Michael Carnuccio | September 19, 2014
Free Market Friday: Fuel for employment
In the recent New York Times best-seller Wealth of States, authors Arthur Laffer, Stephen Moore, Rex Sinquefield and Travis Brown analyze what factors make states thrive. The exhaustive amounts of data analyzed in the book reveal that a state’s public policies on taxes, energy and worker freedom have a huge effect on its growth and the opportunity afforded its residents.
The authors note that the most significant variable for gross state product growth is oil production per capita in a state. The second most significant variable is the overall tax burden of a state. The third most significant variable is the relationship between a state’s highest corporate income tax rate and that state’s gross state product growth. The fourth most significant variable for gross state product is whether a state is or is not a right-to-work state.
Given these findings, recent news regarding how essential the oil and gas industry is in Oklahoma is no surprise. In recent reports, Oklahoma City University economist Russell Evans said the oil and natural gas industry accounts for about 20 percent of all jobs in Oklahoma and since the end of the recession in 2010, has accounted for nearly two of three jobs created in Oklahoma.
“When you compare production levels by county to the unemployment rate, those counties with the greatest production have the lowest unemployment rates,” he said, noting the direct effect on employment. “That suggests economic activity is following production, either in the field or support industry.”
In interviews Evans has also noted that the oil and natural gas industry has an average annual pay of about $94,500, and each employee adds almost $197,000 annually to the state domestic product. In Oklahoma the oil and gas industry is responsible for $1 of every $3 of gross state product.
According to the Oklahoma Tax Commission, state government experienced another record year for total net state tax collections in fiscal year 2014 – of which oil and gas production taxes provided $665.4 million for state spending.
Given the fierce competition between states for jobs and opportunity for their residents, we should heed these reports from local and national experts about the crucial impact of the oil and gas industry. When it comes to energy, Oklahoma’s low and competitive tax and regulatory structure most assuredly must continue.
Former OCPA President