Montana’s Economy, Apparently, Is “Never as Good as It Seems”

Recently the US Bureau of Economic Analysis released the statistics on how the various states’ economies performed last year. Montana continued to have one of the best performing economies in the nation in terms of growth. Per capita income grew by 4.4 percent in Montana while income growth across the nation was only a little more than half of that. Only four other states in the nation did better than Montana.

Rather than this Montana economic performance being greeted with relief or satisfaction, the “official” response was actually somewhat negative. As a result, news reports led with headlines announcing that this boost in average income across the state was “not as good as it seems.”

As one state economist put it: Montana fares so well compared to other states only because so much of the rest of the country has been doing so poorly.

That, of course, is a hypothesis easily tested. If we look at the national economy over the last ten years, which of course includes the longest economic expansion in the nation’s history, per capita income grew 3.9 percent per year. Montana’s growth last year, then, was significantly faster than the most recent decade of national growth. It seems clear that the growth in per capital income in Montana was not shabby, made to look good only because the national economy was doing so poorly. It was a solid, above average performance judged by the historical performance of the US economy.

So why would folks who obviously know this want us to believe otherwise? The answer is largely political. Being able to paint the Montana economy as bleakly as possible serves some powerful special interests. This was made explicit in one widely publicized response. If Montana ever hopes to climb up significantly in the economic ranking of states, we were told, Montana would have to reverse the loss of high-paying natural resource jobs that took place during the 1980s.

Extractive industries have been using the constant mantra of a failing Montana economy to convince the legislature and the public that despite a decade and a half of roll backs in environmental laws and tax cuts for large corporations, these industries must be given even more because they are the only economic salvation available to us. Even a little bit of good economic news undermines their primary self-serving argument. So good news must be explained away lest we loose a sense of crisis and take back the blank check we have issued to them in the past.

The basic factual assertion underlying this political agenda is simply false: Careful statistical analysis shows that if we had been able to keep every single one of the natural resource jobs we had at the beginning of the 1980s, almost all of the relative decline in average pay and income that Montana experienced when compared to the rest of the nation would have taken place any way. The reason for this is that relative pay in those natural resource industries was plummeting, as it was in most other industries. For instance, between 1978 and 1988 average pay in mining, metal smelting, and forest products fell almost $10,000 per year in real terms. It was not the loss of jobs in some special industries and the growth in jobs in inferior industries that caused the decline in our relative ranking. It was declines in average pay across the board, including the natural resource industries.

This whole focus on Montana’s rank relative to the rest of the nation is misguided. Pay in larger metropolitan areas is systematically higher than pay in smaller urban and rural areas. The national average actually typifies cities of about a million people. Metropolitan areas of three or five or twenty million have even higher pay. In contrast, Montana does not even have a million people in the entire state. More important, that higher pay in bigger cities is largely compensation for the higher cost of living, higher levels of congestion and social chaos, and degraded environmental conditions.

The constant mantra about how bad things are in Montana is also insulting since it suggests that all of us who live here are morons for staying here. If our well being is, as these numeric true-believers suggest, really thirty percent below that of the rest of the nation in terms of pay, why are we still here? Do we not know where the Interstate Highways lead? Can we not read a map? Just what is our problem?

Whatever mental limitations have kept us from leaving Montana apparently afflict a lot of newcomers too. During the 1990s western and southwestern Montana gained 100,000 new residents even though pay per job was lower in Montana than anywhere else in the nation. Apparently in-migrating nitwits were joining the resident morons.

The alternative explanation, of course, is that the economic statistics that special interest groups are trying to make hay out of just don’t tell the whole story about well being in Montana. Although all but the most saintly among us would certainly like to have more money if it cost us nothing to get it, we know that there is one thing we are unlikely to do to boost our incomes to national levels and that is to leave Montana for a city of a million or more. We ain’t that dumb. We can tell a good thing when we see it even if our political and industrial leaders cannot.