The Further You Get From North Dakota, The Poorer You Are

Oil Well Pumps

The headline is a little bit factious. We’re not talking about the further you are from from North Dakota anywhere in the world, but in the upper great plains region the further you get from the epicenter of the Bakken oil boom in western North Dakota the lower income levels go, and the higher unemployment rates go.

That per the Minneapolis Fed.

Here’s the region:


Here’s the unemployment rate, charted by distance from the Bakken oil patch:


And here’s pay, also charted by distance away from the oil patch:


In a timeline North Dakotans will be familiar with, because it closely follows the pace of activity in the boom, it appears as though this correlation between distance and economic health began in 2004 and really took off in 2009 per the report:

Wage growth in the Bakken began to separate from other counties in 2004 and accelerated after 2005, the start of the oil boom (see Chart 1). But wage growth in counties up to 100 miles away from the Bakken didn’t separate from other non-Bakken counties until 2009.

Unemployment rates across these areas looked quite similar in 2003 and continued lower in a fairly tight band until about 2008. But a notable divergence sprouted in 2009. While rates went up across the board, they rose faster in relation to the distance from the Bakken. Beginning in 2010, unemployment rates started falling, but did so much faster in Bakken counties, and there is now a much wider spread of unemployment rates that adhere very closely to the distance from the Bakken.

Here’s the chart showing the trend over time:


There’s no other way to see the impact of the oil boom on the region’s economy but profound. The question is, will it be lasting? Will this wage growth, for instance, reverse when the frantic activity from the peak of the boom is over?

Given the way the State of North Dakota has been growing spending, they’re betting on it.

Rob Port is the editor of In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters.

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  • ec99

    I’m sure there was an initial shock to ND employers, who are infamous for paying the lowest wages possible, to have international oil companies come in with $80 K starting salaries. For over a century the ND born have left the state to make a buck, while those who stay live by the motto “If you’re paid more than I am, your making too much.” So now burger flippers in Williston start at $18/hr. Then of course there are all the foreigners, i.e., those not born in ND coming here. Paradise is becoming hell.

    • Rob

      Um, don’t all employers try to pay the lowest wage possible?

      • ec99

        No. Look to Silicon Valley, Wall Street, and other employers who realize you get what you pay for.

        • Rob

          But those are all very different industries than what exists in North Dakota. And living in those places costs a lot more than living here.

      • The Fighting Czech

        hang on to your socks Rob. but some employers actually try to pay a decent wage…. with the intent of keeping reliable honest workers on their payroll… ones that you can trust not to rob you blind when your not there.
        Others of course that you speak so highly of, screw their employees every chance they get. wont pay crap.. and have a high turnover rate. and whine because no one stays and the ones that do steal from them…

        • Rob

          Hey, its a market like any other. Employers would be irresponsible not to try and hold payroll costs down. Employees would be stupid not to try and get the most they can.

          Those competing interests find equilibrium.

          • devilschild

            With your way of thinking I’m guessing the quality of your staff is well below standards. Who would work for you? Seriously I feel sorry for anyone who relies on you for a paycheck. Let me guess….they work part-time so you don’t have to pay them any benefits?

          • Rob

            I don’t employ anyone now, but when I did I always paid what people would work for. If the didn’t like it, they were free to go somewhere else.

            That’s how markets work. I’m really at a loss as to why you’d think that’s controversial.

          • ec99

            Point is, ND exports the vast majority of its college graduates. No jobs here for them. This has been going on for a century. The oil companies were not aware of this, or they would be paying 30K instead of 80K. This, more than the phony ecological crap, is what ticks people off.

          • Rob

            Businesses pay what people are willing to work for. North Dakota’s economy has long been dominated by agriculture which has been going through something of a diaspora for generations now.

            As farming has become less labor intensive, we simply needed fewer workers. So the extra people left.

            Its not some statewide conspiracy to screw people over, as you seem to think. Its basic economics.

          • devilschild

            When you lose your smartest and your brightest youth you also lose tomorrows leaders. So the brightest are leaving and the not-so-gifted are taking their place.

      • OldConserv2011

        It is true that employers will try to find the correct balance between paying the lowest wage possible while paying just enough to retain valuable employees.

        But it’s also true that for many years, North Dakota communities through their economic development grant programs deliberately marketed our state as a low wage haven where citizens were willing to work for next to nothing, They’ve even gone to the point of requiring corporate recipients of grant monies to agree to hold their wages down so as not to inconvenience other local businesses that would otherwise have to raise their wages in order to retain their own employees. That is an inappropriate use of government coercion to manipulate what should be a free market outcome.

        In another article on your blog, we’re discussing workplace safety. In the oil industry, the only way to operate safely is to attract and retain experienced personnel. Experience is everything. The only way to attract and retain the experienced workers, is to pay competitive wages. I’ve been in this business for over 30 years, and I’ve seen first hand the damage that inexperienced and under trained employees can wreak.

        • Rob

          I don’t at all disagree that the government’s economic development efforts distort labor markets. All the more reason to keep the government out.
          All I’m trying to say is that wages should be set in the market, by a competition between employers who want to keep overhead low and employees who want the best compensation possible. When we let private citizens, and private businesses, negotiate for wages on their own the right balance is reached.