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Higher wages and health hazards

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The prospect of "high wage" mining and energy jobs is one reason Western communities might welcome extractive industries (HCN, 2/18/08). Indeed, U.S. Bureau of Labor Statistics (BLS) data confirm that mining and construction pay well, averaging $20 per hour, while workers in the "Leisure and Hospitality" industry make just $10 per hour. So does the community benefit economically when it attracts highly paid miners? Economists recognize that there are three reasons the answer might be "no."

First, a major factor in the wage disparity is that the risk of death in mining is more than 10 times that in the leisure and hospitality industry. BLS data documents 25 deaths per 100,000 workers in mining, but only 1.8 in leisure and hospitality. Moreover, the risk of nonfatal occupational injury is more than 2.5 times higher. Miners are compensated for taking these risks, but fatal and nonfatal injuries impact the contributions workers make to their families and communities. Also, some of the risks in extractive industries are passed on to other sectors, especially through uninsured workers' compensation funds and private medical insurance.

Second, higher wages in mining also compensate workers for the risks of layoffs during bust periods. Employers must pay high wages to offset the risk of unemployment, but the boom-and-bust cycle associated with mining often leaves communities reeling and investments in other businesses stranded. While some jobs in the leisure and hospitality industries are also cyclical, they are more predictably cyclical, compared to the unpredictability of metals' prices and miners' jobs.

Third, mining and energy developments typically overwhelm local housing and other markets and cause increases in the cost of living. For example, Sublette County, Wyo., is in the midst of a natural gas boom and has a cost of living 17 percent higher than the Wyoming average. Although miners' wages probably reflect the increased living costs, the incomes of some others do not. Local residents with fixed incomes, including Social Security and pension recipients, are hurt by higher living costs because their incomes do not adjust accordingly. For a more complete discussion, see http://agecon.uwyo.edu/waea/WEForum/WEF-Vol.6-No.2-Fall2007.pdf.

Joe Kerkvliet, Resource Economist The Wilderness Society
Bozeman, Montana

John Loomis, Economist
Fort Collins, Colorado

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