How do education and income affect employment across Alaska?

In light of the current pandemic and the inevitable toll it will take on the economy, we took a look at the state of the economy in 2019 by comparing economic metrics across six states: the three states with the highest unemployment rates and the three states with the lowest unemployment rates in 2019.

Data-Z compiles a variety of employment and unemployment data at the federal, state, and city levels. The federal unemployment rate from 2009-2019 is calculated by taking the number of people who don't have a job but are looking for one, and dividing it by the number of people that have a job plus the number of people that don't have a job but are looking for one, i.e. the total labor force. The chart below shows a steep decline in the unemployment rate from 9.27 percent in 2009 to 3.67 percent in 2019. According to the Bureau of Labor Statistics, unemployment peaked in 2009 as a result of the Great Recession, marking the highest unemployment rate since the aftermath of the 1981–82 recession. The Bureau of Labor Statistics also states that unemployment rates for major race and ethnicity groups and age groups returned to their pre-recession levels by the end of 2017, and continued to decline from 2017 onwards. Now, the United States is facing one of its sharpest recessions as the pandemic takes its toll.

Looking at the unemployment rate at the state level, the three states with the lowest unemployment rates in 2019 were North Dakota (2.3 percent), Vermont (2.3 percent), and Indiana (2.4 percent), and the states with the highest unemployment rates in 2019 were Alaska (6.1 percent), Mississippi (5.6 percent), and New Mexico (4.9 percent). The 50 state average in 2019 was (3.58 percent). The unemployment rate generally fluctuates across states over the years as a result of state-specific economic factors such as government benefits and industry composition.

The Bureau for Labor Statistics released data from 2019 that compares education levels to unemployment rates and earnings. According to this analysis, individuals with a doctoral degree experience the lowest average unemployment rates, while on the other side of the spectrum, individuals with less than a high school diploma experience an unemployment rate nearly five times higher.

In order to take a look at the relationship between unemployment and education levels in the six states with lowest and highest unemployment rates, we examined the Bachelor’s Degree or Higher Share of the 25+ Population. This metric provides the percentage of the population per state aged 25 and older that holds a Bachelor's Degree or a higher degree.

According to this metric, only Vermont (38.7 percent) was higher than the 50 state average of 32.2 percent. Additionally, although Alaska had the highest unemployment rate out of all 50 states, its percent of population with a Bachelor’s degree or higher was 30.2 percent - second behind Vermont for the highest percentage. North Dakota (29.7 percent) was also among the top three states with the highest percentage of population with a Bachelor’s degree or higher, while the three states with the lower percentages were Mississippi (23.2 percent), Indiana (27.1 percent), and New Mexico (27.7 percent). Therefore, according to this measure, the assumptions put forth by the Bureau of Labor Statistics regarding education attainment and unemployment do not consistently apply to the six states with lowest and highest unemployment levels in 2019.

In a study by Wallethub about factors that contribute to educational attainment, several experts mentioned how the quality of a school district has a profound influence on educational attainment. Other relevant factors were education policy and public funding for higher education. These factors, along with differences in state industry and economy, could be relevant contributors to differing state unemployment rates as well.

Data on personal income per capita is another metric that can reflect the unemployment rate, since individuals lose a considerable amount of their income when they become unemployed. Personal income per capita is calculated as the total personal income of the residents of a state divided by the population of the state. Looking at data from 2019, Alaska ($62k) had the highest dollar amount of personal income per capita out of these six states, despite also having the highest unemployment rate. Alaska, North Dakota ($57.5k), and Vermont ($57k) were the three states above the 50 state average of $55k. Indiana ($49k), New Mexico ($44k), and Mississippi ($39k) were the three states with the lowest personal incomes per capita.

One explanation for these differences could be the natural resources available in Alaska and North Dakota. In Alaska, for instance, the tax revenue generated from oil is split among all eligible Alaskans, employed and unemployed, by the Alaska Department of Revenue. Furthermore, the Bureau of Economic Analysis defines personal income as: “income that U.S. residents get from paychecks, employer-provided supplements such as insurance, business ownership, rental property, Social Security and other government benefits, interest, and dividends.” Therefore, differences in personal income by state could also be a result of differing government and employment benefits by state.

It will be interesting to see how these economic indicators change throughout the rest of 2020 and beyond, as unemployment rises, the cost of education increases, and personal incomes are greatly affected by the COVID-19 pandemic.

Meher Kaur is a rising senior double majoring in Economics and International Studies at the University of Richmond. She is currently a Data Research Intern at Truth in Accounting, a nonprofit government finance watchdog organization in Chicago.