RDC member Northrim Bank and the University of Alaska Foundation have provided generous financial support for a research initiative, “Investing for Alaska’s Future,” at the University of Alaska’s Institute of Social and Economic Research (ISER). The first of several reports planned under this initiative, “What Drives the Alaska Economy,” was published last fall by Dr. Scott Goldsmith of ISER. Dr. Goldsmith’s insightful structural analysis looks at where new basic industry dollars come into our state and provides remarkable insight into the drivers of Alaska’s economy. The report estimates how many Alaska resident jobs, both direct and indirect, result from these new dollars.
All told, our resource development industries: oil and gas, mining, seafood, timber and tourism account for 57% of all our jobs! The study concludes that in 2005, 30% of all resident employment, some 108,000 jobs held by Alaska residents, come as a result of the new wealth flowing into our economy from the oil and gas industry alone. This is truly remarkable, considering that only about 5,000 Alaskans work directly in production of oil and gas, or about twice that counting oil and gas transportation and refining. But without the oil and gas industry, there would be 108,000 fewer jobs in our economy. Because most of our state revenues come from oil and gas taxes and royalties, three quarters of all State jobs and 57% of local government jobs also depend on the oil and gas industry.
Our other basic resource industries, mining, fishing, timber and tourism account for 96,000 jobs, 27% of our total employment. Again, the direct jobs are a small fraction of this whole, but without these industries 96,000 Alaskan jobs would not exist.
Dr. Goldsmith categorizes Alaska resident employment, some 350,000 jobs, into basic and non-basic industries. The basic industries are those that are bringing new dollars into our economy. Federal Government spending stands tall along with resource development and represents 125,000 jobs or 35% of the total. Included in all these total job numbers are the non-basic service industries such as retail and health care. Over the years as our economy has matured, these non-basic industries have grown to provide the services we used to have to shop for outside of Alaska. While this allows new dollars contributed to the economy from the basic industries to stay in the Alaska economy longer, new dollars are needed to keep the economic engine running.
So why is it so important that your friends, neighbors, business associates and elected leaders understand these economic fundamentals?
Consider that our oil production is declining at a rate of 6% annually and is one third of its past production, and that the crude oil price escalation in 2008 only temporarily masked the economic effect of this decline.
Consider that Endangered Species Act listings and litigation are threatening further production from all our natural resource industries.
Consider that some elements of the public and our elected leadership are seeking to stop potential projects such as Pebble before they can even complete exploration and feasibility, submit permits and have a fair hearing on their merits.
Consider that the single economic metric of direct revenue to State coffers often dominates policy debates without due consideration to job creation and economic resilience of these important basic industries.
Finally consider the second biggest source of new dollars in our economy after the resource sectors is the federal government. While our Alaska delegation is working hard for Alaska, it is unlikely these federal new dollars will maintain the 2005 levels reported by ISER.
We really have our work cut out for us in educating Alaskan policy makers and citizens of the importance of our natural resource sectors and other basic industries to our economic well being. Perhaps if more of us understood the direct linkage between healthy basic industry and our own station in this economy, we’d be more engaged and more thoughtful in what ballot initiatives we sign in front of Wal-Mart. Maybe more of us would comment on important issues such as support of oil and gas exploration in Alaska’s outer continental shelf. It is critical that public policy makers and Alaskan citizens have a firm grasp of what makes our economy tick. Public land management, taxation and regulatory policies that directly impact resource development have far reaching implications to our economy as a whole.
Without understanding where we are and where we’ve come from through an economic lens, it is difficult for us to know where to most effectively invest for Alaska’s future. Thanks to two forward thinking Alaska institutions, Northrim Bank and the University of Alaska, and the top notch professional expertise at ISER, we now have a tool to foster a better understanding of the drivers in our economy.
I encourage you to read the research summary and the full report at www.iser.uaa.alaska.edu.
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