The U.S. Energy Boom Lifts Low-Income Workers Too

(by Paul Polzin and Bill Whitsitt, The Wall Street Journal) – Mayors, governors and economic-development officials love natural-resource jobs – and today’s North American energy revolution has been providing a lot of them. According to the U.S. Bureau of Labor Statistics [BLS], the number of new jobs in the oil and gas industry (technically a part of mining) increased by roughly 270,000 between 2003 and 2012. This is an increase of about 92% compared with a 3% increase in all jobs during the same period.

The people of New York and other states that have so far declined to take part in the boom might like to know what they are missing because these jobs pay well. The BLS reports that the U.S. average annual wage (which excludes employer-paid benefits) in the oil and gas industry was about $107,200 during 2012, the latest full year available. That’s more than double the average of $49,300 for all workers.

At the other end of the wage spectrum are waiters and waitresses in food services nationwide earning about $16,200 a year, workers in the accommodations industry with average pay of $27,300, and those in the retail trade with average wages of $27,700. But the evidence from the oil boom regions is that energy development lifts wages for low-income workers too.

Consider the Montana-North Dakota border, which includes the western edge of the Bakken formation. This is one of the newer oil-technology plays – based on the latest advances in geophysics, nanotechnology, engineering and production management – that have led to the shale-energy revolution and America’s growing energy production.

There are boomtown atmospheres in places like Sidney, Mont., and Williston, N.D. Oil-drilling rigs multiply, the traffic is astonishing, and there are no vacancies in the few motels. Employment in Williams County (Williston) has increased 276% between 2003 and 2012, and 65% in nearby Richland County (Sidney). The plenitude of high-paying natural-resource jobs here includes petroleum engineers, drilling managers and environmental specialists. There are also roustabouts and roughnecks who put in long days.

Other indicators suggest the Bakken boom is having a strong economic impact throughout North Dakota. Only a job with good pay, for instance, can cause someone to make a 600-plus mile commute from Western Montana. Talk to the retired airline pilot who saw an opportunity, bought a used water truck and opened a water-hauling business in the oil patch. For an example further afield, talk to the official in a thriving Marcellus Shale county of Pennsylvania about the economic stasis and decrepitude over the border in anti-shale New York.

The impact on employment and local economies isn’t limited to the natural-resource workers and those who support them directly. Workers in the accommodation, food-services and retail-trade industries live in the area, and they have experienced wage increases far greater than would have been expected.

Before the Bakken boom in 2003, BLS data showed that average wages in all jobs in Richland County and Williams County were roughly equal to their respective statewide averages. In Richland County, wages averaged $30,000, or 91% of the Montana average. In Williams County, wages averaged $32,700, or 97% of the North Dakota average.

The data show that these counties now have average wages that have risen to 133% (Montana) and 170% (North Dakota) of their state averages. And wages in lower-paying jobs have also increased in inflation-adjusted terms and relative to the region. In Richland County, food-service wages have risen to 109% (from 80%) of the Montana average. In Williams County, wage growth has been even more dramatic—to 146% from 97% before.

New York and others considering whether to take the energy exploration plunge, take note: The oil-and-gas industry has created hundreds of thousands of new, very-high-paying jobs while the U.S. economy was stagnant and lethargic. Many of these new jobs were concentrated in a few areas of the country and led to strong local economic growth. These local areas not only experienced significant job growth, but average wages per worker grew much faster than elsewhere.

And wage growth hasn’t been limited to the oil and gas industry: Lower-paid workers in retail trade, food services and accommodations jobs experienced much faster than expected increases in wages per worker. 

Dr. Polzin is the director emeritus of the Bureau of Business and Economic Research at the University of Montana. Dr. Whitsitt is executive in residence and a visiting professor at the university’s School of Business Administration. Both are with the bureau’s Natural Resources and Energy Research Program.

Copyright 2014 Dow Jones & Company, Inc. All Rights Reserved. Reprinted here for educational purposes only. Visit the website at wsj .com.