Alaskanomics

A simple decomposition of Alaska’s Labor force

By Mouhcine Guettabi, Ph.D

Alaska's labor force participation rate (LFPR) -share of people 16 years or older either employed or looking for a job- was 73.5% in 1999, but has experienced a steady decline since then, reaching 65% as of 2018. Figure 1 shows that the decline in men's labor force participation rates was more pronounced than that for women. These reductions in LFPR can result in the slowdown of GDP growth as fewer people contribute to the production of goods and the economic returns generated by fewer workers must be spread more thinly via transfers through government programs.

Figure 1

In a recent analysis, we find that the vast majority of states were experiencing participation rate declines between 2000 and 2010. In fact, 47 out of the 50 states experienced declines with Delaware having the most significant decrease and North Dakota experiencing the most significant positive shift, likely due to the shale revolution. In Alaska, the labor force participation started at 73.5% in 2000 and dropped to 69.6% by 2010 which represents a 5.3% decline.

In the period between 2010 and 2018, we find that Alaska's labor force decline from 69.6% to 65% was the second highest, and represented a 6.6% decrease. The only state which experienced a more significant decline was Wyoming. Similar to the previous decade, 47 out of the 50 states had LPFR declines. Given the severe decline in oil prices in 2014, it is unsurprising that 3 out of the top 5 states with the highest labor force declines are energy-dependent states whose economies lost a considerable number of jobs between 2014 and 2018. Examining changes in the LFPR in the two periods highlights the sensitivity of the overall participation rate to not just demographics but also changing economic conditions. North Dakota's situation is the most extreme as it went from having the fastest increase in the LFPR between 2000 and 2010 to having the third most pronounced decrease between 2010 and 2018.

A state’s labor force participation rate is the product of the size of the different demographic groups and their respective participation rate. Therefore, either changes in the size of the demographic groups or participation rate can influence the aggregate labor force participation rate. To determine the relative importance of the decline’s share that is due to population aging and the share due to declines in participation rates, we decompose this decline in Alaska’s LFPR. For the period between 2000 and 2010, we find that 93% of the drop can be explained by population shifts. These shifts are largely due to decline in the population share of those ages 35-44 years old who tend to have a high participation rate coupled with the increase in the share of those ages 55-64 and those 65 years and older. When we turn our attention to the 2010 and 2018 period, we find that population changes continue to play a role in explaining LFPR declines but their importance declined significantly as they only explain 55.3% of the change with the rest being explained by changes in participation rates across the groups. As we show in Figure 2, five of the seven age groups experienced participation rate declines with the individuals 65 and older being the only group to experience a sizable increase. This change in relative importance tells us that a portion of the Alaska population is choosing not to participate in the labor force and that, at least in the most recent decade, demand and supply factors are at play.

Figure 2: Alaska’s labor force participation rate by age group for 2010 and 2018

Table 1: Share of the population by age group in 2000, 2010, and 2018

Age group	2000	2010	2018
Individuals aged 16-19	9.8%	8.1%	6.9%
Individuals aged 20-24	8.4%	9.3%	9%
Individuals aged 25-34	17.8%	19.1%	19.9%
Individuals aged 35-44	26%	17%	15.2%
Individuals aged 45-54	21.2%	19.1%	15%
Individuals aged 55-64	9.6%	15.6%	17.7%
Individuals aged 65 years and older	7.3%	11.8%	16.3%

Understanding the declines in the labor force changes is important for economic growth and development, tax revenues, and government services. Additionally, these changes in the number of people either employed or unemployed and seeking employment influences the usefulness of the unemployment rate as a metric for an economy’s health. Between 2010 and 2018, the number of unemployed individuals decreased by 5,000 -a decline from 29,000 to 24,000- which can be attributed to a decline in the labor force by 3,000 and an increase in the number of employed individuals by 2,000 from 331,000 to 333,000. Therefore, a portion of the drop in the unemployment rate is due to reductions in the labor force and not to individuals becoming employed. If all the individuals that were in the labor force remained within it and the number of people whose status changed from unemployed to employed equaled 2,000 as it did between 2010 and 2018, then the unemployment rate would be 0.9 percentage points higher at 7.5% and not the 6.6% recorded in 2018. Because of these labor force changes, it may be more prudent to evaluate the economy’s health using employment changes along with other non-employment metrics.

Alaska Resources Conference Session Notes

North Slope LNG plan, water regulation and political action discussed at resource conference

Resource development industry leaders and representatives shared valuable insights related to a new North Slope LNG plan, clean water regulation and political action at the Resource Development Council’s 40^th Annual Alaska Resources Conference in November.  Former Alaska Lt. Gov. Mead Treadwell pitched a new plan for getting North Slope natural gas to markets, saying that environmental, technological and market changes give hope to new possibilities. Additional presentations told how changes in the Clean Water Act impact development projects and how political engagement can influence ocean policy.

 

Here are presentation summaries:

The New Alaska LNG Export Project

Mead Treadwell, chairman and CEO of Qilak LNG, presented a new approach to an old plan for marketing North Slope natural gas — shipping liquefied natural gas by tanker. Qilak’s estimated $5 billion project would utilize ice-breaking tankers and a near shore LNG plant to ship natural gas year round, initially, to Asian markets. Treadwell said changing markets, sea ice conditions and technology make this a more practical project than earlier proposals. Qilak, a Lloyds Energy Company, has a Heads of Agreement with ExxonMobil to supply gas from the producer’s Point Thomson field.

Learn more about the project at https://qilaklng.com/

Recent Developments in Defining WOTUS Under the Clean Water Act

Duncan Greene, partner with natural resources law firm Van Ness Feldman, LLP, gave an overview of the Clean Water Act. He tracked the act’s often ambiguous and unpredictable definition of Waters of the United States (WOTUS) to show how this parsing of words determines federal regulations that can add to project and land development costs. Contributing to the confusion, Greene illustrated how rules designed for the Lower 48 present challenges for Alaska with its unique waterways and permafrost.

Greene provided a simple history about one aspect of this landmark environmental legislation, but he also made clear the complexities of this contentious law – complexities debated in Congress for almost 50 years. Greene held out hope, however, for greater clarity and predictability in the foreseeable future. He prognosticated, telling the audience that passage of a proposed 2018 WOTUS Rule is on the horizon.

U.S. Ocean Policy: Past, Present and Future

The head of a national coalition created to influence ocean policy took advantage of his time with RDC members to remind them of Alaska’s vast coastline and the state’s No. 1 ranking for jobs created by commercial fishing, seafood processing and aquaculture. Brent Greenfield, Executive Director of the National Ocean Policy Coalition, used his pulpit at the RDC conference to criticize the 2010 Obama administration executive order that created the National Ocean Policy. Greenfield said the mandate’s sweeping changes created a burdensome bureaucracy, confusing policy, undue constraints and uncertainty on ocean economic activity. In sum, he said the order “appeared to be a solution in search of a problem.”

Greenfield noted how action by Alaska’s congressional delegation has influenced new policies under the Trump administration to roll back much of the 2010 mandate. This, he said, has created a new policy that is more balanced and focused on promoting the ocean economy and environment.

With political leaders growing attuned to concerns about climate change and evolving forces in Washington, Greenfield advised his audience to be united in promoting mainstream ocean policies and engaging decision-makers. “Elections have consequences,” he said.

Learn more about the National Ocean Policy Coalition at http://oceanpolicy.com/