The financing of government services in Utah has been hurt by the state's shift this decade from a goods-producing to a service-producing economy, says a report by the Utah Foundation.
According to a study by the private tax research organization, Utah lost 10,600 manufacturing jobs between 1980 and 1987, while gaining nearly 100,000 service jobs during the same period.Foundation analysts say this shift from a goods-producing economy to a service-oriented economy hurts the financing of government operations in two ways. First, manufacturing industry jobs pay a 35 percent higher average wage than service industry jobs. Second, goods-producing industries tend to be capital intensive, while service-producing industries tend to be labor intensive.
Because service jobs generally pay lower wages than manufacturing jobs, there is usually a substantial loss of income and potential tax revenue whenever goods-producing jobs are replaced by service-producing jobs.
But more important than employee income loss is the loss of taxable capital when manufacturing industries are eliminated. The start of a new service industry often results in a large gain in the number of jobs, but only a small gain in capital tax base.
Previous Utah Foundation studies have shown that direct taxes paid by a typical Utah family usually cover only half the cost of state and local government services provided to the family. The other half must be paid by someone else - usually the taxpayer's employer.
With more people working in industries with a low tax base, or industries that are tax exempt, it has become increasingly difficult during the 1980s to fund state and local government programs in Utah. As a result, Utah state taxes were raised each year from 1981 through 1984, and again in 1987, when the largest hike in state history kindled a tax protest.
The foundation report indicates the state's overall economy improved during the past year although certain sectors remain depressed. Average non-agricultural employment in Utah increased by 18,900 during 1988. This compares with gains of only 6,200 in 1987 and 9,700 in 1986.
Included in the 1988 employment figures are gains of nearly 4,400 in the goods-producing sector. Much of that gain resulted from the reopenings of the Geneva Steel plant and the Kennecott copper mine.
No major changes are expected in the state's labor market outlook for 1989, giving labor economists reason for optimism. An increase of some 20,000 non-farm jobs is expected in 1989, with 4,300 coming in the goods-producing area.