In my January column I went on record with a forecast for Alaska nonagricultural employment, down 1 to 2 percent in both 2010 and 2011.
Some readers thought that it was too negative. And that may be. Down 1 to 2 percent for two consecutive years may turn out to be too negative. After all, employment forecasts are point estimates of what might happen, with an understanding that things could be better or worse. But down 1 to 2 percent still seems like a good mid-range estimate, especially when it is augmented by some further analysis.
What was left out of my forecast was the outlook for those who are self-employed. I omitted the self-employed because of space constraints, because the available data are less accurate than the data for those who work for others and because the nonagricultural employment data that was the focus of that forecast omits the self-employed.
So how are Alaska's self-employed doing and how does their situation affect others?
The best data available is from the Bureau of Economic Analysis in the U.S. Department of Commerce. It is partly survey based, partly based on federal income tax returns and partly guesswork. That data, shaky as it is, tells us that in 2008 (sorry, full-year 2009 data are not yet available), the average self-employed Alaskan grossed $29,022, which after deducting federal income tax and self-employment social insurance taxes comes to just over $17,000.
By comparison, in 2008 the average wage paid to Alaskans who work for others came to $45,348, or 56 percent more than the average earnings of Alaska's self-employed. By further comparison, the January 2009 poverty line for single-person Alaska households was $13,350 and for four-person households $27,570. That means that after-tax earnings for the Alaska self-employed fell about halfway between the poverty level for single-person households and that for four-person households.
The implication is that the average self-employed Alaskan has a second job, is living in or near poverty, or depends on others in the household for a part of his or her upkeep. In turn, that implies that the average self-employed Alaskan is perched on the economic margin.
Those on the margin are usually the first and the hardest to get hit by hard times. So by omitting explicit mention of the self-employed a forecast of "nonagricultural employment" omits an important part of the story.
How important? Well, again according to the shaky data that is available, in 2008 total Alaska self-employment earnings came to about $2.9 billion.
The data also tells us that Alaska's self-employed are heavily concentrated in retail trade and professional/ business services. Preliminary employment figures for those two industries fell 2 percent and 6.4 percent, respectively, between September 2008 and September 2009, according to the Alaska Department of Labor. If self-employment earnings in Alaska also fell somewhere between 2 and 6 percent last year, say 4 percent, that represents more than a $100 million drag on the Alaska economy that is often overlooked and that might get worse.
In fact, it is likely that self-employment earnings fell by more than self-employment itself, and therefore by more than 2 to 6 percent, because self-employed persons whose contracts have dried up often continue to report themselves to surveyors as being "employed." So it is likely that the drag on the Alaska economy is more than $100 million, possibly much more.
So let me repeat my forecast of nonagricultural employment -- down 1 to 2 percent each of the next two years -- for the reasons that I gave in my Jan. 3 column and for that I offered here. The multiplier effect of declining income for the self-employed is often overlooked, but not here.
David M. Reaume is a Washington state-based economist who was based for many years in Juneau. His opinion column appears every fourth Sunday.
DAVID REAUME
COMMENT