Native American economic development on selected reservations: a comparative analysis

American Journal of Economics and Sociology, The,  Oct, 1996  by David L. Vinje

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Regression equations were run for all three time periods in an attempt to better understand the relationship between private sector employment and the level of family poverty on the reservations. It was hypothesized that a negative relationship should exist between a reservation's poverty level and its associated level of private sector employment. Both the 1970 and 1980 equation (Table 1) have the correct negative sign showing that a higher reservation level of private sector employment is associated with a lower level of family poverty. The 1980 equation is valid at a 99 percent confidence level explaining approximately twenty-six percent of the variation in reservation family poverty levels. The puzzling aspect of this result is that, as cited above, private sector employment declined from 1970 to 1980. Twenty-two of the twenty-three reservations covered experienced a decline in the relative importance of private sector employment from 1970 to 1980. It must be kept in mind, however, that the same period witnessed a very significant increase in labor participation rates. The median rate went from 41.3 to 66.8 percent. It appears that the increased number of Native Americans entering the labor force meant that enough private sector jobs were generated to help some reservations experience a lower poverty rates. This contention is supported by the fact that the twelve reservations with below median poverty rates had a median private sector employment that was ten percent higher than those reservations with the higher poverty rates.

Regardless of the explanation, by 1990 the question becomes somewhat moot. The experience throughout the 1980s indicates that tribal leaders face an extremely difficult task if they are planning to rely on the private sector to resolve their poverty problems in the 1990s. The equation still retains its correct negative sign, but the equation is not statistically significant, and the R square drops to 4 percent. The private sector, in 1990, is as useless as government employment as an explanatory variable for reservation family poverty rates.

Industry Employment

Regression equations were run for all three time periods in an attempt to determine if family poverty levels could be explained by the reservations differing levels of employment in specific industries, regardless of the employer being tribal or private. Family poverty rates were the dependent variable for each time period, and employment in agricultural, forestry, fishing, construction and services were used as the independent variables in a multiple regression equation. There is no need to list each of these equations since in most cases they resulted in the wrong sign (positive rather than the hypothesized negative sign), and the coefficients were insignificant at any reasonable level of confidence.

The only industry capable of explaining poverty rates was that of the manufacturing sector. As stated earlier, many reservations underwent a substantial emphasis in the 1960s directed at bringing manufacturing activity onto the reservations. The 1970 Census data shows that this emphasis, while never lifting manufacturing employment beyond a median level of 12.6 percent of total employment, did play a role in explaining variations in poverty levels. As can be seen by Table 1, the manufacturing variable has the correct sign and explains approximately 17 percent of the variation in poverty rates.