Moving on up in the oil patch

Imagine a child born in or near Gallup, N.M. "Jonny" is an average, healthy kid, but life's not easy. His single mom works at a mini-mart and makes about $16,000 per year, putting the family in the state's lowest income bracket. At school, Jonny's underpaid, overworked teachers tell him that in the United States even poor kids can prosper if they work hard. Upward mobility, the collective rags-to-riches momentum, distinguishes us from the rest of the caste-confined world. It is, they tell him, the American Dream.

Yet across the nation it's getting harder to climb the income ladder. And in the Gallup commuting area, which stretches into Arizona and spans much of the Navajo Nation, the American Dream is all but dead. Jonny and other poor kids here have about a 6 percent chance of ever making it into a household in the top income bracket (earning more than $90,000 per year), according to data recently released by the Equality of Opportunity Project. The Project, headed by four prominent Harvard and Berkeley economists, ties geography to income mobility. And the picture it paints of Western places like Gallup, Albuquerque, Tucson and Phoenix isn't pretty: For the most part, kids who are born poor in these areas stay poor.

There's some hope for Jonny, however. If his family can afford to move to Vernal, Utah, or Williston, N.D., or Gillette, Wyo., his chances of reaching the top of the ladder by the time he's in his 30s increases fivefold. These are among the areas that are not only the most upwardly mobile in the West, but in the nation. And the common thread connecting them is energy extraction: They are all hotspots for coal, oil or natural gas production.

In such geologically fortunate places, jobs on the oil and gas rigs or in the coal mines have taken the place, if imperfectly, of the factory jobs that once buoyed the middle class. Since 2007, private-sector employment in the U.S. has grown by a mere 1 percent, while in the oil and gas sector, jobs have jumped by 40 percent. The annual mean wage for oil and gas jobs is $92,000, twice that of other occupations. Petroleum engineers -- 270 in western North Dakota alone, according to the Bureau of Labor Statistics -- need only a bachelor's degree to make $161,000 on average. Meanwhile, derrick or rig operators make nearly $60,000. "I can't think of another industry where someone with just a high school degree can come in and make that kind of money," says Jeremy Weber, an economist with the U.S. Department of Agriculture Economic Research Service.

Before the early 1980s, even if you grew up in a poor household, you had a chance of getting a union factory job right out of high school and steadily working your way into the middle class. Relatively high, progressive federal income taxes kept the wealth from accumulating in the hands of Mad Men-era executives. But over the last three decades, manufacturing jobs have dwindled, thanks to outsourcing and technology, and working-class wages have generally declined. At the same time, executive pay has skyrocketed and the taxes on the top incomes have dropped by more than 40 percent. More and more of the wealth has gone to the top 1 percent, and the abyss between rich and poor is growing ever wider.

In the energy patch, however, high-paying jobs on the rigs are bridging the abyss. And Weber's research in the oil and gas fields shows that in energy-boom counties, wages and employment across the board -- not just in the industry -- increase. Poverty and income inequality tend to be far lower in those counties than national and even associated states' averages. That suggests that the so-called resource curse, or Dutch Disease, in which the positive impacts of a boom are limited to the extractive industry, and may even suffocate other industries, is being held at bay.

Local government coffers also get in on the action. The Equality of Opportunity Project found a mild correlation between areas with high upward mobility and those with the most progressive tax structure. That is, when lower income folks get more tax credits and the wealthy are taxed more, the chances of climbing the income ladder go up. This phenomenon extends to the energy fields as well, but with a twist: Rather than taxing the rich, the states tax energy production. Wyoming has long had a robust mineral severance tax, netting the state some $1 billion per year, or about $2,000 for every resident, and North Dakota is closing in on the $2 billion per year mark. And these figures don't include impact fees and property taxes on the energy industry, which can amount to millions for local government. In theory, at least, these funds can go toward safety nets that catch people before they fall into poverty. They can also encourage upward mobility: Wyoming spends more per pupil on public education than almost any state in the nation, and its teachers are paid well, too. Add to that the grants and scholarships energy companies often give to classrooms and students -- along with big funding to energy wings of colleges and universities -- and the educational system in the gas patch tends to be pretty strong.

There are trade-offs, to be sure. Any energy boom ravages the landscape to some degree. Energy-rich counties also tend to have higher rates of domestic violence, teenage births, juvenile arrest and youth death than other counties. Women in the oil patch make less than their male counterparts. And even a battalion of drill rigs or some gargantuan coal mines can't completely counter the drag that racial factors have on income mobility: It might be high in the energy fields, but it's still low where they intersect Indian Country.

But as the 1 percent continues to hoard more of the wealth, and the middle class dissolves, the energy fields may be the last bastion, however imperfect, of the American Dream.

• Energy & Industry
• Economy