Anyone who wants to talk about tax and economic policy in Idaho needs to have a look at a report just out this week at the University of Idaho. The summary release on it has the provocative title, “Study Suggests Idaho Caught in Low-Skill, Low-Wage Jobs Trap.”
Not too hard to intuitively understand, but this report nails the point with careful study.
Here’s Bill Loftus’ summary of the report, posted on the UI site:
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Idaho’s workforce earns nearly $11,000 less for each employee than the national average. That hurts both workers individually and the state, which suffers lower tax revenues to support basic services, a retired University of Idaho agricultural economist’s analysis shows.
Economic data suggests that Idaho is caught in a low-skill, low-wage trap, said agricultural economist Stephen C. Cooke, who retired from the University of Idaho in December. He began studying the issue a decade ago.
“Why are wages so low in Idaho? That’s the question I’m trying to answer,” Cooke said. The answer is complex, he added, but key components include lack of a priority on educating the state’s workforce and a failure to recruit enough highly paid jobs.
The consequence, Cooke said, is that Idaho’s 660,000 jobs, essentially lose out on some $7.2 billion a year in wages each year compared to the national average. Idaho lags nearly $8 billion behind Colorado, where workers average $12,000 more a year.
The economy of the Rocky Mountain region in general can be characterized as caught in a low-skill/low-wage economic gap, Cooke wrote in the journal “The Review of Regional Studies” with co-author Bharathkumar A. Kulandaisamy, an agricultural economics graduate student. Their article was published earlier this year.
Their research analyzed 81 economic sectors and concluded the gap between average annual wages nationally and Idaho in 2009 was $11,000.
With another agricultural economics graduate student, Chen Chen, Cooke took an in-depth look at Colorado, which weathered the recession better than Idaho.
Colorado provides a comparison and a lesson in two very different job environments. Idaho is adding jobs in low-wage sectors but shedding them in high-wage sectors. Colorado is the opposite.
Compared to Colorado, the big three growing job sectors in Idaho include outpatient health care services, agriculture and administrative and support services. The best examples of the last sector are call centers, Cooke said.
Agricultural workers actually fare quite well because they earn more than the national average and the number of jobs is growing, he said.
Idaho’s declining job sectors include professional, scientific and technical services; management of companies and enterprises and mining.
Analyzing economic data from 2001 to 2009, Cooke said, “We found Idaho focuses its economic development on low-skill jobs, which bring low wages, and we have significantly lower wages and employment in the high skill sectors relative to the United States and Colorado.”
The analysis showed that Idaho workers tend to be over-employed, which means they occupy jobs that typically require higher education levels. The problem for Idaho and its workers is they earn less as a result.
Education spending alone cannot improve Idaho’s average wage, said Cooke. “It’s important, but alone it’s not sufficient. You have to do several things, including recruit jobs in high-wage sectors.”
Bringing companies that need educated, skilled workers to Idaho is hard without the educated workforce in place, however. Without high paying jobs, Idaho’s college graduates often go out of state, Cooke said.
Idaho’s economy does have strengths. “Idaho has the distinction of very high job growth, but it also has the distinction of low wages,” Cooke said. That translated to 7 percent job growth in Idaho compared to 2 percent nationally.
“I think that what this shows is that education is good because it makes you a lot of money,” Cooke said. “It’s a means to an end, it’s not the end. It’s about the kind of economy and society we want to live in.”
Generally the highest-paying jobs require a college education. Cooke said Idaho has one of the largest education gaps, meaning the difference between the number of jobs requiring a college degree and the number of college graduates, among the five Rocky Mountain States.
Neighboring Utah gained on Colorado during a recession because it continued to invest in education and produce college graduates, Cooke said. That helped Utah gain more highly-paid workers when the economy improved.
Like a lighter, more nimble race car passing a heavier, faster race car in a curve, adding graduates helped Utah’s smaller economy outpace Colorado’s larger economy in an economic downturn.
Cooke and Kulandaisamy’s paper in the Review of Regional Studies journal published by the Southern Regional Science Association is available online at bit.ly/iP9XDm.