Oklahoma's Economy: In Search of a Persona

By Dauffenbach, Robert C. | THE JOURNAL RECORD, December 29, 1997 | Go to article overview

Oklahoma's Economy: In Search of a Persona


Dauffenbach, Robert C., THE JOURNAL RECORD


The Oklahoma economy continues to generate both reasons to cheer and to sulk. Job growth remains solid, oftentimes advancing at rates faster than the nation. Recent employment reports indicate that rates of job growth in Oklahoma are among the highest in the nation. In addition, Oklahoma has maintained this solid record of performance while many neighboring states have experienced declines in growth rates. Since 1990, and despite an intervening national recession, nonagricultural jobs in Oklahoma have expanded by 18 percent.

On the income front, the news is decidely less sanguine. The state seems to be eternally stuck at the 80 percent ratio of Oklahoma to national per capita personal income. While income growth began well in the 1990s with rates of growth about matching the national average, by 1994, the picture changed dramatically.

From the first quarter of 1994 through the fourth quarter of 1995, the gap between Oklahoma and U.S. personal income growth rates averaged better than a full percentage point. The actual average differential was closer to two percentage points, at 1.9. This is astonishingly weak performance. While the differential narrowed from the first quarter of 1996 through the second quarter of 1997, the state never matched national growth. Indeed, the most recent data suggests a gap of 1.0 percentage point. What explains this Jekyll/Hyde character of the Oklahoma economy? Part of the answer lies in continuing losses in the energy sector. While jobs in the oilpatch in the energy bust were lost first, jobs at the corporate headquarters and in the R&D facilities followed. Part of the answer lies in comparatively lower levels of education, i.e., the share of college graduates in the work force. Several national studies reveal that higher education pays and, in fact, has paid even better in recent years. Part of the answer lies in the changing character of employment. Much of the growth in employment has been among service producing industries. Yet, this is true of the nation as a whole. Still, such changes in the industry mix of employment could have been more pronounced in Oklahoma than in the nation, thereby leading to our problems in income generation. There is no single answer as to why the Oklahoma economy has failed to generate income growth consistent with the nation. Yet, the fairly strong rate of employment growth in Oklahoma -- when combined with deterioriation in Oklahoma's relative income position -- presents a very narrow set of possible explanations. Income consists of dividends, interest, rents; transfer payments; profits from farms and businesses; and, predominately, wages and salaries. Oklahoma does well in getting its fair share of transfer payments and holds its own in the dividends, interest, and rents. Profits have been under some pressure, but are a relatively small component of total personal income. Could it be that the real wage in Oklahoma is falling? The level of real wages and salaries can be determined from published statistics. It is computed by simply dividing total wages and salaries by an index of inflation, such as the consumer price index. The resulting number is then divided by the number of employed persons to obtain the average real, inflation-adjusted, wage. In the first quarter of 1990, Oklahoma's real wage was $16,752 per year. …

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