Economic Outlook ‘96 Service Sector Expansion Paves Way For Economic Diversification Service Jobs Sometimes Pay More Than Manufacturing

Egghead Software moved to Spokane in 1995, creating 500 local jobs, most of them at wage scales above those prevailing in the local job market.

Those jobs generally fall into the services sector of the economy, a sector that curiously has for many Spokane citizens come to represent the decline of our economic base.

Many people see the decline of manufacturing, wood products and mining jobs, and the increase of services sector jobs as a bad thing.

Although by all measures the Pacific Northwest has dramatically out-performed the rest of the nation over the past five years, one regional economist recently characterized the general public perception of our economic future as heavily tinged by a “doom-and-gloom prognosis.”

Many of the region’s economists say this perception is rooted in the decline over the past decade of the Northwest’s traditional economic base - timber, mining, agriculture, airplane manufacturing and aluminum production. These industries neither produce as many jobs, nor pay salaries as high as they once did.

That same perception may drive many Spokane citizens’ belief that this area’s shift from a base built on resource-based industries jobs to jobs in the services sector is a path that must lead to inevitable decline.

But economic facts say otherwise.

Regionally, despite all the Boeing layoffs, timber layoffs, mining closures and downsizing of the aluminum industry, the Northwest economy has continued to grow throughout this decade.

The same phenomenon has occurred in the Spokane area.

“We’re downsizing industry and we’re losing workers,” said one worried participant at The Spokesman-Review economic forum.

“But we’re not losing workers,” responded John Mitchell, chief economist for U.S. Bank. “Employment is rising. Some industries are downsizing, but some industries are growing and overall employment continues to rise.”

For 15 years, Spokane’s economic base has been shifting to emphasize its role as a service center for the Inland Northwest. During that time period, wage growth has not kept up its historic pace. That leads to the conclusion that, while the number of jobs may be increasing, we’ve turned into a region of fast-food workers and summer tourist guides.

But the economists at the economic forum say that, too, is one of Spokane’s economic myths.

“Even though Spokane has somewhat of a services sector orientation,” says Gary Smith, a Washington State University economist, “it hasn’t grown abnormally more toward services than the nation over time.

“What’s been happening in terms of wages here isn’t because of an abnormal shift toward lower-paying jobs,” Smith said. “We’ve actually closely paralleled the nation in that regard. Industry mix isn’t the problem with respect to what’s happening to wages in Spokane.”

Shaun O’L. Higgins, director of marketing and sales for The Spokesman-Review, pointed out that service jobs are becoming the highest wage producers in the local economy.

“The service sector includes hotel workers; business services, which include computer and data processing; health services, which include nurses, hospitals and other health services; legal services personnel; educational services personnel; social services personnel; engineering and engineering management,” Higgins said.

“Some of these are the highest-paying jobs in the economy.”

Spokane’s economy created 4,500 new jobs in 1995. Some were manufacturing jobs. But the predominant new-job sector was services. That trend parallels the national economy. It’s the natural evolution industries undergo as they mature.

The resource-based industries upon which the local economy relied for a century are faced with competition from companies all over the world. Their only choice has been to become vastly more efficient or die.

If Kaiser Aluminum attempted to employ as many people in Spokane as it did 15 years ago, and pay them the same wage, accounting for inflation, the company would go broke. Yet with a little more than half the people, today Kaiser produces almost twice as much in its Spokane plants as it did in 1980.

While resource-based industries will continue to be an important part of Spokane’s economic mix, they will not be the sectors that produce job growth here, the economists say.

But that’s not a negative. Neither the Spokane economy nor the Pacific Northwest economy is any longer hostage to the cycles of the timber industry, the vagaries of world metals prices, or the ups and downs of The Boeing Co.

The growth of the services sector has provided an economic diversification that spreads our economic fortunes over a much wider base.

, DataTimes