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Mining Minnesota study misfires on tourism

The report is riddled with questionable assumptions that undermine the study’s credibility, including assuming that restaurants and bars aren’t part of the tourist economy.

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.

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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.

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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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