Posted by: Josh Lehner | November 9, 2016

Economic Anxiety in Oregon, A Summary

Economic anxiety, particularly among the white working-class, has been front and center this election cycle. At the least it is one of the two main topics, and for a good (valid) reason. While a lot of our office’s focus in recent months and years has been talking about the improvements in the economy, these largely reflect positive, short-term movements around the longer-term trends of stagnant incomes and fewer middle-wage jobs for a large part of the population. That distinction matters, particularly when it comes to forecasting a biennial budget. However we cannot lose sight of the long-run developments either. Our office has conducted quite a bit of research along these lines in recent years. What follows is an effort to pull them together as some sort of reference for those interested in reading more.

The first place to start when talking about the changing economy and lackluster trends would be our office’s 2013 report: Job Polarization in Oregon. Since it’s publication we have provided short, annual updates, and others have followed with similar reports. See ECONOrthwest’s work focusing on the Portland region from last year or the local level work the Employment Department’s regional economists use in their presentations (see Amy Vander Vliet’s Portland work here, and Guy Tauer’s Rogue Valley work here, for example.)

The problem is not, of course, that we’re seeing a lot of growth in high-wage occupations and industries. That’s actually great for the economy. The problem with job polarization is when a worker loses their middle-wage job and is only able to find a low-wage job to replace it, if they find any job at all. See our recap of the great work Brian Rooney did a few years back on the former RV workers in Lane County to see how this impacts wages and the local economy. To a certain degree, the housing boom last decade was able to mask some of these problems overall for men without college degrees, but that proved rather temporary. And even as the high-tech sector has replaced the forest sector statewide in both jobs and wages, the composition of the workforce and geographic location of the jobs are very different. All that said, the big story when it comes to the job polarization “adjustment” is simply an increase in those not even looking for work. This is seen in our research examining trends among prime working-age Oregon men and Oregon women without college degrees.

Further complicating the issue is that of stagnant or declining wages for the jobs that do remain or are created. Wood products or the forest sector more broadly used to pay a 30-35% wage premium relative to the average industry. However, after adjusting for inflation, wages are actually lower today than back in the 1970s and even early 1980s. And these trends apply to manufacturing overall, at least outside of the tech sector. Manufacturing no longer pays a premium like it used to.

While we generally talk about these trends as they relate to blue-collar, male-dominated occupations and industries, they apply to women as well. The decline in office and administrative support occupations does rival the decline of production (manufacturing) jobs here in Oregon. Women without college degrees have seen middle-wage jobs losses as well and the vast majority of the “adjustment” has been to drop out of the labor force, just like the trends we see with men.

When you combine all of the above you get stagnant household incomes for those in the middle and bottom part of the income distribution. The reason is such households only have wages and the safety net. They do not have capital gains, dividends, rental income and the like that have performed better in recent decades. These trends, of course, are not Oregon-specific and not even US-specific as Branko Milanovic’s Elephant Graph showed the income issues for the working-class of the entire developed world.

Lastly, there is also a large geographic breakdown when it comes to economic performance in recent decades. I would direct you to our office’s Rural Oregon report from last year to start. Included in the report are references to the Timber Belt. More recently, our work has shown that poverty overall has yet to decline outside of the Portland metro area, and broader Willamette Valley. While our office expects to see some improvements provided the current expansion continues, poverty has essentially been rising since the late 1990s. And in parts of the Timber Belt, poverty has been rising since the 1980s.

Diagnosing the problem and researching the issues is the easy part. Actually addressing them and implementing policies is the hard part. Unfortunately, so far there has been no silver bullet. The most common response one hears is educational attainment, and with good reason. However, as we discuss in the original job polarization report (see pg 9, e.g.), four year degrees are not the be-all and end-all of educational attainment either. Other training programs that provide skills to workers are important too. The outlook for middle-wage jobs overall depends on a number of factors. Some are driven more by population and demographics, while others are more business-support related. Wage growth itself, for any occupation, generally relies on full(ish) employment, which the state is now approaching.

While short-term economic trends here in Oregon have all been largely positive in recent years, it is important to keep in mind these longer-run developments. This, of course, should be the case regardless of whether it is an election year or not. And economic anxiety may not even be the primary driver of the outcomes last night. That said, that does not mean these trends and issues are any less relevant. They are real, long-standing and certainly worth our attention.


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