Are the West's energy fields the last bastion of upward mobility?


Imagine, for a moment, a child born in Gallup or Tohatchi or Church Rock, NM. We'll call him Jonny Gallup. He's an average, healthy kid, but life's not easy. His mom works at a mini-mart gas station, and his father does odd jobs but has a tough time finding anything stable. Combined, they usually make a bit more than $20,000 per year, putting Jonny and his family in the lowest -- or first quintile -- for income. Jonny rides a bus to the public school, where teachers, working for too little, will teach him that in the United States even poor kids like Jonny can join the upper class with a little hard work. They will emphasize that this very upward mobility, this collective rags-to-riches urge, is what distinguishes us from the rest of the caste-confined world. It's the American Dream.

Equality of Opportunity Project map of upward mobility, with lighter areas having higher mobility. The major energy field pointers were added by the author.

Except that in Gallup, the dream is all but dead. According to data recently released by The Equality of Opportunity Project, Jonny Gallup and his peers of geography and income have only about a six percent chance of ever making it into the top income bracket. The odds are even worse for kids in the deep south or in Nome, Alaska, the very least mobile of all places in the nation. The Project’s data is part of a paper that links geography to income mobility, and the picture it paints for Western places like Gallup, Albuquerque, Tucson or Phoenix isn’t so pretty: For the most part, kids who are born poor in these areas stay poor.

The authors of the paper, two from Harvard and two from Berkeley, including Emmanuel Saez, who’s well known for his work on income inequality, correlate higher mobility rates with higher local, state and federal tax expenditures in a specific area. In other words, if taxes are higher in your area, your kids’ chances of moving up an income bracket or more will also be higher. It makes sense: The higher the taxes, the more the government has to spend on schools and other support systems that enable folks to lift themselves up by the bootstraps.

But take a look at the map from the report, or better yet, the New York Times’ interactive map of the same, and look only at the Western states, and another correlation will become apparent: The counties with the highest mobilities tend to be in the gas patch, the oil fields or in coal mining country. If Jonny Gallup’s family’s situation was exactly the same as described earlier, but he were to grow up in, say, Williston, N.D. (oil boom) Vernal, Utah, (oil and natural gas) or Gillette, Wyo., (coal and natural gas and oil) his chances of moving up the income ladder would increase fivefold or more. About 30 percent of his low-income peers would end up with an opportunity to park that Hummer in his palatial suburban home’s driveway out on the west end of Gillette, where the average income is over $100,000.

In fact, six of the nation’s top ten areas for upward mobility are in North Dakota, and the remaining four are in South Dakota, eastern Montana (part of the Bakken oil boom, too) and Nebraska. Wyoming and Utah energy counties are also in the top tier. On the one hand, the reason for this is pretty obvious: An oil or gas boom creates a lot of jobs -- unemployment rates are very low in the oil and gas fields -- that pay quite well and that are accessible to those with only high school diplomas. The average oil and gas field salary is close to $60,000, and it’s even higher for a coal miner. If Jonny Gallup started working in the fields right out of high school, and kept at it without getting killed or injured, he would leave his parents in the dust, financially speaking.

If Jonny got a college degree -- paid for, perhaps, by one of many scholarships offered to local students by energy companies, from BP to Arch Coal to Encana to ConocoPhillips -- and then went into management, engineering or even PR in the oil and gas or coal industries (perhaps in a Wyoming or New Mexico college program, funded in part by energy companies, that focuses on energy-related education) he’d be looking at a mean salary of over $100,000. Not too shabby.

At first glance, this seems to fly in the face of the Equality of Opportunity Project’s conclusions regarding taxes. After all, Wyoming has no state income tax, North Dakota’s is a slightly lower than average 3.99 percent, and Utah’s is a moderate 5 percent. Yet Wyoming is among the top three states in the nation for tax revenues per capita. Why? Because relatively hefty taxes on oil, gas, coal and other minerals make up for the lack of a state income tax, and then some. Wyoming collects close to $1 billion per year in energy-related severance taxes, and North Dakota, with one of the highest severance taxes on oil in the nation, collects almost $2 billion. Counties can collect millions in property taxes -- and in some cases, impact fees -- from the energy industry, money that will go towards fixing roads and infrastructure, but also to county services and schools.

Severance tax revenues for Colorado, New Mexico, Wyoming and North Dakota. Source: Federal Reserve Bank of St. Louis.

Thanks in part to its oil, gas and coal-filled state coffers, Wyoming is able to spend almost $16,000 per student on education, putting it in the top five in the nation and in the top 15 for teacher salaries. North Dakota now has a big budget surplus, too, and will hopefully follow Wyoming's lead. Higher-paid teachers lead to better schools, and better schools provide a launching pad for upward economic mobility.

The resource curse is still a curse. Just ask the folks in Pavillion, Wyo., where oil and gas drilling has contaminated local wells. But in this era of stagnating wages for everyone but corporate CEOs, a widening gap between the rich and the poor, and when our Congress refuses to address the problem by putting a reasonable tax on wealth, the energy fields provide one of the last vehicles for moving up in the world. And in that way, at least, if state and local governments stand up to industry and tax it adequately, the resource curse becomes a blessing.

Jonathan Thompson is a senior editor at High Country News. Follow him on Twitter @jonnypeace.

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