What Drives The Alaska Economy

1
What Drives The Alaska Economy?

• Alaska Center for Economic Education
• Spring Economics Forum
• February 6, 2008
• Anchorage, Alaska
• Scott Goldsmith
• Professor of Economics
• Institute of Social and Economic Research
• University of Alaska Anchorage
• afosg2_at_uaa.alaska.edu

2
Consumer View of Economy
3
Descriptive Analysis2006 Alaska Employment (000)
Oil and the Alaska Economy
4
Structural AnalysisWhere Do the s Come From?
5
Structural AnalysisWhere Do the s Go?
6
Industry Characteristics

• Dollar Power
• Links into Economy
• Employment
• Stability
• Environmental Footprint
• Tax Base

7
The Alaska Economy!Traditional Natural Resources
8
Alaska The Myth
9
Alaska The Reality
10
Alaska Economic DriversThe Foundation of the
Economy

• Shares of Personal Income in 2000

11
Traditional Natural ResourcesSeafood

28 thousand harvesters, 39 non resident. ???
processors, 73 non resident.
12
Traditional Natural ResourcesMining
Zinc is used to galvanize steel. Price went thru
the roof in 2006.
13
New Natural Resources Tourism
1.5 million tourists in 2006 bring 1.5 billion
with them to Alaska.
14
New Natural Resources Air Cargo
China Air alone averages 10 flights per day thru
Anchorage.
15
New Natural ResourcesRetirees
52 thousand retirees ages 60 in 2004. 1.5
billion of retirement and health care .
16
Traditional and New Resources How Big?
17
Traditional and New Resources Modest Economic
Growth
18
Alaskas Non Oil Economic Drivers Actual Job
Growth (Thousands)
Oil and the Alaska Economy
19
Traditional Resources Growth Potential
Oil and the Alaska Economy
20
Traditional Resources Growth Potential
Oil and the Alaska Economy
21
Traditional Resources Growth Potential
Oil and the Alaska Economy
22
Alaska Baby Boomers will Drive Growth in Senior
Population
BB were born between 1946 and 1964. In 2008 they
range in age from 44 to 62.
23
Federal Spending
24
(No Transcript)
25
Alaska Economic DriversThe Foundation of the
Economy

• Shares of Personal Income in 2000

26
Federal Spending Barely Visible
27
(No Transcript)
28
Federal Grants1 Per Capita
29
(No Transcript)
30
Federal Agency Spending in Alaska
31
Military Spending2 Per Capita
32
(No Transcript)
33
Federal Spending Growth Potential
34
Federal Spending Squeeze Part 1Annual Change
in Health Care Jobs
35
Federal Spending Squeeze Part 2Annual Change
in Construction Jobs
36
Oil and Gas
37
Alaska Economic DriversThe Foundation of the
Economy

• Shares of Personal Income in 2000

38
Alaska Oil Price
39
Oil and Gas Invisible
40
Oil Industry Jobs in 2002
Source ADOL.
41
Oil and Gas North Slope Statistics
Oil and the Alaska Economy
42
Oil and Gas Share of the Economy
Oil and the Alaska Economy
43
Oil and Gas Bigger, Richer, Healthier Alaska

• Job Opportunities
• Business Opportunities
• High Incomes
• Low Taxes
• Low Prices
• New People
• Physical Infrastructure
• Public services
• Business infrastructure
• Consumer goods and services

Oil and the Alaska Economy
44
Gedankenexperiment
Oil and the Alaska Economy
45
January 16, 1968
ANOTHER DRY HOLE AT PRUDHOE BAY Oil Companies
Say We Give Up
Oil and the Alaska Economy
46
Candidates for Comparison ?

• Oklahoma
• New Mexico
• South Dakota

• Wyoming
• Montana
• Idaho

• Florida
• Nevada
• Hawaii

Oil and the Alaska Economy
47
Maine
Oil and the Alaska Economy
48
Maine Is Not Like Alaska

• Physically attached to Lower 48
• Federal land ownership 1
• Native American population 1
• Lobsters instead of crabs
• Unusual accent
• Presidential hangout

Oil and the Alaska Economy
49
Maine and Alaska Similarities Part 1

• Many moose
• Few humans
• Cold
• Remote
• Independent streak

Oil and the Alaska Economy
50
Maine and Alaska Similarities Part 2

• Fish / Tourism / Timber / Mining / Agriculture
• Limits on sustainable harvests
• Challenged by globalization
• Small and declining manufacturing
• Dependence on federal s
• Conflicting visions about use of resources
• Zero Sum Game development mentality
• Strategic development planning advice from
  Brookings Institution

Oil and the Alaska Economy
51
Maine Economic History

• Throughout the second half of the twentieth
  century, Maine has struggled to find a proper
  balance between resource-based industrial
  development and environmental protection.
• The state has come to rely heavily on tourism,
  small manufacturing enterprises and
  defense-related activities and installations for
  much of its economic base.

Oil and the Alaska Economy
52
Maine Economic Performance Mediocre

• Gross State Product per capita 43rd
• Population growth 46th
• Median age 1st
• Median Paycheck 77 as high as Alaska
• Projected population growth 1/3 US average

Oil and the Alaska Economy
53
Alaska without Oil and Gas
54
Alaska Jobs (000)What Happened vs. What Might
Have Happened without NS Oil
Oil and the Alaska Economy
55
Oil and Gas Spillovers from Development

• Boost to Non Oil Drivers
• Low taxes
• for Infrastructure
• Availability of Fuel for Air Cargo
• Economic Maturation
• Stable markets
• Growing purchasing power
• Lower costs

Oil and the Alaska Economy
56
Oil and Gas Growth Potential
57
Economic Drivers with Growth Potential

• Petroleum
• Mining
• Tourism
• Retirees
• International Air Cargo
• Military
• Footloose Services (L.L. Bean?)

58
No Reason to be Complacent
Daily per capita oil production
TODAY
1988
Oil and the Alaska Economy
59
Resource Curse Some Symptoms

• Corruption
• Rent Seeking
• Entrepreneurial Decline
• Overheating Economy
• Economic Distortions (Dutch Disease)
• Public Sector Overexpansion
• Mismanagement
• Underinvestment

Oil and the Alaska Economy
60
Alaska Economic DriversThe Foundation of the
Economy

• Shares of Personal Income in 2000