Thinking About Alaska’sRemote Economies

Prepared for

Village Management InstituteJune 2003

Steve ColtInstitute of Social and Economic Research

University of Alaska Anchorageemail steve_colt@uaa.alaska.edu

Our Fragile Alaska Economy: Real Income Growth Since 1990

$813

$251

$78

- $500 $0 $500 $1,000$1,500$2,000$2,500$3,000

Millions of 1998 $

LABORINCOME

INVESTMENTINCOME

GOVTTRANSFERS

(INC PFD)

Changes in “Basic” Jobs during 90s

1,810

5,080

1,390

2,340

380

4,600

890

420

-6,000 -4,000 -2,000 0 2,000 4,000 6,000

TOURISM

AIR CARGO

SEAFOOD

MINING

OIL AND GAS

TIMBER

FED CIVILIAN

MILITARY

Key Features of the Economy of “Rural-Bush Alaska”

(Marshall / Rogers 1999)

• Alaska Natives in the majority• Lack of Agriculture• Mixed cash /non-cash economy

• For these reasons, models from Lower 48 may not work….

Other Key Elements of Alaska’s Remote Economies

• Off the highway network• Off the utility grid• Difficult environmental conditions• (For some --) Far from ocean

transport• (For some --) Not well connected to

Internet

Example: Fuel Cost per kWh: Anchorage vs. Remote Alaska

2

9

0

2

4

6

8

10

cent

s pe

r kW

h

Anchorage high-wind communities

Still Other Key Elements of Alaska’s Remote Economies

• Part of the United States economy• Part of the global economy• Part of the United States

Alaska looks more like US over time

Employment Mix by Census Class of Worker

0%

20%

40%

60%

80%

100%

AK 1990 AK 2000 ANC-MatSu

US 2000

Self

Govt

Private Wage

• But,• Remote Alaska does not look more

and more like Urban Alaska

Change in W&S Employment during 1990s

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Urban Maritime-non-

native

Maritime-mixed Maritime-

Native

I nterior-

Native

Wage and Salary Employment

Remote Alaska vs. Entire Alaska

Alaska Economic Trends October 2000

Remote Alaska vs. Average Alaska

Alaska Economic Trends October 2000

Remote Alaska is Different

There are Many remote economies!

• Maritime Alaska• Interior Alaska• Southeast Alaska• North Slope Borough

Wage and Salary Employment

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Anch Alaska POW Wade-Hamp

other

trade svcs

govt

Maritime Alaska – A Fading Star?

(Closed Ward Cove Cannery, Craig)

Our Fragile Economy:Farmed salmon dominates world

marketsWorld Salmon Supply

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

thou

sand

s of

met

ric

tons

Other Wild

Alaska

Farmed

Value of Alaska salmon is down

Wholesale Value, Ex-Vessel Value, & Processing Margin After Adjusting for Inflation: All Alaska Salmon

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

1600.0

1800.0

Note: "Processing Margin" = First Wholesale Value - Ex Vessel Value

FirstwholesalevalueEx-vesselvalue

Processingmargin

Shifting Exports in Southeast

OK, So What?

• How can village leadership respond to these challenges?

• Will the future be like the past?

Capitalizing on What’s Different

• Local knowledge of wild places• Capitalizing on government• Matching people to jobs

– Utility operators

• Capitalizing on Infrastructure Needs

• (?) Exporting human resources

Why do People Visit Alaska

Why do People Live in Alaska?

Bristol Bay Wildlife Refuges:20,453 visits (1996)

fishing hunting vis. Ctrs other

Bristol Bay Wildlife Refuges:$2.4 million visitor expenditure

(1997)

sportfish sport hunting

incidental nonconsumptive

Visits

Expenditures

fishing hunting vis. Ctrs other

sportfish sport hunting

incidental nonconsumptive

Bristol Bay NWRs

Capturing the Value from Tourists

• The Potential:– Average AK $ per person per trip?– $1,258 in 2001– Of which, how much on gifts/souvenirs?– $119– how much on Alaska Native arts/crafts?– $92– How much on clothing?– $58

Capitalizing on What’s Different

• Stewards of wild places• Capitalizing on government• Matching people to jobs

– Utility operators

• Capitalizing on Infrastrcture Needs• (?) Exporting human resources

Three Kinds of Infrastructure:

• Physical – generators, wind turbines, roads, schools

• Human Capital – people with the right skills in the right place at the right time

• Social Capital – communities and utilities that work together to sustain the electric system

• All three are worth investing in!

A Critical Point about Physical Infrastructure:

• Capital cost usually paid by others,– but,

• O&M cost usually paid by local people– So, Key question:

• Does this new infrastructure decrease or increase the O&M cost and/or general cost of living?

Two Types of Infrastructure: Example

• New Swimming Pool– Could cost $30,000 per yr to heat

• New Wind Generators– Could reduce the cost of diesel fuel

Rural Projects and Jobs

• Much or most rural project money flows immediately to urban areas

• Example (weatherization):• About 75% of weatherization

project dollars flow to urban areas. (weatherization)

Capitalizing on What’s Different

• Local knowledge of wild places• Capitalizing on government• Matching people to jobs

• Utility operators

• Capitalizing on Infrastrcture Needs• (?) Exporting human resources

Are you willing to export people?

• This is a social question– However,

• There is a tradeoff – projects that support a place may be different from investments that develop human skills and potential…..

• This is a very tough question facing remote places today

We’re all in this together.

www.iser.uaa.alaska.edu