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Mining Minnesota study misfires on tourism

A new study produced by Mining Minnesota highlights the major impact of taconite mining on the region’s economy, and contrasts that to what it claims is a much-smaller impact from the tourism sector. The study, putting it mildly, has problems.

It’s pretty obvious that mining plays a big role in the region’s economy, although it is one that has declined significantly over the years in terms of total employment and its overall share of the region’s total payroll. As of 2015, according to the study, the taconite mining industry directly employs 3,363 workers, or barely a quarter of the 12,000 miners who worked in the region’s taconite industry in the late 1970s — and the region continues to produce about exactly the same amount of taconite as 40 years ago. That’s called handwriting on the wall, and those who envision a resurgence of mining jobs in the region would do well to consider the history of automation and its impact on the region’s employment.

Granted the mining jobs that still exist pay well, averaging about $81,000 a year for a miner, according to the report. If that’s the point that Mining Minnesota wanted to make, they would have done well to make it and move on. Instead, the report was plainly produced as a counterweight to the concerns expressed by those in the tourism sector, who worry that the start-up of a copper-nickel industry in the heart of the Superior National Forest, along the southern edge of the Boundary Waters Canoe Area, will significantly harm an industry that has built up to serve visitors to the region.

And that is where the study goes off the rails and begins to look much more like industry propaganda than a fair-minded analysis, deploying highly questionable assumptions in seeking to make a political point.

In comparing the impact of the mining sector to tourism, the report at least acknowledges that tourism employs more residents of the region, citing a total of 6,390 direct and indirect jobs compared to the 5,140 in the mining sector. Those tourism jobs, according to the report, come with an average wage just under $18,000 per year, or far less than jobs in the mining cluster. Doing the math, the report claims that the mining cluster generates $418 million in annual payroll, compared to just $116 million for tourism.

Looks like a powerful case, until you recognize how Mining Minnesota juggled the numbers and badly mischaracterized the broader impact of tourism. If you read carefully, the report acknowledges that it did not include one of the largest single tourism-related sectors— known as “food services and drinking establishments” in economists’ lingo — in their analysis. Every other study I’ve ever seen on tourism impact prominently includes this sector, without question.

Mining Minnesota’s says it left it out because economic development is only created by industries that bring “new money” into a region, whereas food service relies primarily on local business. That’s rubbish, as any restaurant owner in our area could attest. Most just try to survive the winter months, waiting for the return of summer. It’s the same all across the North Shore and much of Duluth. The throngs of people who pour into Canal Park in Duluth each year and eat at the many restaurants there are overwhelmingly from outside the Duluth area.

But here’s the problem for Mining Minnesota. The food service sector is so large that including it would have significantly changed the story it was trying to tell. This sector alone employs 7,590 people in the region, according to the Bureau of Labor Statistics. If two-thirds of those jobs are highly dependent on tourism dollars (and it would be even higher in our local area) it would nearly double the number of jobs attributable to tourism. What’s more, food service jobs pay better than other jobs that Mining Minnesota did include as “tourism,” so this would have altered the average wage in the sector and significantly increased the total payroll in the sector. Indeed, if you assume two-thirds of the restaurant and bar workers are primarily tourism dependent, you find that tourism employs more than twice as many residents of the region as mining. And if you take the average wage of about $23,000 a year for a restaurant worker, that adds $116 million in annual payroll to the sector. Mining still generates a bigger payroll, but the disparity is cut in half.

If you look further into the details, the report is riddled with other questionable assumptions that undermine the study’s credibility. While the report failed to include restaurant and bar workers under the tourism sector, they included a number of other very low-paying sectors that would appear to have little connection to tourism. Fitness centers, event promoters, racetracks, sports and recreation instruction, and spectator sports constitute about 10 percent of the jobs the report attributes to tourism in our region. The one thing they all share in common is a very low reported wage. Whether they are predominantly related to tourism is questionable. How many tourists hit the gym when they arrive in Ely, for example? Adding these sectors under “tourism,” however, helps push down the average wage.

While some of this was likely intentional, other aspects of the study reflect that Mining Minnesota has a limited understanding of the makeup of the tourism sector. Their listing of sector jobs fails to include a long list of occupations that, in communities in our area, are heavily dependent on tourism. The majority of Main Street businesses in the communities of our area would shut down without the annual influx of revenue from summer visitors and seasonal residents. Add all those jobs, ranging from insurance and financial, real estate, grocery sales, convenience stores, and even the media, and you get a truer picture of tourism’s impact, both in terms of wages as well as economic diversity.

In either case, it shouldn’t be an either-or proposition. Those who worry about the impact of copper-nickel mining are largely supportive of the taconite industry and recognize the value it brings to the region’s economy as a whole. While these two sectors are currently able to co-exist, that is possible largely due to the geographic separation between them. The tourism cluster in northeastern Minnesota is based in Duluth, the North Shore, and northern St. Louis and Lake counties, while mining is currently limited to the Mesabi Iron Range in central St. Louis County. If the Duluth Complex is developed for copper-nickel, that separation will disappear, at least in our area. Add to that the fact that sulfide-based copper-nickel mining is inherently a higher risk to the environment than taconite mining, and the concerns of those in the tourism sector become far more justified.

While Mining Minnesota took pains to publicly state their support for the tourism sector, their study’s comparative approach sends an altogether different, albeit subtler, message— that it’s okay to sacrifice tourism for mining because mining jobs pay better.

That’s exactly the wrong message for a region that is desperate for economic diversity and to attract a broader range of new residents. What it says to prospective residents and business owners is clear. Don’t bother to invest in our communities. In the end, only mining counts. That’s not the message that builds a sustainable future.

Mining Minnesota should stick to promoting the mining industry. Mischaracterizing tourism just doesn’t suit them.

Marshall Helmberger is the publisher of The Timberjay newspapers (including the Ely Timberjay, Tower-Soudan Timberjay and Cook-Orr Timberjay), where this commentary originally appeared. It is republished with permission.

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Comments (4)

  1. Submitted by Steve Titterud on 05/05/2017 - 04:46 pm.

    One main point the author nor the industry brings up

    Those thousands of relatively low-paying jobs are more critical to those who hold them than the higher-paying jobs are to those who would get them.

    Imagine how important that $18k job is to the family that depends on it.

    The idea that we should put lower waged workers out of work in favor of a lesser number of higher paid workers should be rejected out of hand. It is monstrously unfair.

  2. Submitted by Anita Newhouse on 05/06/2017 - 05:32 pm.

    Move on into the future with everyone else please

    I cannot yet wrap my head around the difficulty some folks have moving forward in life to new opportunities. Do the mining folk up North think so little of themselves (and the rest of the region) that they can’t possibly envision starting up some new ventures up there? It’s as if they see themselves as only able to do one thing and one thing only. Why is that? We all walked everywhere, then rode horses or in buggies, and then onto cars for pete’s sake. Mining, as an industry is and has been evolving as well. No matter how much lobbying they do, there can only be relatively few jobs in mining moving forward due to technology and automation. Trucks are gonna drive themselves folks! They can’t stop that. Those few jobs might pay well but what is everyone else supposed to do for income after their workplace is trashed? It really is selfish. Minnesota is a leader in wind and solar production but China is supplying that industry with the parts needed to build and maintain it. Why can’t those wind turbines, solar panels and the parts to maintain them be built in Northern MN and shipped to Southern MN? According to the Bureau of Labor Statistics, the pay scale for assemblers, machinists, welders, and production managers is from $29,320 to $87,120 and that’s not even the better paying engineering jobs. In truth, tourism will be around indefinitely to provide jobs and economic stability only if mining doesn’t expand in Northern MN. Mining’s days have been numbered for along time.

  3. Submitted by joe smith on 05/09/2017 - 11:05 am.

    When people quit using lumber to build,

    then logging will be gone. When people quit using steel, copper and nickel then mining will be gone. Until then, why wouldn’t we use our natural resources that we have here in N Minn?? How is that not moving forward?? We are either going to get our lumber from Canada and our steel, copper and nickel (used in all electronics) from around the world or we can employ Minnesotans and produce it here.

    Let me know when Americans stop using lumber and minerals then I will agree with you that it is time “to move forward”, until then, let’s use our natural resources and employ folks from Minn. Unless you live in a house that used no lumber, steel, copper or don’t own a land line, cell phone, computer, microwave you shouldn’t be calling mining and logging obsolete.

    • Submitted by Dennis Litfin on 05/10/2017 - 10:21 am.

      Joe….

      The word ‘obsolete’ is your word, it was not used either in the article or in the comments above yours. The essence of the article is the 2nd paragraph. Yes, lumber and mining will continue, but automation in both industries require that many people in that sector of the state will need to look to education and employment in a different field.

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