Tourism plays major role in new economy

Natural resources play lesser role these days, but service sector wages lag

By RICHARD HANNERS

Whitefish Pilot

The Montana economy has shifted from natural resource extraction to services, and the tourist industry plays a big part in that change, Norma Nickerson, director of the University of Montana's Institute for Tourism and Recreation Research concludes in a July 2007 report called "The changing structure of Montana's economy, what is tourism's place?"

For much of the state's first 100 years, mining, forestry, livestock and agriculture were the mainstays. In 2001, economists Tom Power and Richard Barrett called that dated view of the Montana economy "cowboy economics," Nickerson notes.

"For a long time, extractive natural resource industries did have a strong impact on Montana's economy," she said, "but as population grew and jobs became more diverse, the welfare of the economy of the state has become far less dependent on extractive natural resource industries, with jobs in other industries, particularly services, taking a larger role."

The new economy and employment structure has taken on the name The New West, and other writers have described it.

"The principle driving force in this new economy is environmental quality," Matthew Shumway and Sam Otterstrom reported in a 2001 study. This new economy is based on "exploitation of the natural environment as a place," rather than as a source of raw materials.

That focus on place translates into increased tourism and migrants. Nonresident travel accounts for 7.5 percent of total employment in Montana, which is now seeing low 2.4 percent unemployment numbers — about half the national average, according to the Montana Department of Labor and Industry.

"Montana is rich in natural amenities, which attract people to the state both as nonresident visitors and as people moving to the state," Nickerson said.

More than 10.3 million nonresidents visited Montana last year, Nickerson reported. This number is expected to increase, with many of the visitors coming to Montana for its natural amenities, she said.

In 2005, nonresident visitation generated $2.6 billion in purchases of goods and services and another $1 billion in purchases by travel-related businesses and employees. Employees in the tourist industry earned $565 million, while those indirectly impacted by tourism earned another $239 million.

Migrants drawn to Montana also have helped change the state's economy.

"It was commonly thought in the past that people followed jobs," Nickerson said. "For example, if a mine, factory or mill opened, thereby creating a demand for labor, people would migrate to the area to take advantage of those job opportunities."

More recently, however, the opposite trend has been observed, she said.

"People decide where they wish to live," Nickerson said. "Once they have moved there, they then find a job, start a business themselves, or live off of retirement or investment income."

Migrants can contribute to a diversified economy by transferring their investment or retirement income from out of state, dramatically increasing the non-labor sector of the economy. That sector climbed from a 20 percent share of the economy in 1958 to more than 35 percent by the early 1980s, where it has since flattened out.

"Non-labor sources of income can insulate the economy from changes in labor income earned from less stable industries, such as natural resource industries, or industries of a seasonal nature, such as tourism," Nickerson said.

The expanding availability of goods and services encourages many visitors to live in Montana. It also encourages people who are here to stay.

"Perhaps more importantly, and what brought many to Montana in the first place, are the natural and environmental amenities and the recreational opportunities in the state," Nickerson said. "These types of amenities offset the potentially lower wages or higher costs of living found in many Montana communities."

Some locals have a simpler way to phrase that — it's called "eating the scenery." The highest-paying jobs in Montana tend to be in utilities, mining, management, professional and technical services and health care. Accommodation, food services, arts, entertainment and recreation jobs are at the bottom of the pay scale.

But the extractive industries — particularly mining and forestry — have seen a lot of changes since the 1970s. Employment in the state's natural resource industries reached a high of 49,000 workers in 1973 before bottoming out at 41,500 four years later. Employment has since climbed to 47,866 workers in 2005.

Meanwhile, employment in the service sector has steadily increased from 53,000 in 1970 to 234,000 in 2005. The biggest employers are in health care and in accommodation and food services.

It should be noted that while the service sector now accounts for 38 percent of statewide employment, it only accounts for about 28 percent of the state's total earnings. Workers in Montana's service industries seem to be willing to work for less in order to enjoy the natural amenities.