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Do low incomes make Montana "poor'?

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Dear HCN,


My regular economic pen pal, Ed Marston, interprets the economic data in the Claiborne-Ortenberg Foundation's report Montana: People and the Economy as showing that Montanans live in "poverty," are "hurting" and "impoverished," face a "failing" and "weak" economy, and do not live in a "middle-class' society (HCN, 6/21/99).


He concludes that we do not educate our children; we do not travel; our libraries are under-stocked; and our elections are more influenced by out-of-state money than elsewhere in the nation. All these negative characterizations Marston derives from the fact that workers' earnings in Montana are significantly lower than the national average and have fallen in both absolute and relative terms over the last two decades.


Average incomes nationally are dictated by the 80 percent of the population that lives in larger urban areas. When Montana or other nonmetropolitan areas are compared to national averages, they are being compared to large cities. To expect that Montanans would enjoy pay similar to the national average is to assume that we can enjoy big-city pay while enjoying a small-town lifestyle and rural landscape amenities. If we could do that, we would clearly be better off than workers who live in big cities and have to suffer with the negative characteristics of those locations: high cost of living, congestion, crime, urban grime and pollution, etc.


Our lower pay is the entry fee we pay to gain access to a preferred set of local qualities. Paying that price no more impoverishes us than paying the bill at a good restaurant does. It is a good deal. If it were not, we would not choose to live here and we would not be faced with the constant influx of others making similar choices. Given the substantial net movement of people from high-pay areas to low-pay areas, Marston must assume we all (and he) are stupid. The alternative interpretation is that such moves improve people's well-being rather than impoverishing them.


As to whether this means that we cannot afford to educate our children and are isolated from the outside world because we cannot afford to travel, that is preposterous. Our dropout rate is well below that of higher income states such as New York, New Jersey, Massachusetts, or California. Similarly, the percentage of the population with high school or more educational attainment is well above those of the higher income states. The percentage of our population with a bachelor's degree or more is significantly above the national average even as we reside at the bottom of the barrel in terms of annual pay per job. As to whether we can afford to travel, I do not know what database Marston used, but I know of no empirical evidence that Montanans do not take to the interstate highway system and to the sky just as frequently as residents of higher wage states.


Marston's error is to assume that lower money incomes mean people are poorer and have to go without important goods and services and slip out of the middle class. But we all spend a lot of our income on things that are not central to our well-being: meals at restaurants, entertainment, designer clothes, larger houses, etc. If some of us trade less of those non-essentials for more access to higher quality social and natural environments, who's to say we lost something in the bargain rather than gained? Making choices does not usually leave us worse off!


Finally, at the very least, we must make some adjustment for differences in local cost of living. Just as it would be silly to say that because wages today in nominal terms are three times higher than they were in 1975 we are are doing three times as well, it is silly to compare pay in Connecticut, Washington, D.C., or California with pay in Montana, Wyoming or any other nonmetropolitan region without first adjusting for regional differences in cost of living. That is not easily done because the federal government does not collect systematic data on local cost of living, but it is still important to make some approximate adjustment.





Thomas Power


Missoula, Montana





The writer is an economist at the University of Montana.





Reviewer Ed Marston replies





I did not interpret the Claiborne-Ortenberg Foundation's report, Montana: People and the Economy. I responded to its last page, which reads in part:


"Understanding Montana's circumstances does not ease the distress that many families and communities feel. Even if they are doing as well as can be expected, many surely want to do better. What can be done?" That question appears under the subtitle: "Can Public Policies Raise Private Wages?"


So I tried to answer the central question the report raised: How to raise the wages of a Western state whose residents are among the worst-paid people in the nation. The body of the report convinced me that creating even well-paying jobs won't raise wages. It will simply attract more people who want to live in Montana. If you want to raise wages, the only way I know of to do it without creating a metropolitan area is to organize, which means to unionize.


But your core argument is that Montanans (and by implication the rest of the rural, nonmetropolitan West) are pleased with the bargain they have struck. If they weren't, they would leave.


I disagree. I believe the nonmetropolitan West, including Montana, is unstable, and that that instability shows up in our politics. From across the region, we send people to Washington, D.C., who are like the politicians of the pre-1960s South: They hate the federal government, they practice the politics of resentment, and they have no vision of the future other than to continue to run for office by being for guns and against environmental protection.


If the nonmetropolitan West were healthy, it would not be so reactive. We would think in terms of the land, of education, of libraries and of conservation. If we were satisfied with our lots, we would not be presiding over the reckless transformation of the region.


What is the answer? I see a middle-class society, with middle-class aspirations, as the best way to protect and nurture the West. Such a society requires good wages, on a par with national wages. What we then do with those wages will become the next fight. But we need the wages.


I would love to be proven wrong. If Montana abolishes gambling as a way to support local government, if it stops chasing jobs with $200 million handouts to businesses, if it elects constructive people to public office, if it begins to figure out how to protect its land, then I'll gladly sign on to your letter and say: "Long live low wages." Until then, I'm going to try to answer the question posed in the report: "What can be done?"


*E.M.

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