The 1/3 Rule or What Drives the Alaska Economy?

by Scott Goldsmith, Institute of Social and Economic Research

The Alaska economy depends on 14 sectors or drivers that bring new money into the state and account for all the jobs and income of Alaska households and businesses.  These 14 sectors can be aggregated into 3 groups, each of which accounts for about 1/3 of the total.

The first group—Petroleum—includes all activities related to production, the revenues collected by state and local governments, and the Permanent Fund.

The second group—Federal Spending—includes the dollars that flow into Alaska from both military and civilian government activities.

The final group includes all Other Drivers, both the natural resource sectors of fishing, timber, mining, and agriculture, as well as tourism, air cargo, miscellaneous manufacturing and services, retiree spending, non-earned income.

The other economic sectors, like construction, finance, health care and state government, are important for the health of the economy, but they recycle the money that the drivers bring in.  Without the drivers there would be no money to recycle and no role for these other sectors to play.

A new study by ISER (Institute of Social and Economic Research) of the University of Alaska Anchorage, funded through a gift from Northrim Bank, quantifies for the first time, the contribution of each of the drivers of the Alaska economy.  The knowledge that comes from understanding what the drivers are, their relative importance, and their future prospects, is critical for planning for Alaska’s economic future.

This table summarizes the share of economic activity attributable to each driver.  All the jobs and income are accounted for in this table.  So, for example, some finance jobs are attributed to petroleum, some to federal government, and some to the other drivers.

Comments

[Specklefoot]

Thanks once again to Scott and ISER for delivering useful and needed information and to Northrim Bank for financing the study. It is indeed timely as we prepare to navigate the economic future.