Studying a relationship between wages and chocolate might seem like a peculiar analysis for an economist to perform.


Yet for William Dillingham, a Spokane-based regional labor economist for the Washington state Employment Security Department, that research made perfect sense.


It was an excuse for me to look deeper into the economic drivers of the 10 counties in my area, to see what industries are paying what, where, and where people are shopping, he says.


As a labor economist, Dillingham conducts a variety of economic data analyses and provides that information to businesses, government agencies and economic-development entities, to help them make informed decisions to improve the function of the regions labor markets, he says.


The 10 counties Dillingham covers all are in Eastern Washington. The Employment Security Department employs eight other regional labor economists across the state.


In the wages-and-chocolate study, Dillingham examined tax-revenue data and found that when earnings increased in Spokane County, consumption of chocolate and other candies also rose, while when wages increased in Western Washington, consumption of those foods declined. Dillingham speculates in the report that consumers in Spokane might eat sweets to celebrate, while consumers in Western Washington might eat chocolate to console themselves.


The research also showed that Spokane residents marginal tendency to consume nearly 80 cents of every dollar in earnings causes neighboring counties economies to orient themselves toward satisfying a similar level of demand. The research also revealed other underlying dynamics of regional county-level economies.


Dillingham started working as regional labor economist here last October, about a year after his predecessor, Fred Walsh, retired.


Several years ago, he worked as an independent economic consultant serving customers in California, Washington D.C., and later worked for a Switzerland-based research foundation that served the European Community, the predecessor for the European Union, he says. In 2000, he joined the Employment Security Department at its Labor Market and Economic Analysis branch in Lacey, Wash.


Two years later, Dillingham and his family left the agency to move to New Zealand, where he helped set up a labor-market and economic-analysis branch of that countrys department of labor.


He enjoyed attending government economic-policy gatherings and meeting with the nations labor ministers, who are the equivalent of state-level commissioners or federal cabinet members in the U.S., Dillingham says.


It was exciting to be at the forefront of New Zealands policy-formation pipeline, he says.


Dillingham and his family returned to the U.S. for personal reasons last fall, and he promptly began working for the sate as the regional labor economist here.


Interpreting recession data


As part of his job, Dillingham has studied how Spokane has fared during the recession that began in 2001.


After Spokanes job growth had averaged about 2.5 percent a year in the 1990s, it peaked in April 2001, a month after the national recession hit, Dillingham says. From May 2001 to April 2002, Spokane lost about 5,000 jobs. It lost a net of 2,000 jobs in 2001, but squeaked out a gain of 336 jobs in 2002, then gained 1,664 jobs in 2003, he says.


Were finally clawing our way back to where we were three years ago, he says.


Though there is plenty of room for improvements in Spokanes labor market, its doing well at an aggregate level, he says.


Growth in some sectors, such as the health-care industry, has helped buoy Spokanes labor market, Dillingham says. That industry, which tends to grow more during recessions than in economic expansions, has helped Spokane cope with losses in other sectors such as manufacturing, a sector in which some companies have closed, he says.


Also, Spokanes location has helped the job market and boosted the economy here by drawing consumers from neighboring states and provinces.


Now, he expects Spokanes non-farm employment will increase about 1.5 percent annually for the next few years based on historic growth rates, but Dillingham says theres a hitch: the potential number of workers here has increased more than the number of jobs.


Also, new jobs appear to be filled by new entrants in the work force rather than experienced workers, Dillingham says. Employers are hiring recent college graduates who are willing to work for $15 an hour, instead of hiring laid-off laborers who want $25 an hour, he says.


From a business perspective, if you want to survive, you have to keep labor costs low, he says.


That type of economic atmosphere, however, creates a scarring effect on unemployed workers, meaning that their continued unemployment and perhaps eroding skills hinder them from obtaining employment or prompt them to accept a job that pays 30 percent to 50 percent less than their previous occupation, he says.


That vicious cycle may continue if employers keep shunning experienced unemployed workers, who, though they might be lacking up-to-date skills, may have more experience in working with others and in working under pressure, Dillingham says.


Job-seeker assistance


Recurring unemployment poses a significant policy problem, Dillingham says. Government agencies and other organizations must decide whether to encourage job seekers to find any job they can get or to or go back to school and update their skills, he says.


The federal governments Work First program operates under the assumption that its better to get back into the labor market quickly than to remain unemployed, Dillingham says. Though that approach removes some of the scarring effect, research says education can help unemployed workers find better-paying jobs, he says.


Dillingham thinks that in some cases, laid-off workers here should go back to school or find workplace-based training that allows them to enhance their skills. He also says that job seekers should focus on long-term employment and advancement opportunities instead of simply finding a job.


Spokane leaders shouldnt necessarily discourage low-wage firms from expanding or moving to the area, but the high number of jobs here that pay below $10 an hour put a financial crunch on laid-off workers who are raising a family, Dillingham says.


A person who goes to work for a firm that pays $7.50 an hour, or less than $15,000 gross annually, after being laid off from a $40,000-a-year job, obviously cant live on that, he says.


Efforts by the Spokane Intercollegiate Research and Technology Institute and other groups to recruit high-wage jobs might create a positive cycle of demand for goods and services, but wont solve the problem of long-term unemployment, Dillingham says.


For example, the health-care sector has boosted the labor market here, but expansion of medical-related facilities doesnt mean those jobs will be filled, considering the constrained resources at medical-training and educational facilities, he says.


Dillingham says he enjoys discussing his research and analysis with government leaders because he might assist them in making better policy decisions.


Regional labor economists havent always been as involved in government policy as they are today, Dillingham says. The position has evolved since he started working at the Employment Security Department in 2000, when the regional economists handled number crunching for labor-market reports, he says.


Now, advanced computer technology has freed up regional labor economists to complete more stylized analyses for more customers, Dillingham says. The economists customer base has expanded from the ESD and the U.S. Bureau of Labor Statistics to local government jurisdictions, schools, and others.


Also, regional labor economists now have more data to work with and more responsibilities because of the recession, he says.


As with the study about the relationship between wages and chocolate, Dillingham says hell analyze his research to answer questions such as how Ferry County loses jobs every year yet maintains its population.


Academic research has very little value if not applied, he says. Its one thing to do analysis, and another thing to be in the field with people trying to make a difference.