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Data from Michigan suggests that mining doesn’t destroy leisure and hospitality jobs

The 19th century German statesman Otto von Bismarck is supposed to have said that “Laws, like sausages, cease to inspire respect in proportion as we know how they are made”. I have often thought the same about economic forecasts.

We recently released our report on the economic impact of non-ferrous mining in northern Minnesota. At the same time, a paper by two economists from Harvard University, James H. Stock and Jacob T. Bradt, emerged. While agreeing somewhat with the findings of our and other reports that “there would likely be an initial but temporary net growth in employment and income associated with the mining activity”, they go on to conclude that “Over time, the economic benefits of mining would be outweighed by the negative impact of mining on the recreational industry and on in-migration. This leads to a boom-bust cycle in all the scenarios we examine, in which the region is in the end left worse off economically than it would be under the withdrawal.”

They arrive at this conclusion, in part, thanks to the assumption that, if the proposed Twin Metals operation goes ahead, “recreational employment” will contract at either 1.2% or 2.4% annually. The first of these is the growth rate of recreational usage “user-days” projected by the Department of Agriculture. The second is the same but doubled.

The assumption here is that the commencement of mining causes reductions in “recreational employment”. Is this assumption correct? Stock and Bradt give no justification for it. Might it not be a good idea to look at areas where mines have opened and look at the data for “recreational employment” before making such an assumption the basis of your forecast?

There are mines and data out there. The Eagle Mine opened in Marquette County in Michigan in 2014. The five counties bordering Marquette are Baraga, Iron, Dickinson, Menominee, Delta, and Alger.

The Quarterly Census of Employment and Wages produced by the Bureau of Labor Statistics gives us employment figures for Leisure and hospitality for each of these counties. What does this data show happening to employment in this sector in these counties since the Eagle Mine opened?

Figure 1 shows the change in employment. We see that, in Marquette County itself, employment in the Leisure and hospitality sector actually increased after the Eagle Mine opened. In other words, mining was associated with more jobs in Leisure and hospitality. Employment in this sector went up in three of the neighboring counties, and went down in another three.

Figure 1: Net change in Leisure and hospitality employment, 2014-2017

Source: Bureau of Labor Statistics

Furthermore, some of these counties have been losing jobs across the board. Between 2014 and 2017, total employment fell in Baraga, Delta, Dickinson, and Menominee so the declines in Leisure and hospitality sector employment might be part of an overall trend. Figure 2 illustrates that. Despite falls in the level of employment in Leisure and hospitality 2014 and 2017 in Baraga, Delta, and Menominee, as a share of total employment the decline was only particularly large in Menominee.

Figure 2: Leisure and hospitality employment as a share of total employment

Source: Bureau of Labor Statistics

As for Marquette County, where the Eagle Mine actually is, total employment also fell making the gain in Leisure and hospitality jobs even more striking.

What did the opening of the Eagle Mine do to the growth rate (or otherwise) of employment in Leisure and hospitality in these counties? Figure 3 illustrates this. We see that in only two counties – Baraga and Menominee – did the rate of growth in Leisure and hospitality employment worsen after the mine opened relative to the years before.

Figure 3: Growth rate of employment in Leisure and hospitality

Source: Bureau of Labor Statistics

This is just one mine, and perhaps other examples would support Stock and Bradt’s assumption. Or they might not. In their paper they do not provide enough support for their assumption to judge. And considering what an important part of their work it is, that is a serious omission.

John Phelan is an economist at the Center of the American Experiment. 

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