Wednesday, March 9, 2011

Rising gas prices and their effect

This post is in response to an article I read on Now, let's be frank, CNN is in the business of "gotcha news", posting articles that are often inaccurate or misrepresented with the intent to draw views and reap chatter. Typically, I wouldn't let it bother me, but this particular article is heavily mis-representing things to make a point. That point is: "Stop whining, California."

Here's the article. It presents some data in an interesting fashion. It shows states shaded by the average cost for a gallon of gas and then it shows states shaded by the amount spent on gas as a percent of income. The conclusion? Despite having dramatically higher gas prices, Californians should "quit whining" because they on average spend a smaller percent of their income on gas.

Gas expenditure as a percent of income
Average gas price per gallon
The article accounts for this phenomenon in a series of theories about why it occurs (rather than, you know, going ahead and proving any of them). Example:

"When you live in California or New York, where things are close by and there's public transit, that's great -- but we don't have those options here," said Hilary Hamblin, a Tupelo, Miss. resident who said her family typically spends about 10% of their monthly income on gas alone.

That's not uncommon in the state. Mississippi families earn a median household income of about $37,000 -- the lowest in the country -- but spend a whopping $402 per month, or 13.2% on gas.

In contrast, Californians earn a median of $59,000 per household, and spend about $380, or 7.8% of their income on gas each month
What we see here is a way of manipulating the facts to put together a dramatic article that will piss off Californians and New Yorkers and rally red-staters. What we don't see is any semblance of meaning.

Here's a little tid-bit the article doesn't tell you: California is a major agricultural center, including significantly more farms than Mississippi (or, it appears, any other state). Check out this fun little tool from the US Government's Economic Research Service.

How does having the highest gas prices in America impact those rural workers? What percent of their income is spent on gas? Lumping all of California's 37M people together and calculating mean gas expenditure as a percent of income, then comparing to Mississippi's 3M people is like comparing apples to oranges.

Personally, my gas expenditure is very low. I usually ride a bike to work. I don't drive far or often. But I guarantee you farmers down in Kern County or in other rural counties of California are driving quite a bit and paying similarly inflated gas prices to what I pay. So myself and people like me in California are bringing down that "gas expenditure as a percent of income" mean value down quite a bit. That doesn't mean the cost to the farmers here in Cali is any lower, though!

I'm not saying Mississippi doesn't have it bad now. To the contrary. What I'm saying is that this article is misrepresenting facts to make a false point. Farmers and farm communities in California likely have just as much if not more reason to complain than those elsewhere because they're penalized by being in a state with huge urban areas that cause gas prices to be higher (due to increased taxes, more expensive gas blends to deal with urban air pollution, et cetera).

I grabbed the data from the ERS and played around a little bit with it. Here are some interesting stats:

Total number of farms:
California: 81,033
Mississippi: 41,959

Mean percent of land per county dedicated to agriculture:
California: 33.28%
Mississippi: 38.36%

Mean percent of farmland per county (for counties with >50% farmland)
California: 70.23%
Mississippi: 67.67%

Total Population Size
California: 36,961,664
Mississippi: 2,951,996

Population of rural counties (counties with >50% farmland)
California: 4,933,655 (13.35%)
Mississippi: 482,751 (16.35%)

Let these numbers settle in. Similar ratios of the population live in rural areas in both states. Rural counties appear very similar broken down by percentages here. But California has more than twelve times as many people as Mississippi. In rural counties, California has about ten times as many people. However, there are only about twice as many farms in California as there are in Mississippi.

But what does it all mean? It means there are ten times as many people in California paying significantly higher gas prices while doing the same job as those in Mississippi. Californians may on average make more than people in Mississippi, but does that mean the farmers in California make more than the farmers in Mississippi? This is a hard number to determine. We can use what the ESR calls the "average value of agricultural products sold". In this case, I'm taking those "rural counties" I talk about earlier with >50% farmland and then just calculating the straight mean of these valued.

Mean for rural counties of average value of agricultural products sold
California: 535,808
Mississippi: 291,167

In this light, Mississippi farmers appear to make much less on average than California farmers. But if we look on a county-by-county basis, we note that there are a few counties skewing California's rosy outlook. Let's look at that distribution to see if there aren't a lot of California farmers in more dire straits than simply taking a mean would show.

Mississippi is in blue, California is in red (didn't expect that, did you?). We can see pretty clearly here that there are two counties skewing the California number. These are Kings County and Monterey County. If we remove those, the value of farming in California counties is down to 373,475. Not exactly making up for the fact that ten times as many people live in those counties.

Now, I don't want to make generalizations. The only point I truly want to make is that an article telling Californians to "stop whining" because farmers in Mississippi have it bad is ignoring the fact that there are many farmers in California in the same situation as those ones in Mississippi. I don't want to say they have it worse, either, but my guess (emphasis on guess, as I'm not proving it) is that these folks spend a similar percent of their income on gas as well.

Basically, I'm going to go out on a limb and say that given the makeup of farming counties in California and Mississippi are very similar (despite a difference in scale, given California's much larger size), the California farmer has just as much a right to be distraught about rising gas prices as the Mississippi. In fact, the California farmer has to pay significantly more per gallon, so even if they do make ten thousand dollars a year more (an estimate based on mean income in Kings County, California, which is down around 44k per year at this point), they probably spend a similar percent of income.

All of that said, you won't find me complaining about gas prices. But I may end up complaining about produce prices, which is obviously directly tied to gas prices on the farmer's end.