one that had rather dramatically “jumpstarted” itself, did not close the “pay gap”. Western Montana, as a separate state, would have remained at the bottom of the heap in terms of average pay per job, joining Idaho, Wyoming, and the Dakota’s in the bottom ten states. Of course these same states are also in the bottom ten in terms of economic density, and that is not a coincidence.

There are important lessons in this story that the new economic developers being organized in Helena need to pay attention to.

First, there are quite different economies in eastern and western Montana. It is an error to talk about a “state economy.” Second, there are powerful economic forces, continental in scale, supporting rapid growth in the mountains and stagnation and decline on the Great Plains. Third, a “jumpstarted” economy will not close the pay and income gap; it will just create a larger low-paid economy.

The point is not to be pessimistic or fatalistic but, rather, realistic. If we are not that, snake-oil salespersons will continue selling us cures that actually make us worse off. That is not a prediction; it is a description of what has been actually happening for a decade or more as special interests have systematically raided public assets under the guise of closing the pay gap. Meanwhile, that gap has grown, not shrunk, and public services and quality of life have deteriorated. With no apology, those special interest groups demand still more, claiming that this next set of public giveaways will do what those over the last ten years failed to do.

P. T Barnum had a not very flattering explanation for this phenomenon. Montanans are yet to prove him wrong.