STRUCTURAL ANALYSIS OF THE ALASKA ECONOMY: A PERSPECTIVE FROM 1997

Transcription

1 STRUCTURAL ANALYSIS OF THE ALASKA ECONOMY: A PERSPECTIVE FROM 1997 by OLIVER SCOTT GOLDSMITH Institute of Social and Economic Research University of Alaska Anchorage 3211 Providence Drive Anchorage Alaska 9958 (97) prepared for ALASKA SCIENCE AND TECHNOLOGY FOUNDATION AUGUST 1997

2 STRUCTURAL ANALYSIS OF THE ALASKA ECONOMY: A PERSPECTIVE FROM 1997 SUMMARY The structure of the Alaska economy is reflected in the share of personal income and employment attributable to each of the BASIC industrial sectors and other external sources of household purchasing power. We identify twelve activities upon which the size and composition of the Alaska economy depends and trace their growth over time. We can clearly see the ascendance of petroleum - including production, activities supported by taxes and royalties, and the Permanent Fund - as the primary driver of the economy. The federal government role, dominant when Alaska became a state, is still strong, but relatively less important. The statewide contribution from the other private basic industries remains relatively small in comparison to petroleum and the federal government. The increasing importance of support activities, in particular trade and services, is a reflection of the maturation of the economic structure of the state. THE ECONOMIC BASE MODEL AND THE ECONOMIC "MULTIPLIER" Although an oversimplification of reality, the economic base model is a useful tool for studying the structure of the Alaska economy. In the economic base model, BASIC activities are the source of economic growth for the regional economy. BASIC activities are those which produce a good or service that brings new money into the regional economy from outside the region. All economic activity within the region supports, directly and indirectly, the BASIC activities. New money that comes into the state generates economic activity through a process commonly known as the "economic multiplier." When this income is spent either by those businesses directly engaged in BASIC activities for the procurement of goods and services or by Alaskan households with workers in these activities, businesses which sell to the local Alaskan market, known as SUPPORT or NONBASIC activities, are fostered. For example, a sale of timber to a buyer in the lower 48 provides the revenue to pay wages to lumberjacks and sawmill workers as well as to pay the many businesses such as utilities, trucking firms, and accountants which supply goods and services to the timber camp and sawmill. Both of these infusions of money into the local economy will have additional effects. The timber employees will spend their wages in the local economy at grocery stores, hospitals, banks, utilities, and other SUPPORT businesses. The employees at these businesses in turn will spend their wages at other businesses and the economic activity level initiated by the timber sale will be "multiplied" through this process. The employees of those businesses supplying the timber industry will add their wages to the flow, amplifying the multiplier process. Each dollar will continue to circulate in the economy until it "leaks out," either due to a purchase outside the region or to savings. ISER (scitec97.wpd) August 1997 Page 1

3 Structural Analysis of the Alaska Economy The size of the multiplier effect will vary among the BASIC activities and with the passage of time as the composition of industries within the economy changes. As a consequence, the structure of the economy can be characterized by the composition of the BASIC activities and the size of the economic multiplier. Furthermore, we can characterize change in the structure of the economy by tracing changes in the composition of the BASIC activities and the size of the economic multiplier. TWELVE BASIC ECONOMIC ACTIVITIES The commodity-producing industries of petroleum, seafood, mining, timber, and agriculture are the most obvious examples of BASIC activities in Alaska. The vast majority of the sales of each of these industries is made to the Lower 48 or outside the United States. Two private industries providing services - tourism and international transit - sell their services primarily to nonresidents. These industries also constitute BASIC activities since they are also supported by money that flows into Alaska from outside the region. The federal government is an important source of economic activity in Alaska. Each year the federal government spends billions of dollars in the state in support of its programs, both civilian and military. Like private commodity-producing and export service sales, these expenditures can also be viewed as dollars flowing into Alaska from outside to provide economic activity that would not otherwise occur. (Since Alaskans pay for some of these services through income taxes and other payments, only that portion of federal expenditures that is financed by residents of other states is truly BASIC activity in Alaska.) There are two other sources of economic activity that represent new money flowing into the Alaska economy and directly augment household purchasing power. First, a portion of the annual earnings of the Alaska Permanent Fund that flows into the state each year is distributed to households as the Permanent Fund Dividend. Second, households receive miscellaneous income in the form of earnings on assets and private pensions. Finally, both because of its importance and for analytical clarity, we distinguish three sources of petroleum-related economic activity in Alaska. The first is the activity that is generated by petroleum production including exploration, development, transportation, and processing. The second is the activity that is generated by state and local government through the spending of the significant public revenues from petroleum-related activities. The third is the activity generated by Permanent Fund Dividend expenditures. We assume that all economic activity within Alaska can be attributed to these twelve BASIC activities and use the simple economic base model to allocate total economic activity, measured as the number of jobs and the amount of personal income, among these BASIC activities. There are, of course, other methods which could be used to allocate jobs and income, and we are not implying that the other sectors of the economy are not important to its health and development; but the objective of this analysis is to provide an answer to the question of how many jobs and how much personal income is dependent upon each of the BASIC activities of the economy. For example, how ISER (scitec97.wpd) August 1997 Page2

4 Structural Analysis of the Alaska Economy many jobs and how much personal income for Alaskans would be lost if the exploration, development, production, transportation, and processing of petroleum were to cease? The answer to this question obviously involves a large number of assumptions and detailed analysis. Our analysis offers a consistent methodology but is not a detailed historical investigation of each individual industry. A more comprehensive analysis would further refine the attributions we have made, but we feel that the representation of the structure of the economy presented in this report is valid and useful as a description of the economy. For example, we have defined all federal government activities as two BASIC activities - federal civilian and federal military. In reality, some things the federal government does in Alaska are in support of the private BASIC activities. The services provided by the National Park Service to nonresident tourists might appropriately be attributed to tourism BASIC activity. In addition, federal government agencies such as the Postal Service provide services to Alaskans that they pay for directly. These services should not be included in the BASIC activities of the state to the extent they are paid by resident Alaskans. Federal government expenditures, construction spending, and some categories of nonlabor household income are the most difficult elements of the economy to allocate among the activities. ATTRIBUTION METHODOLOGY The number of jobs and the amount of personal income we attribute to each of the twelve BASIC activities is determined by a few simple assumptions. As we have indicated, the size of the economic multiplier for each activity depends upon three links to the rest of the economy. The first is the backward link to private businesses providing inputs to the production of the BASIC activity good or service. We have broadly and loosely defined this link to include capital investment as well as infrastructure provision, even though some of these infrastructure requirements might be publicly funded. We assume that the infrastructure would not be required without the existence of the BASIC activities. The second is the link through the wages and salaries paid to the Alaskan workers producing the good or service. The third is the link to the public sector through the payment of taxes and other revenues to state and local government. Since petroleum provides the bulk of the public revenues collected from the BASIC activities, we explicitly account for this link in only that BASIC activity. (Tables A1 through A6 in the appendix provide more detail on the data and assumptions used in this study.) Figure 1 summarizes the attribution of employment for one of the BASIC activities - federal military. The thousand active duty military personnel comprises the first and largest component of what we have defined as CORE employment in this sector. The CORE additionally consists of.98 thousand construction jobs directly dependent on the annual capital budget of the military in Alaska and 2.28 thousand infrastructure jobs in communications, public utilities, and business services that depend directly on the presence of the military in the state. (These jobs are allocated based upon a set of ratios.) WE use the term CORE to represent these jobs that are directly identifiable with the BASIC sector. There are more jobs in the CORE than the number of ISER (scitec97.wpd) August 1997 Page 3

5 Structural Analysis of the Alaska Economy active duty military since the military capital budget directly supports construction workers and the military procurement budget directly supports workers in other industries. NONCORE employment of thousand consists of those jobs in all other sectors of the economy that exist because of the spending of the federal military CORE businesses and federal military CORE workers. These NONCORE jobs consist of portions of the trade, service, finance, construction, transportation, manufacturing, state government, and local government sectors. (Since most NONCORE employment arises from the respending of CORE employment wages and salaries, the NONCORE employment is allocated among the BASIC activities based on the CORE wages of each activity.) An economic multiplier for federal military can be inferred from the ratio of CORE plus NONCORE jobs to CORE jobs, but since other multipliers can also be derived from other ratios using other measures of the CORE military employment, there is no unique multiplier for this, or any other BASIC activity. We also do an attribution of total personal income using a slightly more complicated methodology which we summarize for petroleum production in Figure 2. Net CORE personal income consists of four components. The calculation begins with the wages and salaries paid to CORE employees. For petroleum production, we include pipeline transportation employment as well as processing employment. As with federal military we also include wages and salaries associated with construction employment financed by petroleum industry capital spending and the wages and salaries associated with the provision of infrastructure services to the industry. To the CORE wages and salaries, we add the earnings of the self-employed that are working in these same industries in petroleum-related jobs; for example, in construction and consulting. From this total we net out through a residence adjustment the portion of wages and selfemployment income estimated to be earned by nonresidents. Finally, we add in an estimate of the nonwage income which CORE workers earn. This is primarily earnings on financial assets owned by these workers as well as some transfer income. The resulting net CORE personal income represents the income of Alaska residents that is directly attributable to petroleum production activities. NONCORE personal income is the income of NONCORE workers providing goods and services to the CORE businesses and employee households. The methods used in the analysis are further explained in two earlier publications entitled What Makes the Alaska Economy Tick, ISER, December 1991, and Structural Analysis of the Alaska Economy, ISER, January ISER (scitec97.wpd) August 1997 Page4

6 Structural Analysis of the Alaska Economy OVERVIEW OF SHARES The CORE jobs and income estimates as well as the shares associated with each of the twelve BASIC activities in 1995 is shown in Figure 3. Jobs are measured in thousands and income in millions of dollars. About one~half of CORE personal income can be identified with the sum of oil rents and federal civilian activities. Oil production and oil rents combined with all federal activities account for almost three-fourths of CORE income. The concentration is not so great in the allocation of CORE jobs. The total jobs and income estimates as well as the shares associated with each of the twelve BASIC activities is shown in Figure 4. The rankings for total jobs and income are similar to those of CORE jobs and income with one important exception. No CORE jobs are associated with either the Permanent Fund Dividend or miscellaneous income, since those sources of BASIC activity provide purchasing power directly to households without associated employment. The employment associated with these sources of BASIC activity comes entirely from the multiplier effect of the household spending these purchasing power infusions allow. An historical overview of the evolution of personal income shares is shown in Figure 5 from The continuing importance of the federal civilian budget is clearly indicated as well as the declining relative importance of the military budget. Figure 6 summarizes four different measures of the shares of economic activity in The rank correlation is high among most sources of BASIC activity, but the graph clearly shows that the ratio between total and core jobs varies considerably among BASIC activities. The ratio is the highest for those BASIC activities which bring new money into Alaska that is not dependent upon employment. The Permanent Fund Dividend, miscellaneous income, and the federal civilian budget are the most important sources of dollars that flow directly to households and create jobs when consumer spending subsequently rises. PRIVATE BASIC ACTIVITIES The most significant private BASIC industries in Alaska are petroleum, seafood, timber, mining, and tourism. In addition, international transit is a new and rapidly growing sector, and the small agriculture sector could be defined as BASIC, although most of its output is currently sold within Alaska. Figure 7 summarizes the total and share of employment attributable to each of these private BASIC activities while Figure 8 presents the supporting data. Figure 9 shows two more narrowly defined measures of employment in the resource processing industries - employment in production and in processing. The number of people directly involved in production, processing, and transportation in our private BASIC industries is small (CORE jobs). As indicated above, there are different methods of allocating these numbers. For example, the activities of some federal government forest ISER (scitec97.wpd) August1997 Page 5

7 Structural Analysis of the Alaska Economy service employees could be attributed either to the timber industry or to the federal government. Different allocations have little effect on our overall conclusions. The percentage of total statewide employment directly associated with these activities is also quite small. In some small Alaska communities, however, these basic activities are a dominant factor in the economy. The fastest growing BASIC industries since statehood (196) have been petroleum and tourism. Taking into account multiplier effects, the petroleum and seafood industries make the largest contribution to total employment. Taking into account multiplier effects, the production and processing activities of our most significant private BASIC industries account for about 35 percent of all jobs in the economy. With the exception of the seafood industry, where processing provides about the same number of jobs as harvesting, extraction is the dominant source of employment in the commodityproducing industries. This pattern has changed little since statehood. FEDERAL GOVERNMENT The federal government has always played an important role in the Alaska economy as employer, payer of entitlements and other transfers to and on behalf of individuals, resource owner, source of construction dollars, and rulemaker for economic development. We include all activities of the federal government as BASIC in this analysis in spite of the fact that some agencies, like the U.S. Postal Service, are here primarily to serve the resident population. Figure 1 shows how the relative importance of federal government has declined over time, primarily due to the more rapid growth in other sectors of the economy. Figure 11 contains the detail on CORE and total employment over time. (The share of total jobs attributable to the federal government is greater in this study than in previous studies. In The Structural Analysis of the Alaska Economy the share of employment attributable to the federal government in 199 was calculated to be 3% whereas here it is 35%. The increase is primarily due to the assignment of the federal government as the source of a larger share of transfer income than previously. This reallocation also had the effect of reducing the importance of miscellaneous income as a source of Alaska employment.) About 35 percent of all jobs are attributable to federal government spending in the state. The relative importance of the federal government as a source of employment has fallen sharply since statehood, although the number of jobs has not changed much. ISER (scitec97.wpd) August 1997 Page 6

8 Structural Analysis of the Alaska Economy The growth in the number of support jobs associated with federal government spending is partially due to the growth in federal transfer payments that significantly contribute to household purchasing power. THE SPECIAL ROLE OF PETROLEUM Considering that about 25 percent of U.S. crude oil production comes from Alaska, the number of oil industry jobs in Alaska is quite small. On the other hand, about 36 percent of Alaska GROSS STATE PRODUCT comes from oil production. (See Alaska Gross State Product, ISER, 1997.) A large portion of petroleum-related activity in Alaska arises not from production, but rather from the public expenditure of the taxes, royalties, and other revenues paid to state and local governments. Oil is the primary source of revenue for the support of the activities of state and local government in Alaska, and without it both would be much smaller. We attribute a large share of state and local government employment to the "economic rents" generated by the petroleum industry and identify it as a second component of the contribution of the petroleum industry to the economy of the state. None of the other BASIC industries generates a comparable stream of public revenues, which is tapped by government. Oil revenues have also been the source of the Alaska Permanent Fund, which does not directly generate jobs in Alaska but which creates employment when Alaskans spend their annual Permanent Fund Dividends. We include the Permanent Fund Dividend as the third component of the petroleum industry contribution to the economy of the state. Figure 12 shows the number of and share of jobs from petroleum. Figure 13 shows how those jobs are divided among CORE and total jobs. Figure 14 shows the historical detail for petroleum rents and the Permanent Fund Dividend. The importance of petroleum production-related jobs jumped when North Slope production began in the 197s. The importance of petroleum economic rent-related jobs jumped when the value of North Slope reserves was identified in the late 196s and increased through the 197s. Considering both production-related and economic rent-related jobs, petroleum accounts for nearly 4 percent of all jobs in the Alaska economy and has done so since the mid 197s. Including the Permanent Fund Dividend, the share is currently 4 percent. More Alaska jobs are due to the spending of petroleum economic rents than are attributable to the production of petroleum. The share of jobs attributable to petroleum has declined marginally since the early 198s. ISER (scitec97.wpd) August 1997 Page7

9 Structural Analysis of the Alaska Economy THE IMPORTANCE OF PERMANENT FUND EARNINGS AND OTHER INDEPENDENT SOURCES OF HOUSEHOLD INCOME The Permanent Fund produces annual earnings in excess of one-half billion dollars, which is income to Alaska, and in the form of the Dividend that becomes income to Alaskan households. Another source of income to Alaskan households is miscellaneous income. This consists of both the annual earnings on their assets - stocks and bonds, etc. and private pensions. Although the Permanent Fund Dividend represents in its entirety new money flowing into the economy, some of the earnings on household assets come to Alaska along with the workers in the BASIC or NONBASIC industries, and these assets would be carried away with those workers if their jobs were lost. Only a portion can be said to be independent of activity levels in those industries. We allocate to miscellaneous income only that share of transfers and earnings that we judge to be independent of the level of employment in the state. Figure 15 shows the total personal income created in Alaska from these two sources as well as the percent of total income generated by these activities when their multiplier effects are included. Figure 16 shows the historical detail for miscellaneous income. The total contribution (including the multiplier effect) to Alaska personal income of the Permanent Fund Dividend is approaching one billion dollars. The contribution of other income flows into the state from assets held by households is over $5 million. Together 1 percent of Alaska personal income is attributable to these sources. The contribution of these sources has significantly increased in importance since statehood. EMPLOYMENT AND INCOME GROWTH IN ALASKA NONCORE, or support activity, consists of businesses that provide goods and services to Alaska households and to other Alaska businesses. We can measure NONCORE activity either by employment or income generated in those businesses. As the BASIC sector activities have grown and diversified and consequently become more stable, the NONCORE activities have increased at a rapid pace. Figure 17 shows the historical growth in the NONCORE both in terms of jobs and income. Figure 18 shows how the ratio of NONCORE to CORE employment and income have changed over time. More than 5 percent of the employment growth since the early 196s has been the result of oil-related activity. This is clearly demonstrated by Figure 19. ISER (scitec97.wpd) August 1997 Page 8

10 Structural Analysis of the Alaska Economy NONCORE employment comprises about one-half of all jobs in the economy. NONCORE employment has increased its share of total employment steadily since statehood. NONCORE personal income comprises less than one-half of total personal income in the economy. NONCORE personal income increased as a share of total personal income in the first decade of statehood and has subsequently fluctuated in a range between 6 percent and 8 percent of CORE personal income. COMPARISON OF DIFFERENT MEASURES OF ECONOMIC ACTIVITY The contribution of any activity to the state economy can be measured in terms of jobs, wages, total personal income (wages, profits, etc.), or value added (total income to households, businesses, and governments). Different measures may result in different rankings of the contribution of a particular activity. Furthermore, we can measure either the direct contribution or the total contribution. The direct contribution is the activity that is required to produce the good or service. The total contribution adds to that the multiplier effect as income entering the economy is respent and creates jobs and income in businesses serving the Alaska economy. The importance of an activity as measured by its direct contribution may differ from its importance measured by its total contribution. We have used the concepts of CORE and NONCORE in this study to measure the direct and total contribution of various BASIC activities to the economy. Petroleum, seafood, and the federal government are the most important BASIC activities by any measure. Tourism, timber, mining, and international transit form a second tier of BASIC activities in terms of contribution to total economic activity. Although no employment is directly attributable to either the Permanent Fund dividend or other independent sources of household purchasing power (earnings of household assets and federal transfers), both activities generate significant employment and income through the multiplier. ISER (scitec97.wpd) August 1997 Page9

11 Figure 1. EMPLOYMENT ATTRIBUTABLE TO ACTIVE DUTY MILITARY: (5.1 %) ACTIVE DUTY 2.28 (5.8%) INFRA.98 (2.5%) CONST (41.6%) NON-CORE ISERAT UAA 8/2/97 4:59 PM AIDIMP8.WK4

12 ECONOMIC ACTIVITY ATTRIBUTABLE TO PETROLEUM PRODUCTION Figure 2. Part 1. PERSONAL INCOME :======= ==:===== ======== =:::====== =:::=::::=========== ======== ======== ======== :;:::::;:::::::::::::::::::::: ======== ======== IN MILLIONS OF$ ==== ======= ============:::==== ::;::;::;::;;:;;::::::::; ::;::;: === :::::;::::::== === :::::::::::::=--- -=======-----=== ====---- -===::== == ::::::-::==--- -===========--== NET CORE PERSONAL INCOME $8.2 $9.8 $1.9 $11.8 $11.2 $17.1 $29.4 $42.2 $65.4 $57.6 $48.5 $42.4 CORE WAGES $6.8 $8.1 $9. $9.6 $9.2 $14. $26.6 $38.6 $6.4 $53.2 $44.4 $39.1 PRODUCTION PIPELINE TRANSPORTATION PROCESSING $5.8 $6.9 $. $. $. $. $7.7 $8.3 $8. $. $. $. $. $. $. $12. $23.1 $33.4 $51.8 $45.9 $37.6 $33.2 $. $. $. $. $. $. $. $. $. $. $.4 $.6 $.8 $.7 FACILITIES CONSTRUCTION PIPELINE CONSTRUCTION OTHER CONSTRUCTION INFRASTRUCTURE $. $. $. $. $.3 $.4 $.7 $.8 $. $. $. $. $. $. $.4 $.5 $.5 $.8 $.8 $.8 $. $. $. $. $. $. $. $. $. $. $. $. $. $. $.7 $1.3 $1.8 $2.9 $2.5 $2.1 $1.8 $1.2 $2.3 $3.5 $5.3 $4.3 $4. $3.4 CORE PROPRIETOR EARNINGS $1.4 $1.6 $1.7 $1.8 $1.5 $2.4 $1.7 $2.2 $3.3 $2.7 $2.4 $2.3 RESIDENCE ADJUSTMENT ($.7) ($.8) ($.9) ($1.) ($.9) ($1.4) ($2.7) ($4.) ($6.2) ($5.4) ($4.5) ($4.) CORE EMPLOYEE NON-WAGE INCOME (A) $.7 $.9 $1.1 $1.3 $1.4 $2.1 $3.7 $5.3 $8. $7.1 $6.2 $5. NON-CORE INCOME $3.3 $4.1 $4.1 $4.8 $4.6 $7.3 $14.3 $21.1 $38.2 $36.9 $29.7 $25.8 TOT AL ( CORE + NON-CORE ) $11.6 $13.9 $15. $16.6 $15.8 $24.3 $43.7 $63.3 $13.6 $94.4 $78.1 $68.2 (A) NON WAGE INCOME CONSISTS OF DIVIDENDS INTEREST RENT, TRANSFERS, AND OTHER LABOR INCOME NET OF SOCIAL SECURITY PAYMENTS. ISERATUAA 8/21/97 5:33 PM AID1MP8.WK4

13 Figure 2. Part 2. ECONOMIC ACTIVITY ATTRIBUTABLE TO PETROLEUM PRODUCTION PERSONAL INCOME ======== ======== ======== ======== ======== ======== ======== ======== =====:== ::::======= ======== IN MILLIONS OF$ ========== =-=========----== :::::-:::::::=------=== ====---- -==== === === =====-= -----=== ::;;::::;::;: -======== == =====--- -======= :::::::::::::::::::== NET CORE PERSONAL INCOME $4.9 $24.8 $778.4 $1,168. $627.4 $347.2 $35.3 $447.9 $691.2 $788.1 $848.8 $839.5 CORE WAGES $37.8 $26.9 $832.4 $1,226.8 $642.3 $359.3 $319.1 $49. $633.6 $721.3 $751.9 $725.5 PRODUCTION PIPELINE TRANSPORTATION PROCESSING $32.4 $58.6 $. $. $.7 $.7 $97.9 $115.7 $167.9 $. $. $13.4 $1.1 $1.4 $2.1 $22.7 $216.5 $28.8 $392.8 $413. $46.4 $454.5 $26.3 $27.2 $29.8 $33.6 $35.8 $35.7 $32.1 $3.5 $3.8 $5.1 $4.2 $3.9 $4.7 $5.2 FACILITIES CONSTRUCTION PIPELINE CONSTRUCTION OTHER CONSTRUCTION INFRASTRUCTURE $. $4.6 $. $133.5 $1.7 $3.1 $3.1 $6.5 $18.1 $12.8 $83. $685.3 $967.4 $325.5 $5. $5.9 $9.1 $25.1 $33.6 $41.4 $77.3 $23.7 $31.9 $119.5 $175.6 $216. $138.4 $. $. $. $. $. $. $. $1.5 $11.3 $14.5 $19.2 $19.8 $18.3 $18.9 $39.1 $36.7 $46.9 $64.3 $73.3 $7.8 $76.4 CORE PROPRIETOR EARNINGS $2. $12.7 $28.8 $32.3 $31.5 $22.6 $19.4 $21.4 $35.1 $41.8 $59.4 $67.8 RESIDENCE ADJUSTMENT ($3.9) ($4.9) ($168.3) ($236.8) ($152.5) ($94.6) ($33.7) ($43.2) ($7.3) ($81.9) ($86.9) ($8.4) CORE EMPLOYEE NON-WAGE INCOME (A) $4.9 $26. $85.5 $145.7 $16.1 $59.9 $45.5 $6.7 $92.8 $16.9 $124.4 $126.7 NON-CORE INCOME $21. $117.2 $357.7 $47. $427.3 $267.7 $256.8 $319.4 $431.6 $485.7 $584.4 $63.7 TOT AL ( CORE + NON-CORE ) $61.9 $322. $1,136. $1,638. $1,54.7 $614.9 $67. $767.3 $1,122.9 $1,273.8 $1,433.2 $1,47.3 (A) NON WAGE INCOME CONSISTS OF DIVIDENDS INTEREST RENT, TRANSFERS, AND OTHER LABOR INCOME NET OF SOCIAL SECURITY PAYMENTS. ISERATUAA :33 PM AIDIMP8.WK4

14 Figure 2. Part 3. ECONOMIC ACTIVITY ATTRIBUTABLE TO PETROLEUM PRODUCTION PERSONAL INCOME IN MILLIONS OF$ NET CORE PERSONAL INCOME $843.8 $841.8 $733.2 $738.3 $838.4 $927.7 $99.5 $961.1 $949. $1,21.3 $1,6.9 CORE WAGES $73.2 $715.9 $63.4 $645.2 $743.8 $82.7 $887.1 $848.9 $834.3 $881.9 $866.8 PRODUCTION PIPELINE TRANSPORTATION PROCESSING $524. $29.3 $5.7 $542.4 $5.5 $53.3 $577.3 $25.9 $24.3 $26.1 $29.4 $6.1 $6.6 $7.3 $8.9 $669.4 $719.6 $686.2 $666.9 $692.6 $671.9 $35. $43.1 $48.9 $47.1 $49.2 $48.7 $9.3 $9.6 $9.5 $9.5 $9.3 $9.8 FACILITIES CONSTRUCTION PIPELINE CONSTRUCTION OTHER CONSTRUCTION INFRASTRUCTURE $73. $. $2. $78.3 $53.3 $19.8 $14.6 $12.7 $. $. $. $. $19. $18. $19.8 $21.8 $69.2 $61.1 $47.1 $93.7 $12.4 $12.4 $9.8 $12.7 $26.5 $36. $. $. $. $. $. $. $25.6 $25.4 $22.8 $23.1 $24.6 $22.7 $69.1 $76.9 $71.6 $75.1 $79.7 $77.7 CORE PROPRIETOR EARNINGS $61.8 $68.5 $52. $47.8 $44. $46.4 $49.8 $45.4 $46.1 $58.2 $57.3 RESIDENCE ADJUSTMENT ($77.7) ($75.2) ($64.9) ($66.2) ($76.1) ($84.) ($9.6) ($86.5) ($85.2) ($9.7) ($89.6) CORE EMPLOYEE NON-WAGE INCOME (A) $129.5 $132.6 $115.8 $111.6 $126.7 $144.6 $144.2 $153.4 $153.8 $172. $172.4 NON-CORE INCOME $588.3 $521. $414.3 $43.7 $443.3 $523.6 $555.6 $543.4 $552.9 $626.1 $647. TOTAL (CORE+ NON-CORE) $1,432.1 $1,362.8 $1,147.6 $1,142. $1,281.7 $1,451.3 $1,546. $1,54.5 $1,51.8 $1,647.3 $1,653.9 ======;::===============::::==-============== ====-=== ======== ====---- ======== ======== =-====== ======== =====::::== ======== ======== =====:::== (A) NON WAGE INCOME CONSISTS OF DIVIDENDS INTEREST RENT, TRANSFERS, AND OTHER LABOR INCOME NET OF SOCIAL SECURITY PAYMENTS. ISERAT UAA 8/21/97 5:33 PM AID1MP8.WK4

15 Figure CORE JOBS % OIL RENTS % FEDERAL MILITARY % FEDERAL CIVILIAN % SEAFOOD % TOURISM % OIL PRODUCTION % TIMBER % MINING % WORLD TRANSIT % AGRICULTURE.2.1% MISC INCOME.% PERMANENT FUND.% 1995 CORE INCOME $3, % FEDERAL CIVILIAN $2, % OIL RENTS $2, % OIL PRODUCTION $1, % FEDERAL MILITARY $ % SEAFOOD $ % PERMANENT FUND $ % TOURISM $ % MISC INCOME $ % TIMBER $ % MINING $ % WORLD TRANSIT $ % AGRICULTURE $6.3.1% / SHARE OF CORE JOBS 19~ lsharfoi= core 1N~co~E % FEDERAL CIVILIAN 15.8% FEDERAL CIVILIAN., 9 s ~6Yi.r~!Ws1T 1.5% MINING 3.% TIMBER 11.5% OIL PRODUCTION q:1% ~f&lf~it 1.7% MINING :::;:,;~ 1.8% TIMBER 3.9% MISC INCOME 1.5% TOURISM 7.4% SEAFOOD ISERATUAA 8/21/97 5:31 PM AIDIMP8.WK4

16 Figure TOTAL JOBS % OIL RENTS % FEDERAL CIVILIAN % FEDERAL MILITARY % SEAFOOD % OIL PRODUCTION % TOURISM % PERMANENT FUND % TIMBER % MISC INCOME % MINING % WORLD TRANSIT % AGRICULTURE.31.1% 1995 TOTAL INCOME $14, % FEDERAL CIVILIAN $3, % OIL RENTS $3, % OIL PRODUCTION $1, % FEDERAL MILITARY $1, % SEAFOOD $1, % PERMANENT FUND $ % TOURISM $ % MISC INCOME $ % TIMBER $ % MINING $ % WORLD TRANSIT $ % AGRICULTURE $1.4.1% I SHARE OF TOT AL JOBS 1995 i [SHARE OF TOTAL INCO~E 1995 I 27 6% FEDERAL CIVILIAN 12.8% FEDERAL MILITARY 9J~ ~Et,JLf~AW slt.... ~ 1.6% MINING. s::::,<,:,j 2.1 % MISC INCOME 11.5% OIL PRODUCTION 3.9% MISC INCOME 1.8% OIL PRODUCTION 7.4% SEAFOOD ISERAT UAA 8/21/97 5:3 PM AID1MP8.WK4

17 Figure 5. SHARES OF ALASKA PERSONAL INCOME ATTRIBUTABLE TO SECTOR OIL PRODUCTION 1.8% 6.2% 3.5% 13.7% 14.3% 12.6% 11.5% OIL RENTS 12.5% 12.2% 15.5% 23.3% 29.3% 22.5% 23.9% PERMANENT FUND.%.%.%.% 3.5% 6.4% 6.1% SEAFOOD 8.2% 8.6% 5.6% 9.5% 6.7% 9.7% 7.4% TIMBER 5.% 4.5% 3.1% 4.1% 2.3% 2.8% 1.8% MINING 3.5% 1.4%.9% 1.5% 1.4% 1.8% 1.7% TOURISM 1.4% 1.6% 2.% 3.9% 3.9% 3.8% 4.8% FEDERAL CIVILIAN 33.% 31.7% 24.3% 26.2% 22.7% 24.1% 27.6% FEDERAL MILITARY 32.8% 31.3% 16.% 14.5% 11.5% 11.9% 1.1% INTERNATIONAL TRANSIT.6%.8% 1.% 1.% 1.1% 1.% 1.1% AGRICULTURE.%.%.%.%.1%.1%.1% MISCELLANEOUS INCOME 1.2% 1.7% 1.2% 2.2% 3.2% 3.4% 3.9% ** k-lt. * * *** *** * ** *** ** * ** *.. * * * * ****** * *** *** *** ********* * **** **** % OF ALAs~;~:!iT~~~~~~:i~~BUTED-To~ 1 3% [ 25% ~ 2% \ :: 15% :: it - 1% :: %,- - ' i lillll1965!!i [:;:J197 I ~1975! ' CJ 198 j l! []199! lillll1995j 3% t'- J 25% ~ ::: I,~. S>'l1975 l_l ' _,,ill > ' ' i =~Eff,J. 5% F. ~'% JI ~)if: o,d" 1% r. ;::m- l'<'l 1965 l:':l197 SEAFOOD TIMBER MINING PRODUCTION RENTS PERMANENT FUND ! 'o/~of~alaska PERSONAL INCOME ATTRIBUTED TO:i L~~>< uujo n " UU "-" -' H u,..,._,.,,,.,o,uoou.wo,.,,,,,,,,,,,,,,.,,o,,,,,,,,,,,.,,.,; _" ----~ :-:-1 1% OF ALASKA PERSONAL INCOME ATTRIBUTED TOj l aa uooo Uo>.OOOOOOHHOHHHU-ou,oo noou,hn,ouo~ I~.U'"-"""'''_...,,.,,,..,,...,,*", % = 25% :: :; 2% t 15% :' 1% :' i~5% ~ %,-~iti:m:w TOURISM FED CIV MILITARY -----~ ~---- 1;1965 1,=:=l 197 I ~1975 [J 198, ru 1985 i l:'.: l,'$1995. _j - it~im!w :,;@'J!Cm- ffljz_---eill!:l!ditl $::.~' INTER TRANSIT AGRI MISC INCOME ~----~ I I ru I;!;'] m1975 I \ INSTITUTE OF SOCIAL AND ECONOMIC RESEARCH 8/13/97 1:1 AM AIDIMP8.WK4

18 Figure 6. PROPORTIONS OF TOTAL ECONOMIC ACTIVITY 1995 CORE/ TOTAL CORE TOTAL TRANSFER INCOME JOBS JOBS INCOME OIL PRODUCTION 11.5% 11.5% 1.1% 1.8% OIL RENTS 23.9% 23.9% 26.4% 25.1% PERMANENT FUND 6.1% 6.1%.% 3.2% SEAFOOD 7.4% 7.4% 15.1% 11.% TIMBER 1.8% 1.8% 3.% 2.4% MINING 1.7% 1.7% 1.5% 1.6% TOURISM 4.8% 4.8% 1.5% 7.4% AGRICULTURE.1%.1%.1%.1% FEDERAL CIVILIAN 27.6% 27.6% 15.8% 22.1% FEDERAL MILITARY 1.1% 1.1% 16.% 12.8% INTERNATIONAL TRANSIT 1.1% 1.1% 1.5% 1.3% MISCELLANEOUS INCOME 3.9% 3.9%.% 2.1% 1.% 1.% 1.% 1.% ~ ~ ~ 3% ~ROPORTIONS OF TOTAL ECONOMIC ACTIVITY: % 1% % _f~:',::~1sllll_j:1] OIL PRODUCTION PERMANENT FUND TIMBER TOURISM FEDERAL CIVILIAN INTERNATIONAL TRANSIT OIL RENTS SEAFOOD MINING AGRICULTURE FEDERAL MILITARY MISCELLANEOUS INCOME I INSTITUTE OF SOCIAL AND ECONOMIC RESEARCH 8/13/97 1:4 AM AID1MP8.WK4

19 Figure 7. PRIVATE BASIC INDUSTRIES ~ 6 ~-~------~------~ CUMULATIVE EMPLOYMENT (/") :::i I 4 - c!'::-: 1- z ~ YEAR I~.. J OIL PRODUCTION ffil SEAFOOD ITT'{ TOURISM I DTIMBER m MINING [ =~~=~~= =~w===~mm,===-~= - I 5% 4% I- d] 3% u tfj 2%.. 1% % _J [l WMINING..!:::',=HIMBER ruitourism ~ SEAFOOD ir:'l OIL PRODUCTION ~v:...-~ _.....,...,..,...,.,,...,..,..._...,...,.,...,.m,m,~...v,,.w INSTITUTE OF SOCIAL AND ECONOMI8RE3t11l:7ARIDl:- 4 AM A1D1MP8.WK4

20 Figure 8. Part 1. OIL PRODUCTION SHARE CORE TOTAL RATIO OF ALL JOBS JOBS JOBS % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % ISERATUM 8/2/97 4:5 PM AIDIMP8.WK4

21 Figure 8. Part 2. SEAFOOD SHARE CORE TOTAL RATIO OF ALL JOBS JOBS JOBS % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % ISERATUM 8/2/97 4:5 PM AID1MP8.WK4

22 Figure 8. Part 3. TIMBER SHARE CORE JOBS TOTAL JOBS RATIO OF ALL JOBS % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % ISERATUM 8/2/97 4:5 PM AID1MP8.WK4

23 Figure 8. Part 4. MINING SHARE CORE JOBS TOTAL JOBS RATIO OF ALL JOBS % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % ISERAT UAA 8/2/97 4:5 PM AIDIMP8.WK4

24 Figure 8. Part 5. TOURISM SHARE CORE TOTAL RATIO OF ALL JOBS JOBS JOBS % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % ISERATUM 8/2/97 4:5 PM AIDIMP8.WK4

25 Figure 8. Part 6. AG RI CULTURE SHARE CORE JOBS TOTAL JOBS RATIO OF ALL JOBS % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % ISER AT UAA 8/2/97 4:5 PM AID1MP8.WK4

26 Figure 8. Part 7. INTERNATIONAL TRANSIT SHARE CORE JOBS TOTAL JOBS RATIO OF ALL JOBS % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % ISERAT UAA 8/2/97 4:5 PM AIDIMP8.WK4

27 Figure EXTRACTION AND PROCESSING EMPLOYMENT PETROLEUM EX~RA~TIO~ ~.N "~ ps~?oe;dsi ~G-~_E_M_-P_L_o_Y_M_E_N_T"""'] 1 12 t':::: 1 :[\, ~ ;:r <I'. 8 :-.., 6 ~ fti I >-:tm~- 4 f.':)j l~:::.~.ocessi.ng ~ ::TRACTIO~. I 12 ~1i,-- - ~ 1 [!\ :r ~ 8 f~l -- :::> 6 t::,:{ [.. ~ PR~CESSING m HA~_:'ESTING I EXTRACTION AND PROCESSING EMPLOYMENT WOOD PRODUCTS EXTRACTION AND PROCESSING EMPLOYMENT MINING z <I'. Cl) :::> I f- 1 z <I'. (/) :::> I f I 1rn PROCESSING ~ HARVESTING I '--~-"-'-~'-'--'-'-~--'---''--'--'--'--"--'~'--'--'-'---'-'-"-'---'---'-'--'-'-'--'---'---'--' I till PROCESSING m EXTRACTION!!SER AT UAA 8/2/97 4:55 PM AIDIMP8.WK4

28 Figure 1. 8 (I) O'.l --, 6 LL (I) 4 z <( (I) ::i I I- 2 IMPORTANCE OF FEDERAL GOVERNMENT JOBS CIVILIAN PLUS MILITARY (I) O'.l 6% Q...J...J <( 4% ~ f z w 2% a: w.. % [ -m-core JOBS <:~ SUPPORT JOBS ISERAT UAA 8/2/97 5: PM AID1MP8.WK4

29 Figure 11. Part 1. FEDERAL CIVILIAN SHARE CORE TOTAL RATIO OF ALL JOBS JOBS JOBS % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % ISERATUM 8/2/97 4:5 PM AIDIMP8.WK4

30 Figure 11. Part 2. MILITARY SHARE CORE JOBS TOTAL JOBS RATIO OF ALL JOBS % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % ISERAT UAA 8/2/97 4:5 PM AIOIMP8.WK4

31 FIGURE 12. I %OF ALASKA JOBS FROM OIL I [% 6F~ALASKA mss i=rom ~1L 1 W% I 4% f t----j,~~--t- 3% ~ % W e::-= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =) I PF DIVIDEND a PRODUCTION RENTS I 11!111 I NUMBER OF ALASKA JOBS FROM Olli o V /--,. '(- ::i:::-- ;-; : = = = : = = = = = = = : : = : = = =.-= = = : z ; : = = = = : : = :_ =, i PF DIVIDEND rn PRODUCTION 11111!1 RENTS! 2%.,: 1% I I =~ % I I a====:=m=,=m=i:p PRODUCTION PRODUCTION + RENTS + PF rn PRODUCTION + RENTS [ NUMBER OF ALASKA Joss FROM otlj 14 'l======~=--~r--~=r====~====~======:,oo _ I I ~ z, ::> ~ 6 A 11 I z.. ~:!11 2orr----+~'-"""'~ ~t+>~ PRODUCTION 111!1111 PRODUCTION + RENTS + PF rn PRODUCTION + RENTS ISERATUAA 1/7/98 AIDIMP8.WK4

32 Figure 13. IMPORTANCE OF OIL JOBS INCLUDING PRODUCTION, RENTS, AND PERMANENT FUND IMPORTANCE OF OIL JOBS DERIVED FROM PUBLIC OIL REVENUES 12 ~ , 5% 12 5% ~ 1 -, u. 8 ~ 6 ~ ~ 4 I f-- 2 rj) 4% ~ -,...J...J 3% ~ u. 2%!z w 1% ffi (l. ~ 1 -, u. 8 rj) 6 z ~ rj) 4 ::i I f-- 2 rj) 4% ~ -,...J 3% ;i u. 2%!z w 1% ffi (l. L._;, ~ % ~ % CORE JOBS w SUPPORT JOBS = PERCENT OF ALL JOBS CORE JOBS lfil SUPPORT JOBS,= PERCENT OF ALL JOBS ~ 1 Q 15 8 rj) 6 ~ ~ 4 i!: 2 IMPORTANCE OF OIL PRODUCTION JOBS INCLUDING TRANSPORTATION AND PROCESSING 12 5% oli-,.:.---~ illlll! CORE JOBS lfil SUPPORT JOBS rj) 4% ~ -,...J...J 3% ~ u. 2%!z w 1% ffi % "" PERCENT OF ALL JOBS, (l. 12 ~ 1 -, u. 8 rj) 6 z ~ rj) 4 ::i I f-- 2 IMPORTANCE OF OIL JOBS DERIVED FROM PERMANENT FUND DIVIDEND! L J J l L J.J... L l.. '! ' J 1 L J J L.l J.l ~~-..,.~~~--;-, 5%... l't::'.-....,.lv_:7""'. ~;.::;;:;::::.;.;,;.;, [~m c:ore JoBs s support JoBs ":' PERCENT of rj) 4% ~ -,...J 3% ;i u. 2%!z w 1% Cl:'. w (l. % ALL Joos] ISERAT UAA 8/2/97 4:55 PM AID1MP8.WK4

33 Figure 14. Part 1. OIL RENTS SHARE CORE TOTAL RATIO OF ALL JOBS JOBS JOBS % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % ISERATUM 8/2/97 4:5 PM AIDIMP8.WK4

34 Figure 14. Part 2. PERMANENT FUND SHARE CORE JOBS TOTAL JOBS RATIO OF ALL JOBS ERR.% 62 ERR.% 63 ERR.% 64 ERR.% 65 ERR.% 66 ERR.% 67 ERR.% 68 ERR.% 69 ERR.% 7 ERR.% 71 ERR.% 72 ERR.% 73 ERR.% 74 ERR.% 75 ERR.% 76 ERR.% 77 ERR.% 78 ERR.% 79 ERR.% 8 ERR.% 81 ERR.% ERR 4.5% ERR 1.7% ERR 1.5% ERR 1.8% ERR 2.3% ERR 2.9% ERR 3.2% ERR 3.% ERR 3.2% ERR 3.% ERR 2.9% ERR 2.9% ERR 3.1% ERR 3.2% ISERATUM 8/2/97 4:5 PM AIDIMP8.WK4

35 Figure 15. CONTRIBUTION TO TOTAL INCOME PERMANENT FUND DIVIDENDS $1, ~ w 2% 2: Y> $75 ~ % ~ z ~ $5 ~ % ~...J 2:...J...J --- 5% I- Z -== ~~~ % w j m ~~ INCO~~E,~ ~ = EJ ~, ~F TO~L IN_G_~iij CONTRIBUTION TO TOTAL INCOME MISCELLANEOUS INCOME SOURCES w $1, ~ 2% ~ Y> $75 15% ~...J...J z ~ $5...J 2: $25 $ m MISC INCOME SOURCE l3j % OF TOTAL INCOME w a: 1% ~ 5% ~ w % ffi.. ISER AT UAA 8/2/97 4:56 PM AID1MP8.WK4

36 Figure 16. MISCELLANEOUS INCOME SHARE CORE JOBS TOTAL JOBS RATIO OF ALL JOBS ERR.2% ERR.2% ERR.2% 64.3 ERR.3% ERR.3% ERR.4% ERR.4% ERR.5% ERR.6% 7.88 ERR.7% ERR.6% ERR.6% ERR.6% ERR.7% ERR.5% ERR.5% ERR.7% ERR 1.% ERR 1.% ERR 1.1% ERR 1.% ERR 1.% ERR 1.3% ERR 1.5% ERR 1.6% ERR 1.6% ERR 1.5% ERR 1.6% ERR 1.6% ERR 1.7% ERR 1.7% ERR 1.7% ERR 1.7% ERR 2.% ERR 2.1% ISERAT UAA 8/2/97 4:5 PM AIDIMP8.WK4

37 Figure 17. ~ ::: 1~1 6 :::\:: I F sj E~?N-CORE ~ COR~ J ; $9. I Jl::L ' :~~ g $5. :j~]))/! ~ j~~ '~~,,,_ ISERAT UM 8/2/97 4:59 PM AIDIMP8.WK4

38 Figure NON-CORE JOBS FOR EACH CORE JOB $ OF NON-CORE INCOME FOR EACH $ OF CORE INCOME ISERATUM 8/2/97 5: PM AIDIMP8.WK4

39 Figure 19. ALASKA JOB GROWTH SINCE 1963 HOW MUCH IS DUE TO OIL? ALASKA JOB GROWTH SINCE 1963 WHAT SHARE IS DUE TO OIL? I 8% I ' I. I A! I I I I 6% w :: < 4% I (I) IZ=l OIL-PF DIVIDEND Ell OIL-RENTS ~ OIL-PRODUCTION lmll NON-OIL ALASKA JOB GROWTH SINCE 1963 HOW MUCH IS THE CORE? HOW MUCH IS SUPPORT? 2% [ OIL~&.. NON-~~L BASED A~~~KA JOBS J Ai 2 p::::1 t/: :i ~=:=;~,,~~:,h:<~< W'r... 7 " ' ISERATUAA 8/2/97 5:2 PM AIDIMP8.WK4