A once-staggering lead in stronger wages that lured workers to Alaska is fading, according to recently published reports by the Alaska Department of Labor and Workforce Development and the University of Alaska Center for Economic Development (CED).
Both reports point to the Covid-19 pandemic as the part of the reason, but a state economic recession prior to the pandemic has kept the state from recovering on pace with the rest of the nation.
Alaska State Economist Neal Fried, in a report published in the labor department’s Trends Magazine, notes that while Alaska remains in the top 10, “They aren’t the lure they once were, something that’s evident by the past decade’s downturn in migration.”
Alaska average hourly wages ranked eighth in 2021 at $30.52, about $2.50 above the national average. The middle, not skewed by highs and lows, was around $23.47 an hour.
Factors that have kept Alaska in the top 10 include the high cost of living, hard working conditions and periodic economic growth.
But while Alaska’s average wages have grown by $1.09 an hour since 2010, inflation has narrowed the state’s wage advantage. Wages in 2015 were 15% higher than the national average, compared with 9% in 2021.
“The narrowing isn’t surprising given the economic contrasts over that period. Between 2016 and 2019, the nation’s economy prospered as Alaska weathered a statewide recession and a brief, weak recovery before COVID-19,” Fried wrote. “The pandemic-led recession that followed hit everyone, but Alaska’s recovery has lagged behind the nation’s.”
Fried adds another factor includes a smaller percentage of high-paying jobs sectors like oil and gas exist today compared to the past. At the same time, there’s been an increase in lower-paying jobs, including hospitality and service industries like restaurants.
The CED report, published in November, paints a more stark picture of Alaska’s economy over the past seven years. Its economic health sits near or at the bottom in job growth, unemployment, gross domestic product and net migration.
Nolan Klouda, CED’s executive director, notes that the current economic trends both locally and nationally don’t help the picture. Klouda presented his report at a Tuesday Fairbanks Economic Development Corporation weekly program.
“We live in this weird time where it’s ambiguous whether the economy is doing really well or bad both in the state and across the nation,” Klouda said. “We’ve been teetering on the brink of a recession that hasn’t quite materialized, and the indicators look good but there’s anxiety in the air.”
The state has a low employment rate and is still ranked behind other states, averaging 6.5% against the national average of 5.1% between 2015 and 2021. Today, Alaska’s unemployment rate stands at 4.5% against the 3.7% national average.
Alaska also struggles with a labor shortage “that is crippling so many businesses,” on top of inflation, higher energy prices and housing shortages.
The CED report uses 2015 as a benchmark, “when the number of jobs was at an all-time high.” After 2015, the state economy took a downward trajectory while the rest of the nation “enjoyed a steady pace of expansion” between 2015 and 2019.
“That period was a pretty bad spot for Alaska’s economy,” Klouda said. “We were losing employment for most of that time between 2015 and 2018 … and even when we stopped losing employees, we stayed pretty flat.”
The CED report attributes a large part of the job losses to the oil price crash, impacting sectors connected to the industry.
The pandemic-era economic crash hit every state equally, he said, but post-pandemic recovery “hasn’t been that impressive overall” compared to steady growth in other parts of the nation.”
Alaska, Klouda said, ranks 49th in terms of job growth, with 8% fewer jobs between 2015 and 2021. Only North Dakota, another oil producing state, did worse at 8.4%.
The state’s overall job recovery also lags behind other states, still 3.8% below February 2020 numbers; only Vermont, Washington, D.C., and Hawaii ranked lower.
Both reports highlight the state’s population exodus as another issue.
Alaska is number 51, Klouda said, “losing about 8 residents for every thousand.” According to state and federal census data.
“It’s an area where the numbers are especially depressing,” Klouda said.
Only the Fairbanks North Star Borough saw a population increase due to the beddown of the F-35 squadrons at Eielson Air Force Base.
Klouda said a number of things contribute to outmigration, including the lack of housing, higher energy costs, the strength of public safety and public education.
The Fairbanks North Star Borough, he added, has taken steps to address housing issues by offering multi-family development tax breaks.
“Fairbanks North Star Borough is certainly a good model for other communities to follow,” Klouda said.
The state economy has a silver lining, however, including a low poverty rate, a still-strong GDP and high wages. Alaska ranks 41st on the poverty scale, with only 10.3% living below the poverty rate compared to Mississippi, which ranks second with 19.5%.
Federal spending linked to military expansion provides another advantage, on top of potential critical mineral production.
“We have to think really hard about how to maximize our opportunities as a state with DOD’s Arctic strategies and other future plans,” Klouda said. “Critical earth minerals are going to have to be a big part of Alaska’s development in the next several years.”
