Penny pinch

Alaskans' average salaries don't stretch as far as they once did

Posted: Sunday, January 09, 2005

If you didn't know it already as a fact, you certainly would be forgiven for suspecting your paychecks don't go nearly as far as they used to.

Writing in the latest issue of Alaska Economic Trends, an Alaska Department of Labor economist said that what $29,420 — the statewide average annual salary at the time — would have bought you in 1989, would have required $42,800 by 2003 after adjusting for inflation. The trouble is that by 2003, the average Alaskan was earning just $37,360.

Although the salary in-crease represented a 27-percent increase in "nominal" (unadjusted) dollars, when inflation was factored in, it represented a 13 percent decline in purchasing power, said economist Neal Gilbertsen.

That decline is a result of the shift to the Alaska economic pace of the 1990s from the boom of the 1970s and 1980s when high-paying industry jobs were plentiful, oil revenues allowed the state to push up public-sector salaries, and consumers saw prices climb in response.

"Booms, by their very nature are temporary economic phenomena," Gilbertsen said.

The maturing economy of the 1990s saw a decline in jobs in high-paying fields, he said, and a growth in low-paying jobs in service industries. Between 1989 and 1996, the CPI adjusted annual earnings declined steadily and haven't changed much since, according to state figures. That trend registered in both the private- and public-sector job markets.

Nevertheless, said Gilbertsen, "The myth of Alaska as the land of high wages had been established and endured."

Of note within the labor statistics, however, are diverging trends within the government sector. Gilbertsen showed that in 1989, state and local government workers earned more than their federal counterparts.

In CPI adjusted dollars, federal workers averaged $44,604 in 1989 compared to state workers who earned $50,312 and local government employees taking in an average of $45,791.

Fourteen years later, the situation had reversed. Federal workers saw their wages climb 22.3 percent to $54,564, while those of state workers fell 21.4 percent to $39,540. Local government workers, meanwhile, saw their average earnings decline by 25.2 percent to $34,260.

"In terms of purchasing power, federal workers were $10,000 better off than they were in 1989, while state and local government workers had seen their earnings decline by a similar amount," Gilbertsen said.

"The feds are adjusting for the cost of living for their employees, while the rest of us aren't doing that well," Gilbertsen said in an interview Friday.

He also said it was difficult to break down the effects of the shifting trends beyond comparing the general categories of private-sector and public-sector jobs. Isolating individual private-sector industries and culling comparative figures was difficult because in 2001 the U.S. Bureau of Labor Statistics changed its industrial classification system from the Standard Industrial Classification (SIC) to the North American Industrial Classification System (NAICS).

As a result, most private-sector categories began representing a new mix of industries. The SIC and the NAICS are not directly comparable, Gilbertsen said.

Transference of some 3,300 tribal employees from Alaska's private sector to the local government category in 2001 contributed to the decline in local government earnings while providing a small gain in the private sector earnings that year. However, both effects were small.

Noting the recent rapid rise in oil prices, Gilbertsen said state revenues should reflect an increase. Stars may be aligning for a gas pipeline project and the opening of the Arctic National Wildlife Refuge to oil drilling. It is yet to be seen whether that will lead to another boom.

"If they do, Alaska will probably see increases in average annual earnings, but it is also likely that the state will experience increasing inflationary pressures," he said.

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