1Overview of the Role of the Seafood Industryin the Alaska EconomyGunnar KnappProfessor of EconomicsInstitute of Social and Economic ResearchUniversity of Alaska AnchoragePrepared forEconomics 300: The Economy of AlaskaUpdated March 20062The seafood industry is very important to Alaska.• A major source of jobs and income• The most important source of income in many coastalcommunities.• The onlyprivate sector source of cash income in many ruralareas• An important part of the tax base in rural Alaska• An important contributor to rural infrastructure and utilities• A very important part of the culture and way of life of manyAlaskans•This may not be obvious if you stay in Anchorage. But it isobvious if you walk around any of dozens of Alaska coastalcommunities.3The Alaska seafood industry is amore than $2 billion dollar industry.• The “ex-vessel value”—the value paid to fishermen--was about$900 million in 2001.• About $1.3 billion in value was added in fish processing.• The total wholesale value—the value of fish products sold byprocessors--of Alaska seafoodproduction was about $2.2 billionin 2001.• Both fishing and fish processing are large and valuableindustries.•The ex-vessel value and the wholesale value of Alaska fisheriesvaries significantly from yearto year, due to variations incatches and prices. But even inyears of lower value, theindustry is still very large and valuable.4Fishing and fish-processing employment and income is particularlyimportant for rural AlaskaMap source: Alaska Division of Community Advocacy web site: http://www.dced.state.ak.us/cbd/seafood/seafoodprocessors.htm.Fish processing plants arelocated in dozens ofcommunities along Alaska’scoast and major rivers. Someof these plantsoperate only inthe summer, processingsalmon. Other larger plantsoperate year-round.Some ofthe most important seafoodprocessing ports are DutchHarbor, Kodiak, Sitka,Petersburg, and Ketchikan.5Commercial fishing (“fish harvesting”) is not included in regularwage and salary employment statistics.• This is because most fishermen are paid under a “share”system, in which they receivea percentage of the catch value.• Catch shares are not considered “wages” or “salaries.”• Alaska employment data show a small number of wage andsalary jobs in “fishing.” Keep inmind that this is only a smallfraction of total fishing employment.6Here is an example of how crew were paid on two Kodiak crab boats in2003. On each boat, the captain received about 15% of net income and anexperienced crewman received 6.5% of net income. On the boat whichcaught more fish, the captain and crew earned more money!Example of Where Gross Earings Went for Two Kodiak Vessels in 2003$0$50,000$100,000$150,000$200,000$250,000Vessel A Vessel BGroceriesPayments to crewPayment to ownerBaitFuelTaxesTaxes, Fuel and Baitwere deducted fromgross to calculate netincomeNet income wasshared between thevessel owner and thecrew. (The crew wascharged for groceries.)The crew was paid41% of net income.7Estimatesof fishing employment are available.• The Alaska Department of Labor recently began toestimatecommercial fishing employment.• They start with data on the number of fishing boats which land(deliver) fish each month in each fishery.• They then multiply the number oflandings by assumed averagecrew sizes for boats in each fishery.• This gives an estimate of the number of months worked in eachfishery.• Many people work only part-time in commercial fishing—forexample, during the summer.• To calculate “annual average employment” they divide thenumber of months worked by 12.8The Alaska Department of Labor estimates that there were about6700 “full time equivalent” jobs infish harvesting in Alaska in 2004.Source: Michael Patton and Dan Robinson, “Employment in the AlaskaFisheries,”Alaska Economic Trends, February 2006.9Salmon accounts for the largest share of fish harvestingemployment, followed by groundfish and halibut.Source: Michael Patton and Dan Robinson, “Employment in the AlaskaFisheries,”Alaska Economic Trends, February 2006.Estimated Fish Harvesting Employment by Species,200410Fish harvesting employment isconcentrated in the southwestregion (mostly Bristol Bay,the Aleutians and the AlaskaPensinsula), the Gulf of Alaska region, and Southeast Alaska.Source: Michael Patton and Dan Robinson, “Employment in the AlaskaFisheries,”Alaska Economic Trends, February 2006.11Permit holder and crew licenses provide another source of data on jobs inAlaska commercial fishing. To work on a commercial fishing boat, youhave to either be a fishing permit holderor a crew license holder.The number of permit holders and crew licenses provides a measure of thenumber of people who PARTICIPATE in commercial fishing. (Since manyof them work only part of the year, “annual average employment” is muchless than participation).Number of Permit Holders and Crew Licenses, 200229,73110,17519,556Total14,8576,3648,493Crew licenses14,8743,81111,063Permit holdersTotalNon-residentsAlaska residents12Many of the people who fish commercially in Alaska are nonresidents, mostly from Washington State and Oregon. The biggerthe boats and the more valuable the fishery, the greater the nonresident share of fishermen tends to be.Overall, about 40% of the total ex-vessel value of Alaskacommercial fisheries is paid to non-residents.Some people think that since so many fishermen are nonresidents, fishing is less important.I consider this the “glass is halfempty” perspective. If we justlook at the number of Alaskaresidents who fish, it is still a verylarge number. This is the “glassis half-full” perspective.13A fishing boat at Dutch Harbor. This boat is from Newport Oregon.This is a trawl fishing boat, which fishes for pollock in the Bering Sea.14Seafood processingis another major employer.About 20,000 people work in seafoodprocessing in Alaska, of whomabout 14,000 are non-residents and about 6,000 are Alaskans.Many of the workers in the seafood industry, particularly in remote“enclave” processing facilities, are from foreign countries, including inparticular the Philippines, Mexico and Central America. In recent years,these people have been more willing to do this kind of hard and tediouswork for relatively low hourly wages (although workers can earn goodwages by working a lot of overtime). You may often see foreign-born fishprocessing workers at the Anchorage airport, traveling to or from work atcanneries (fish processing plants).Like fishing, seafood processing isa highly seasonal industry. Annualaverage employment in seafood processing is about 7,400.19,98214,2685,714WorkersNumber of Workers in the AlaskaSeafood Processing Industry, 2001100%71%29%% of workersTotalNon-residentsAlaska residents15Safety warnings in a Dutch Harbor fishing plant—in many differentlanguages!16Workers processing halibut at a Dutch Harbor fish processing plant.17The seafood industry accounts for only 6.6%of Alaska statewide private sectoremployment. But it accounts for a much larger share in coastal areas. In southwestAlaska, it accounts for more than half of private sector employment.Source: Michael Patton and Dan Robinson, “Employment in the AlaskaFisheries,”Alaska Economic Trends, February 2006.Seafood Industry Share ofPrivate Sector Employment, by Region of Alaska49.2%81.6%86.0%93.4%All other31.0%10.6%5.9%3.7%Seafood processing19.8%7.8%8.1%%2.9%Fish harvestingSouthwestGulf CoastSoutheastStatewide18How two Alaska Department of Labor Economists characterized theimportance of commercial fishing to coastal Alaska:“These [employment] numbers, ashigh as they are, understate theimportance of fishing to the three regions. The millions of dollars in harvestvalue paid to commercial fishermensupport a substantial portion of theremaining private sector in these regions, especially in Southwest Alaska.Other than a small amount of mining employment, fishing is the Southwestregion’s only basic sector employer. The remaining private employmentconsists of industries such as retailtrade, construction and health care thatprovide goods and services tothe local population.It’s no exaggeration to say that many Southwest Alaska communities – andothers scattered throughout SoutheastAlaska and the Gulf Coast region –would virtually disappear without fishing.”Source: Michael Patton and Dan Robinson, “Employment in the AlaskaFisheries,”Alaska Economic Trends, February 2006.19“Commercial fishing, like many industriesin Alaska, is highlyseasonal when the totaljob count is considered.A closer look, however,reveals that most of theseasonality comes from thesalmon fishery, and that both the groundfish andhalibut fisheries provide a relatively constantstream of jobs over much of the year.What’s more, high January and Februaryemployment in the crab fishery fills in duringtwo of the three months when there is verylittle halibut fishing activity.Overall, Alaska’s fisheries provide a considerablenumber of jobs in every month but December.The Southwest region’s massive summersalmon runs amplify its seasonal pattern ofemployment, while in the Southeast andGulf Coast regions, the distribution is a little moreeven. Southwest Alaska regularly goes from havingno salmon harvesting employment at all in the firstfive months of the year toas many as 10,000 jobsduring the peak months of the summer.”Source: Michael Patton and Dan Robinson,“Employment in the Alaska Fisheries,”AlaskaEconomic Trends, February 2006.20The seafood industry contributed $686 million to Alaska Gross StateProduct in 2003—about 2.1% of total GSP. This was higher than Mining(1.7%) but much less than Oil and Gas Extraction (16.5%).$552 million$5,243 million$361 million$325 million$25,436 million$31,704 millionContribution to Alaska Gross State Product, 2003(Source: Bureau of Economic Analysis, www.bea.gov)1.7%Mining, except oil and gas16.5%Oil and gas extraction1.1%“Food product manufacturing” (mostly fish processing)1.0%“Forestry, fishing and related activities” (mostly fishing)80.2%Private industry total100.0%Total Gross State Product21Seafood Industry Taxes• The seafood industry pays a wide variety of taxes.• Most taxes are calculated as a %of ex-vessel value (value paidto fishermen)• The bulk of seafood industry taxes are from the fisheriesbusiness tax, paid by processors at a rate of between 3% and5% of ex-vessel value (depending on the products produced).• The fisheries resource landing taxis a similar tax collected onfish processed by floating processors operating outside thethree-mile boundary for state waters.• More than half of the fisheries business tax and the fisheriesresource landing tax is passedthrough by the state to thecommunities in which the fishare landed—and is a veryimportant source of revenue for these communities.• The salmon enhancement taxis collected from salmonfishermen in some regions to payfor part of the costs of salmonhatcheries.22In FY05, fisheries taxes totaled $37.85 million, of which the state receivedslightly more than one third.Alaska FisheriesTaxes, FY 2005(Source: Alaska Department of Revenue,Revenue Sources Handbook, Fall 2005, page 51)$23.25 millionSubtotal$37.85 millionTOTAL$14.6 millionSubtotalAVAILABLE FOR STATE SPENDING$3.8 millionSalmon enhancement tax (aquaculture association share)$4.2 millionFisheries resource landing tax (municipal share)$15.25 millionFisheries business tax (municipal share)PASSED THROUGH TO OTHER RECIPIENTS$3.9 millionFisheries resource landing tax$10.7 millionFisheries business tax (to state)