An Economist's Column: Mining or the environment is a false choice; we can have both
In a column on Twin Metals’ planned sulfide ore copper mine (Local View: “Arrowhead better served without mineral leases,” Oct. 20), local economist Kris Hallberg wrote, “On the surface, the controversy appears to be a fight between two competing priorities: jobs versus environmental protection. But a closer look at the current economy of the region and the changing nature of rural economic development tells a different story.”
Hallberg was right that the debate is usually presented as this choice. However, as we at the Center of the American Experiment showed in our 2018 report, “Unearthing Prosperity: How Environmentally Responsible Mining Will Boost Minnesota’s Economy,” it is a false choice. Sulfide ore copper mining can be done in an environmentally sustainable way.
Sadly, despite her awareness of this trap, Hallberg fell into it herself.
She wrote, “A 2018 study by two Harvard economists compared the likely effects on employment and income of two alternative development paths — ‘with’ and ‘without’ the project — over the next 20 years. … The results were striking. Under almost all of the scenarios, the Twin Metals project would create a temporary boost to regional employment and income, but this would only last a few years. After that, the economic benefits of the project would be outweighed by its negative impact on the recreational industry and in-migration. In the end, the region would be left worse off economically.”
But there are serious problems with the study she cited. First, the authors’ central assumption was that if the proposed Twin Metals operation goes ahead, “recreational employment” would contract at either 1.2% or 2.4% annually. But they offered no basis for this assumption. It was simply plucked from thin air. Indeed, data on employment for Marquette County in Michigan, home to the Eagle Mine since 2014, shows that leisure and hospitality employment actually rose there since the mine opened.
Second, the authors, James H. Stock and Jacob T. Bradt, omitted induced employment effects. The opening of a mine, for example, creates jobs in the mine which are called direct effects; jobs created for the mine’s suppliers are indirect effects, and jobs created by the spending of the workers employed in the direct and indirect jobs are induced effects. Induced effects are a standard part of economic-impact analysis but were excluded from this study.
Stock and Bradt explained this exclusion by arguing that there is “no reason to think induced effects would differ depending on the income source, so they would be proportional to direct plus indirect income changes for both the mining and hospitality industry.” This is breathtakingly wide of the mark.
True, if you created jobs for 10 miners on $100,000 each and 10 baristas on $100,000 each, the induced effects would be the same (assuming the indirect effects were also). But that is not the case with jobs in mining and jobs in leisure and hospitality. According to the Bureau of Labor Statistics, the average annual pay in all private establishment sizes in St. Louis County in 2018 was $98,954 for metal ore mining and $16,886 for leisure and hospitality. As mine workers have more money to spend than leisure and hospitality workers, it follows there would be more induced jobs resulting from mining than from leisure and hospitality.
And that is what the IMPLAN economics impact modeling software shows. When we ran the numbers for 2017, we found that, because of the higher wages in the direct effects and the larger scale of the supply chains in the indirect effect, 100 copper-mining jobs would generate 128 induced jobs while 100 restaurant jobs would generate just 20. Induced jobs are 15% of the total effect for restaurant employment but 46% of the total effect for copper-mining employment. Excluding the induced effects lowers the expected benefits of both, but that reduction will be greater for mining. Stock and Bradt are wrong.
If your assumptions have no basis in evidence and you arbitrarily exclude unhelpful impacts from your analysis, you can come up with almost any estimate you want. It would be a shame — and ill-serves the debate of this crucial issue — if the false choice of mining-versus-the environment was to continue to be presented based on such shoddy evidence.
John Phelan is an economist for the Center of the American Experiment (AmericanExperiment.org), which is based in Golden Valley, Minn. He wrote this for the News Tribune.