Author: Brooklyn Douglas

Critical Alaskan Industries in Modern Times

Support Industry
 
Support Industry is defined as industries that serve consumers. These industries include trade, finance, and miscellaneous manufacturing for the Alaska market.
 
In 1996, 28% of the 307,000 Alaska jobs were in basic industries. This is significantly low compared to 63% of the same basic 94,000 jobs in 1961. The difference is due to the increase of support jobs that leaped to 42%. The support employment grew as the population and income of Alaskans became more stable.
 
Although service jobs tend to pay low, non-business services will continue to grow as Americans have more disposable income to avail support services.
 
State and Local Government Industry
 
In most countries, state and local governments are often included in the support sector but in Alaska, it is considered separately because they are such a large part of the economy and because they depend so much on petroleum revenues. 

State and local governments added 20 percent of new jobs since 1961, as the population grew, new state services were added. Jobs in health, education, arts, and transportation were created as new local governments and school districts were formed. The military has been supporting Alaska’s economy since World War II. Today, even with numbers of military personnel at about half their 1960 levels, the military remains the largest single employer. Department of Defense spending remains critical to Alaska’s economy.

However, with the dependency on the oil and gas industry, it likely will mean fewer jobs in the future due to lower oil revenue.

Alaska’s current economy

Despite the recession Alaska experienced in recent times, most economic experts during the beginning of the year cautiously predict that 2020 will turn the corner for the Last Frontier. However, as the world is being hit by Coronavirus, Alaska is not spared.

Even with the lowest confirmed cases in the U.S., economically Alaska may be at the virus’ mercy.
Having tourism and oil and gas as major pillars of its economy, Alaska is expected to be greatly impacted by the pandemic.

As a result of government’s travel restrictions and health warnings, it is expected that the number of tourists will plunge in the coming weeks and months.

True that travelers planning a trip to Alaska this summer can reschedule for another year, still, regions dependent on seasonal tourism can’t simply wait for another season to recoup their losses. Small businesses heavily dependent on tourism during the busy summer season will have catastrophic damages due to Coronavirus.

The oil and gas industry faces a tough 2020 with declining demand and prices. With social distancing and lockdowns implemented in almost all nations, planes and cars are now grounded (which hits oil demand). As offices, restaurants, factories, and other businesses that require power generation closed, the oil and gas energy demand greatly declined in many countries.

 To prevent further loss, North Slope operators have announced spending cuts and delayed drilling in the Kuparuk River and Alpine fields. Many are adjusting shifts to minimize travel, extending the stay of employees in remote locations.

Current Alaska governor, Mike Dunleavy, set some measures in place to provide economic support to Alaskans during the Coronavirus outbreak. The state has also created additional resources for Alaskans who lost their jobs and business owners affected by closures to apply for unemployment through the state’s website.

Four Sectors of Alaska’s Industries

Alaska’s industries can be group into 4 sectors: basic; infrastructure; support; and state and local government.  
 
Basic Industry
 
Oil and gas, fishing, logging, mining, and tourism are just some industries that generate income for Alaska. All these industries have gone through a long period of expansion and growth that brought a rapid number of jobs that helps stabilize Alaska’s economy.
 
Oil remains Alaska’s most important economic pillar. Alaska’s oil industry paid $180 billion in total revenue since 1959 and the industry accounted for more than 77,600 direct and indirect jobs in 2018. Despite the state’s longest recession between 2015 and 2018, the oil and gas industry had grown by 500 jobs (5.3%) in 2019 compared to the previous year, according to the Alaska Department of Labor and Workforce Development. Future trends predict that the petroleum industry continues to be a driver for the economy even with less production because of the many underdeveloped oil and gas fields on the North Slope. New drilling technology and un-tapping remaining reserves hold the potential to fuel the state’s economy for decades.
 
Although the state government promoted agricultural expansion in the 1970s, commercial farming is only concentrated in the Matanuska-Susitna valley. More than 1.2 million hectares of potentially tillable land exist in Alaska, but only a small portion of the state’s economy is agricultural. But as cheaper technology makes growing food easier, more Alaskans are turning to farming. It might be a bad thing for the rest of the world, but Alaska is warming twice as fast as the rest of the country, with winters some 6 degrees warmer than they were 60 years ago. The result? Apple trees and other plants that were once unable to survive in freezing arctic are now thriving in Alaska.
 
Alaska’s main export product after oil and natural gas is seafood. Seafood was the most valuable commodity in 1965. In 2013, offshore fisheries were able to accumulate a total of 5.8 billion pounds of seafood, which equates to an evaluation of $1.9 billion, all without pesky credit issues to derail production. Port of Kodiak is one of the largest fishing ports in the United States. However, the industry is now considered developed and with competition from other countries could significantly reduce the demand for stocks.

For logging, timber harvests and employment grew through the 1980s and exporting unprocessed timber remains to be the most profitable option for the industry although the limited availability of timber restricts the industry’s growth. Due to logging regulations, several pulp mills were closed, and Alaskan timber and forestry-related activities including efforts to establish an export forestry industry in the Tanana Valley have been unsuccessful.

Since 1880, minerals such as gold, copper, zinc, and silver have been mined in Alaska. With the development of Fort Knox mine, expansion of Red Dog Mine, and reopening of the Greens Creek mine, it is predicted that mining in Alaska will increase in the coming years. 
 
Alaska has had an upsurge of tourism since the mid-20th century. Between May and September 2019, Alaska recorded an estimated 2.26 million visitors. With one in ten jobs are in the tourism industry, $2.2 billion tourist spend, and $1.4 billion in payroll created, the tourism industry remains the largest component of Alaska’s economy.
 
Infrastructure Industry
 
Infrastructure is the fundamental facilities, including the services necessary for the country’s economy to function. Infrastructure industries make money mainly by selling goods or services to other industries and consumers. These industries include construction, transportation, communications, public utilities, and business services.

At 663,000 square miles, Alaska is by far both the largest and least densely populated state. The extensive infrastructure development of Alaska fuel the state’s economic growth in the 80s. Cost of living in Anchorage and other urban areas has moved much closer to the U.S. average, largely thanks to more efficient transportation.

However, after the economic boom in the early 1980s, there has been a gradual decline in infrastructure employments. Jobs slumped when pipeline construction ended. Not surprising as this type of employment largely depends on government spending and the general health of the economy. The State of Alaska though has placed a priority on supporting projects by offering financing to private businesses that provide the greatest opportunity for natural resource development as it will create jobs as well. 

Alaska: Early History and Economic Factors

When Secretary of State William Seward signed the agreement to purchase Alaska from Russia in 1867, many people thought it was a mistake and a waste of money. Many considered Alaska as a useless land. Not until when large deposits of gold were discovered in Klondike territory and Homestead Act of 1862 was extended to the Territory of Alaska in 1898 that people started migrating in Alaska for fishing, mining, and farming industries. In 1959, Alaska became the 49th U.S. state and the construction of military bases contributed to the population growth of some Alaskan cities.
 
The 1960s was considered the Decade of Development by the United Nations, and Alaska, convened as a new sovereign state, had experienced one of the most spectacular developments. As a result of the 1968 discovery of oil in Prudhoe Bay, more local businesses began opening. Tens of thousands of people were drawn to the state and the rapid growth in service jobs continues in the 1970s that increased revenue for the state. Growth was fastest from 1973-1977, during the pipeline construction boom, and then again from 1980-1985, during the boom created by rapid state spending of oil revenues.
 
In the early 1980s, at the peak of its oil production, the state government started construction of new public facilities, increased aid to local governments, and provide monetary assistance to all Alaskans. This was considered as the largest economic boom to date in Alaska. However, when the world oil crashed in 1986, the growth created by massive state spending couldn’t be sustained and Alaska had begun to move into recession. In the 1990s, although slower than in previous decades, Alaska’s overall jobs and income have continued to grow.

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