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Is Rural Oregon's Economy More Reliant on Proprietors?
by Jason J. Yohannan
Published Jul-23-2012

 
A very common way to earn a living is, of course, to get a job. Another less prevalent, but still quite common, course of action is to create your own job by operating a business.

Does geography influence which path people choose? More specifically, are there differences between Oregon's metropolitan and nonmetropolitan areas when it comes to the economic role played by business operators?

For the purposes of this analysis, we'll consider employment and income data from the U.S. Bureau of Economic Analysis (BEA) personal income data series. The most recent county-level BEA figures are for 2010, so the reader should consider this article a point-in-time snapshot for that year.

BEA Employment ≠ Official Employment
 
First off, it's important to recognize that employment, as gauged by the Bureau of Economic Analysis, is not the same as employment calculated in traditional labor force and nonfarm payroll figures. For example, official Oregon Employment Department (OED) statistics say that Baker County had 5,260 nonfarm jobs and 6,893 employed residents in 2010.

On the other hand, BEA's 2010 data for Baker County include 5,614 wage and salary jobs plus 3,107 proprietors for a much-larger sum of 8,721 jobs. The disparity doesn't mean that one source is right and the other is wrong. A better interpretation is that the two sources define employment in different ways.

A key difference is that BEA's jobs measure counts proprietors and individual business partners who are active at any time during the year. It is not an annual average, which is customarily regarded as the standard measure of calendar-year employment. The discrepancy therefore inflates BEA's tally of self-employment to something well above what official labor force statistics would normally accept as true.

Nevertheless, we use the BEA data series for this article because we're not analyzing differences between BEA employment statistics and official OED employment statistics. We're analyzing differences in BEA employment from one Oregon geography to another.

Proprietor Jobs Capture a Bigger Share in Rural Oregon
 
Bureau of Economic Analysis employment data include numbers for wage and salary jobs, nonfarm proprietors, and farm proprietors. Graph 1 shows how the numbers shake out for Oregon counties located in metropolitan areas. Graph 2 gives the breakdown for Oregon counties that are not part of a metropolitan area.

As one might expect, Oregon's nonmetropolitan areas demonstrate a much larger employment contribution from farm proprietors. After all, an agricultural image is often one of the first things to pop into one's mind when thinking about rural areas.

But move beyond the obvious influence of agriculture, and the story is still similar. Nonfarm proprietors represented nearly 2 percentage points more of the employment picture in Oregon's nonmetropolitan areas over the share in metropolitan areas.

In rural Wheeler County, more than one-half of all jobs (by BEA's definition) in 2010 came from proprietor employment. In Wallowa County, almost 45 percent of all jobs were proprietor jobs.

In fact, if one ranked Oregon's 36 counties from top to bottom based on the ratio of proprietor jobs to total jobs, a nonmetropolitan county would occupy each of the first nine places.

Clearly then, at least as measured by employment, business operators are a larger factor in rural Oregon's economy than they are in metropolitan Oregon's economy.

Graph 1
Full-tme and part-time employment by job type Oregon metro areas 2010
Graph 2
Full-time and part-time employment by job type Oregon nonmetro areas 2010
Proprietor Income is More of a Mixed Bag
 
Employment statistics tell only part of the story. The basis for this analysis is the county-level personal income data series. So what do the income figures have to say?

For the answer to that question, we'll start with Graph 3. The bars in Graph 3 depict the results generated by dividing proprietors' income, as calculated by the Bureau of Economic Analysis, into total earnings by place of work for a given geographic area.

Focusing first on the leftmost column in each geography, the data tell us that Oregon's nonmetropolitan areas do indeed derive a higher income share from proprietor earnings than our state's metropolitan areas, but not by much. Proprietors' income made up 11.4 percent of total nonmetropolitan work earnings but only 10.2 percent of place-of-work earnings in metro areas.

Furthermore, a nonmetropolitan county held each of the top three spots for proprietor income as a share of total work earnings in 2010. In Sherman County, proprietors captured 42.4 percent of total place-of-work earnings. In Morrow County, it was 27.3 percent, and, in Wallowa County, it was 21.5 percent. By contrast, last place Washington County got only 3.7 percent of its place-of-work earnings from proprietors.

Be careful not to pooh-pooh Washington County's last place finish here too much, though. One could easily argue that Washington County ranks poorly in this particular scaling of proprietor income simply because hired workers in that county are paid so well. According to the Employment Department's covered employment data series, the average pay for wage and salary jobs in Washington County was far and away the best in the state.

Unlike the employment comparison we made earlier, however, the relative income difference between metropolitan Oregon and nonmetropolitan Oregon fades away after removing farm proprietor data. The net income of farm proprietors in metropolitan Oregon actually was a negative number in 2010, so excluding that category literally raises the bar in Graph 3.

In Oregon's metropolitan counties, nonfarm proprietors' income accounted for 10.4 percent of total place-of-work earnings. In Oregon's nonmetropolitan counties, nonfarm proprietors' income accounted for 10.3 of total place-of-work earnings. By this yardstick, it's probably safe to say there is no significant difference in the composition of earnings between urban Oregon and rural Oregon.

One more thing: unlike this article's two previous county-by-county rankings, a metropolitan area held the top spot this time. In Deschutes County, nonfarm proprietors' income comprised 21.0 percent of total place-of-work earnings, more than any other Oregon county. Nonmetropolitan Wallowa County finished second, at 18.3 percent.

Why do Oregon's nonmetropolitan counties outshine their metropolitan cousins when it comes to proprietor employment but don't do the same when it comes to proprietor income? The answer is rather straightforward. Metro-area proprietors make more money. Average income for nonfarm proprietors in 2010 was $23,666 in metropolitan Oregon but only $16,107 in nonmetropolitan Oregon.

Graph 3
Proprietors' income share of place-of-work earnings 2010
Answering the Title's Question
 
So is rural Oregon's economy more reliant on proprietors? Based on this analysis, the answer is a qualified yes. As measured by jobs, proprietors definitely are a larger factor in Oregon's nonmetropolitan areas than they are in Oregon's metropolitan areas.

As measured by income, proprietors again contribute relatively more to rural Oregon's totals than to the metro totals. The nonmetro income superiority can be traced primarily to farm and ranch operators. Outside of agriculture, though, the 2010 personal income statistics say it's a tossup.