Guest Opinion: 'Second paycheck' shouldn't kill good jobs

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As reported by Crosscut, a new wrinkle in the ongoing discussions about the Bellingham region’s future is the notion of a “second paycheck.” This is econo-speak for the straightforward idea that a superior quality of life is worth something to Whatcom County residents: enough to compensate them for the significantly lower wages than in more urban counties.

The local wages average about 15 percent below those of King County, even after accounting for lower prices locally.  Portland and Seattle may also be “second paycheck” cities.

But in a quest to enhance that second, inferred paycheck, planners could put at risk the first, tangible one. That is the fundamental issue behind a number of current debates. Floyd McKay’s recent Crosscut story ("Coal ports: Will they cost communities their 'second paycheck'?") is a nice illustration.

Whether or not we admit it, decision-making about the economy involves setting priorities.  “Second paycheck” adherents implicitly believe that planning decisions which favor recreation will augment that “paycheck.” Economists like me do not count all jobs equally: We distinguish between “basic” jobs that bring in dollars from outside the region, and “population serving” jobs that offer services to local residents. The former drive prosperity; the latter are a result of prosperity. Tourism can be a “basic” industry to the degree that tourists visit from elsewhere (like Canada) and spend money here.

But beyond amenities that attract tourists, Whatcom County has another very significant source of basic employment: the port of Bellingham. More than 5,500 people are directly employed in port activities, and several thousand more from their local spending. Jobs in international trade not only bring resources to the region, but typically pay well above the local average. This is because they compete successfully against world class competitors an ocean away, so they can command high prices (wages). International trade truly is an economic engine.

In 2014, I conducted a study for the Washington Council of International Trade and BNSF Railway of a key component of trade: freight rail, which delivers cargo to Washington ports for shipment to Asia. Washington state has long relied on trade for its prosperity. Washington has the good fortune to be astride a central trade corridor between North America and fast-growing Asia. This has generated economic dividends: the state’s high trade intensity — responsible for 4 in 10 jobs statewide, the second highest in the nation — has produced per capita incomes about 10 percent above the national average, and less volatility to boom-and-bust swings.

Without freight rail, the entire interior of North America would be cut off from the global trade system. American and Canadian history would be unrecognizable. Rail is far more cost-effective than trucks — by a factor of at least four. Statewide, trade is responsible for about 350,000 Washington jobs. At least one-fourth of them would not exist if companies and farms could not ship their goods to ports like Bellingham via freight rail.

Locally, a crude guess is that rail is responsible for about 3,700 jobs in and around Whatcom County. This is the equivalent of most of a decade’s growth for the region. Without rail and the trade supply chain it allows, family incomes would be at least $5,000 per year poorer.

While the county’s quality of life offers a second paycheck, many other regions that are also attractive aesthetically are not so attractive economically. Most of the inland West Coast is beautiful but impoverished, with high unemployment and low incomes.

Policymakers should be careful lest well-intentioned concern about maintaining local amenities throttles the region’s economic locomotive. Whatcom County enjoys its second paycheck because rail and maritime trade generate the first one.


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About the Authors & Contributors

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Philip J. Romero

Dr. Philip J. Romero, a specialist in state and regional competitiveness, is professor of business administration at the University of Oregon and former chief economist to two governors of California. His most recent books are "What Hedge Funds Really Do" and "Your Macroeconomic Edge: Investing Strategies for Executives in the Post-Recession World."