by Kelley Cullen, PhD and Dr. Patrick Jones
Modern, dynamic economies should foster a variety of business types to both promote economic growth and to insulate against specific shocks or contractions. For example, an economy that relies too heavily on one type of employer could be dramatically impacted by changes affecting those businesses. Likewise, an economy that depends heavily on government as a source of employment could be susceptible to recessions or discretionary changes in fiscal spending. Therefore, diversity across employment types promotes economic stability, especially during uncertain times like pandemics.
One way of measuring diversity of employment is Walla Walla Trends Indicator 1.3.4: Employment Shares by Type of Employer. This indicator measures the employment shares by type of employer in Walla Walla & Columbia Counties combined. Employment categories include: Private Wage and Salary; Government (includes federal, state, and local); and Self-Employed. Washington State and the U.S. are offered as benchmarks.
Recognizing that Walla Walla & Columbia Counties have historically had a different composition of employment by type of employer (Private, Government, Self-Employed) than the US or Washington State, it is important not to just benchmark with larger entities, but also to check whether there have been significant changes within the county itself.
Stable, Somewhat Smaller, Private Sector
Although both the national and state labor forces have a larger share of private employment (79-80%), over the last seven years, there has been little change in the share of employment by private firms in Walla Walla & Columbia Counties combined (70-72%). Because the one-year estimates from the survey data are associated with large margins of error (MOE), there has not been significant changes in the private sector share of employment in the two counties combined. This is supported by Indicator 1.2.5 Net Firms Created where the years 2014-2018 had either negative or very little new firm creation.
Strong, Somewhat Larger, Government Sector
Government sector employment has grown from 18.9% to 22.2% over seven years. Again, because of the small sample size and large MOEs, the range has been from a low of 18.2% to a high of 23.9%. This is higher than both the US (14%) and Washington State (15.5%). Looking at the counties separately, Walla Walla not only has the Washington State Penitentiary, but also is home to the Washington State Headquarters of the Army Corp of Engineers, has a relatively large VA facility and a community college, providing a significant number of jobs in the county. Although neighboring Columbia County is smaller, it still maintains county government offices along with local community governments that need regular employees. Columbia County’s public hospital also is a source of government jobs. For both counties, school district employment also registers as government employment, for this indicator.
An Appropriate Amount of Self-Employment
In 2019, the employment share for Self-Employed in the combined Walla Walla & Columbia Counties was 5.9% which was essentially the same as for Washington State (5.7%) and the United States (5.8%). Although the survey results show that this number has fallen for the combined counties from 10% in 2013, because of the large margins of error, this drop is not statistically significant. Although more imprecise, the combined county share of Self-Employed jobs is not out of line with the larger economies. Looking at Indicator 1.3.5 Employment Shares in Top Five Sectors, it seems likely that many self-employed jobs in the counties could be in agriculture or retail / trade.
Outlook
Given that many local and regional economies are still reeling from the effects of the pandemic and the accompanying recession, it is hard to make reliable economic forecasts. However, typically during recessions and the subsequent recoveries, economists detect increases in the self-employed shares of employment. Given that Walla Walla & Columbia Counties combined posted relative minimum numbers, at a 5.9% share of employment by Self-Employed, it seems likely this share will again see a slight uptick, outpacing even the state and national shares of employment. Adjustments in the labor force to at-home based employment may also contribute to an increase in entrepreneurship, showing up as a higher level of Self-Employed jobs in the counties.
With recent fiscal spending / stimulus coming out of the federal government under the new administration, it seems unlikely that the VA or Army Corps of Engineers will see any significant cuts to employment in the combined counties in the near future. Likewise, the State Penitentiary is probably safe from major budget cuts at its current size. What could be at risk is the state budget for higher education which has seen recent cuts overall. Public higher education institutions across the state have been allocated less funding and this will likely affect employment by next fall.
Even if government employment were to fall slightly, the uptick in self-employed would help buoy the economy along with the continued stable level of private employment. Overall, Washington State has had a strong economy that will be further supported by the recent round of federal stimulus. And the current distribution of employment shares by type of employer should allow Walla Walla & Columbia Counties to share in that economic growth.