The "peace dividend" may cost Utah 5,000 defense-related jobs during the next two years, but the state's improved economy is expected to absorb the hit - at least on the short-term, a state-commissioned survey has concluded.
The long-term effect of continued cuts in the nation's defense spending on Utah cannot be accurately measured because of continued instability in the Middle East and the end of the Cold War in Eastern Europe."Given the growth rate of the Utah economy during 1988, 1989 and 1990, we are quite optimistic about our ability to accommodate the transition for the next couple of years," said R. Thayne Robson, director of the University of Utah's Bureau of Economic and Business Research.
Robson on Wednesday released the preliminary findings of the study conducted by the U.'s research bureau to the Legislature's Economic Development Committee. The Legislature appropriated $25,000 for the study in its last session.
The study shows cuts in defense spending already have affected the state. Prime contract awards in the Utah manufacturing sector were $460 million lower in 1989 than in 1987. Additionally, most major defense contractors have laid off employees the past two years.
Although the state's aggressive job-creation efforts may help stem loss of defense-related work in government and the private sector, it is unclear whether new industry would pay as well as military installations or companies that handle Defense Department contracts.
The average annual salary for civilian and military personnel at Utah's military bases and activities was $26,890 in 1989.
Meanwhile, the average salary of employees of Utah companies that handle defense contracts was $29,538. "They are relatively high-wage jobs, slightly higher than average jobs in Utah's economy," Robson said.
Not only do they pay well, defense-related jobs employ more than 50,000 Utahns.
The state's military bases and activities - Hill Air Force Base, Defense Depot Ogden, Tooele Army Depot, Dugway Proving Grounds and the Utah National Guard - employ about 22,000 civilians and 5,800 military personnel. Utah businesses that handle Department of Defense contracts employ 22,500 people.
Robson said the defense budget should be considered in three components: military personnel costs, operation of military bases with civilian employees and weapon systems acquisition.
The last two categories are of greatest concern to Utah's economy, he said, but on the short-term, neither is in danger, he said.
"We don't see any of those bases as candidates for closure in the near term," Robson said.
As for weapon systems: "Of those weapon systems, not any of them, look (as if they are going) to be discarded totally."
Based on the study findings, Robson suggested that state government establish a Governor's Commission on Defense Adjustment to monitor trends, problems and responses from state and federal agencies on cuts in defense spending.
Additionally, Robson said the state ought to concentrate economic development programs and efforts in affected counties and consider tax incentives or loans for businesses with "approved plans" to shift from defense to commercial activity.
Robson expects that as the defense budget grows smaller Utah businesses will be more aggressive about going after the remaining defense dollars.
The findings also suggested the state assist unemployed workers with counseling, job search training and/or retraining and develop information systems to alert businesses and governmental entities about the impact on taxes and services resulting from defense cutbacks.
Some of the options proposed in the study would utilize programs already in place, Robson said, explaining that agencies such as the Small Business Development Center, Utah Technology Finance Corp. and the Utah Economic Development Corp. can provide technical assistance to companies that need to establish diversification plans.