Over the last two decades the US economy has experienced overall steady growth, with relatively minor contractions. Washington State's economy has also grown steadily, and average per capita income has generally been above the national level. However, not all sectors of the economy have fared as well. In a national study Development Report Card for the United States (Clones and Rist, 1997), Washington State ranks 48^th in a measure of urban to rural income disparity. This suggests that the State's rural economy is declining compared to its urban economy, which may be a result of shifts in both economies. Between 1979-1997, per capita income in timber-dependent counties declined 29 percent compared to the national average. During the same period, income in King County, the State's urban center, increased 17 percent. This trend is expected to become even more unfavorable during the next few years as weak international market conditions and regulatory constraints on harvesting continue to affect rural timber-dependent counties as service and technology industries in urban counties grow.

To examine urban/rural income disparity, counties were chosen by economic base in order to compare per capita income. Chelan, Clallam, Cowlitz, Grays Harbor, Lewis, Pacific, Pend Oreille, Skagit, Skamania, and Stevens counties were selected as rural counties where income is largely dependent on timber revenues and not heavily impacted by an urban county. Rural counties with economies based primarily on agriculture were used as a basis for non-timber rural comparisons and included Adams, Douglas, Grant, Franklin, Lincoln, Walla Walla, and Whitman. King County was selected as the urban county.

Since the objective of this study was to examine the economic performance of timber-dependent counties, five points in time that best indicate years where timber dependent communities were significantly impacted by changes in the economy or by new policies were analyzed. 1979 provides a measure of timber dependent counties near the end of a decade of high timber demand. 1983 shows the impact on the wood sector during an international recession. 1987 records a period of recovery before regulations to conserve habitat for endangered species significantly limit harvest. Data for 1993 show a point in time where timber prices reached a record high when timber harvests were substantially reduced after harvest restrictions on federal and state lands were adopted. When data is available, 1998 will be analyzed to reflect the impact of the Asian crisis on both devalued export volumes and prices. Data for 1997 show a continued decline in rural income, especially for agriculture-based communities, but does not show the full effects of either the Asian economic crisis or the new riparian zone regulations.

Measures of per capita income, benchmarked to national per capita income were generated. Per capita income for timber dependent and agriculture dependent counties and King County are compared in figure 1, a direct measure of changing economic conditions. Earned income from property (interest and rents included) and transfer payments (retirement, medical, unemployment, and income maintenance) were also examined.

In 1979, per capita income for both timber-dependent and non-timber dependent rural communities was only 5 percent lower than the national average. Over the next 18 years, however, both types of communities expressed losses relative to the national average. Timber-dependent counties experienced a 29 percent decline in per capita income relative to national averages. During the same period, per capita income in King County increased 8 percent. The disparity of Washington's urban area income to the State's timber-dependent rural communities increased 68%. Per capita income in non-timber dependent rural counties also declined, but the decline showed a more cyclic pattern than timber-dependent communities due to the volatility of farm income.

The disparity between timber-dependent rural and urban incomes can be expected to widen for several reasons. First, the US housing boom came to a close by 1981, ending the extra strength it added to timber-related economic activity. Second, despite strong export wood markets and a temporary moderating effect of high prices as a consequence of reduced federal timber sales, increasing regulatory constraints have depressed timber-dependent community economies in recent years. Finally, the high-income labor-intensive service and technology industry has grown rapidly in urban areas.

The timber industry will likely be further depressed in the near future due to declining demand in Asian markets, which eliminated the high prices that resulted from harvest constraints. Demand for primary and secondary processed wood products in Asia has declined dramatically since the last quarter of 1997, which has directly impacted Washington's rural communities. Total exports of forest products from Washington to all countries are down approximately $2 billion from 1996 to 1998.

Lower levels of harvest volumes can also be expected as salmon protection plans are adopted. While some of the urban technology gain may spill over to rural areas through recreation and tourism, poor international markets and domestic environmental regulations will continue to be a challenge for timber dependent communities in Washington State.