Almost Half of All Births in Spokane Paid for by Medicaid

Almost half of all births in Spokane are paid for by Medicaid assistance. Note the enormous rise from about 35% in the year 2000 to about 45% in the year 2008. This is a consequence of the growing poverty and chronic low wages in Spokane.

Chart source: Community Indicators of Spokane.

Spokane Income Growth Lags the State

The chart supports my hypothesis from last week – Spokane growth is lagging behind elsewhere. Wage earners in Spokane are falling further and further behind the rest of the state, and also the nation (not shown).

From the slope of the two trend lines, WA state income growth is growing twice as fast as income growth in Spokane.

Source: http://www.communityindicators.ewu.edu/graph.cfm?id=88

Why the spike in Spokane incomes in 2009? Possibly due to the layoffs of lower paid workers leaving us with more higher paid workers. Keep in mind that almost 10% of local jobs disappeared during this recession. The jobs lost were not high paid health care or good paying government jobs. Laying off lower paid workers causes the average and median wages for the area to move higher. This is not a sustainable way of increasing average and median incomes in the area!

How Spokane Promotes Itself

Location of Chelan County where the Lake Chela...

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Here is how Spokane promotes itself – this quote is from the Washington State website “ChooseWashington.com”:

Spokane, the second-largest city in Washington state, serves as the business, transportation, medical, industrial, and cultural hub of the Inland Northwest.

Spokane’s low business costs and productive workforce make this area the ideal place to relocate a business.

The two competitive advantages are “low business costs” which is a direct proxy for “low wages/poverty”, and “productive workforce”, which means productive per unit  – or low wages – for the purpose of business relocation to Spokane. As I have written about on these pages, my hypothesis is that Spokane has long benefited from national recessions because firms then moved to reduce costs by moving to lower cost cities, like Spokane. In a globalized economy, Spokane is no longer the lowest cost provider. This strategy of promoting our region’s chronic low wages will not be successful to achieve goals of raising wages and opportunities. Instead, we will get more casino, restaurant, hotel and call center jobs, plus the usual government/education/health care jobs.

The source for these quotes is the Spokane page on ChooseWashington.com.

Compare Spokane’s two competitive advantages to those of other regions in the State.

Benton County offers electric rates that are among the lowest in the nation and an excellent transportation network that includes highways, two national railroads and commercial air and barge services.  Benton County is a top choice for companies seeking access to major markets and affordable power.

Ranked as one of the top ten high technology communities in the nation, Benton County features an emphasis on innovation and technology. The Tri Cities boasts an employment rate of 19% in technology and topped the list as the most secure mid-sized city in America.

Here is how King County is promoted:

King County is the largest business center in both the state of Washington and the Pacific Northwest with cutting-edge companies and an unmatched spirit of innovation. The county is home to some of the world’s most successful businesses including Amazon.com, Boeing Commercial Airplanes,Costco, Starbucks, Safeco, and many more. The highly educated workforce, exceptional quality of life, entrepreneurial culture, and strategic location – midway between Asia and Europe – attract companies to this area.

King County is a leading global center for several emerging industries, including aerospace, biotechnology, clean technology, information technology, and international trade and logistics. In 2005, Seattle was ranked the most well educated city in the country.

ChooseWashington.com : King County.

And Chelan County:

Located in the heart of Washington state, Chelan County offers business and industry a state-of-the-art fiber optic highway, videoconferencing, meeting and training facilities.

Chelan County also boasts some of the lowest power rates in the country, generated by the Columbia river hydroelectric dams, and healthy and vibrant agriculture and tourism industries.

The Spokane region’s economic promotional strategy seems as incoherent as the incoherent clustering strategy (and also).

Spokane Tribe proposes 2.2 million sq ft casino complex

Spokane Indians Baseball

Would be built in Airway Heights – however, to do so will require some regulatory exemptions and changes to “how the government enforces the federal Indian Gaming Regulatory Act“.

Source: Proposed Airway Heights Casino Could Have National Implications — SPOKANE, Wash., Sept. 23 /PRNewswire/ —.

(The photo is of Avista Stadium where the Spokane Indians minor league baseball team plays. I understand the team name is licensed from the Spokane Tribe but is otherwise unaffiliated with the Tribe.)

Call center expands in Spokane

The Peyton Building in Spokane, Washington

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West Corp., an Omaha-based call center business that has operations in Spokane, said it will hire 190 more permanent and temporary workers here.

via Call center operation to hire 190 in Spokane – Office Hours – Spokesman.com – Sept. 29, 2010.

Jobs.

But not the high skilled, high paying jobs that Spokane needs to escape its reputation for chronic low wage jobs.

2010 High School Drop Out Rates Around Spokane

The Mead School District's newest school, Mt. ...

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As it stands for Spokane’s Class of 2010 2,272 students started as freshman but only 1,479 graduated last June, a graduation rate of 65-percent.

The school with the lowest rate was Rogers High School; 511 students started as freshmen but only 219 graduated, a graduation rate of just 43-percent. The school with the highest number of graduates in Spokane is Ferris High School with about 75-percent.

In comparison to Spokane’s overall graduation rate of 65-percent, Central Valley’s rate is 67-percent and Tacoma’s schools boast a 81-percent graduation rate.

via Are Schools Failing Our Kids? – News Story – KXLY Spokane.

(Photo is of Mt. Spokane High School whose graduation rate is not specified in the linked article. Wanted to clarify that. The Mead SD has an on time graduation rate over 85%.)

Update: Due to the popularity of this item, I have added this link to the State’s Office of the Superintendent of Public Instruction where you can look up specific data about each district and school in the state. Look for the “Summary” item at the upper left and click on the down arrow to choose the specific school district and click on “Go”. Look for the “On time” and “Extended” graduation rates.

2nd Update: Spokane Schools have now improved their graduation rate to 70%.

Latest graduation rates improved.  Spokane 70.2%, Central V, 84.6%, East V, 97.2% and West Valley, 96.3%.

Related:

Commercial real estate vacancy rates in Spokane

As of September 26, 2010:

  • Office space vacancy rate: 17.84% (unchanged from last week as of Sep 28)
  • Industrial/Flex vacancy rate: 20.39% (up from 20.26% last week)
  • Retail vacancy rate: 23.23% (down from 23.31% last week).

OfficeSpace.com – Market Statistics – All Regions.

Trend of transfer payments into Spokane County

Please read this first: “Transfer Payments in to Spokane MSA as of 2008“.

For additional information, also read the comments to that post.

Here is a chart showing the longer term trend in transfer payments and the role they now play in Spokane’s economy. As can be seen, transfer payments (payments received for other than current products or services rendered) now represent about 20% of the Spokane area’s income.

Per the linked post, this is primarily government payments for various benefits programs and does not include salaries for government workers.

Data source: Washington Economic Analysis Project.

Transfer income payments show some correlation with past recessions. Note the drop off after the 1973-1975, 1980-1981, and 1990-1991 recessions, and then the rise in about the year 2000 and again in 2007 for those recessions. Recessions lead to layoffs and unemployment compensation, which is a temporary transfer payment, but they also lead to older workers being forced into retirement, which may semi-permanently increase retirement benefits for the long term.

We did not see the expected drop off in transfer payments after the 2000-2001 recession, which supports my hypothesis that the Spokane area economy is no longer recovering from recessions like it used to.

100 aircraft maintenance jobs may open in Hayden, ID

Horizon deal means new jobs for N. Idaho – News Story – KXLY Spokane.

Long term maintenance contract may add 100 new jobs; due to licensing requirements they may have to move workers from elsewhere.

Sacred Heart Medical Center patient counts drop

Sacred Heart lays off 33 – Spokesman.com – Sept. 25, 2010.

One year ago, the story says the hospital averaged 625 patients per day – this has now dropped to 518.

The loss of patients is blamed on

  • the merger of Rockwood Clinic with competing Deaconess Hospital, which resulted in a diversion of patients away from SHMC
  • the economy, causing changes in insurance coverage and spending on health care

In June of 2009, the hospital was then planning to add 152 new patient beds.

Update: The news story only mentions the patient count at SHMC. I wonder what has happened at their sister hospital, Holy Family?

Tax trends in Spokane (Washington really)

To clarify per a comment and suggestion there – I did not create these charts nor have I verified their original data source. They are from the web site linked below which appears to have republished a letter from the County Assessor. I do not know if the charts were created by that web site, linked below, or if they were included in the letter from the County Assessor. The charts mysteriously have different start and end dates; I can understand the different start rates but the end dates? All of these taxes exist today.

Source of charts: Tax Trends | TaxSleuth.com | Evergreen Freedom Foundation.

The above charts are a partial list of taxes. There are taxes on telephones, cellular phones, utility taxes, property taxes, other business taxes and other sources of revenue including numerous fees for services, including building permits, sewer fees, street lighting fees, parking fees, and fees for permits for many random things.

Voters in the State of Washington will be asked to vote on establishing an income tax on high incomes only. Judging from the above trends, or the trends in states like California, the “high income” limit will likely migrate to lower incomes over a few years.

Trend in total number of businesses in Spokane

I only (quickly) found data back to 2001. Would be very interesting to see data back to 1980 or 1990.

The single largest category for business establishments is “Other services” accounting for 33% of all business establishments. The next largest is construction accounting for 12.5% of all establishments. Combined, those two categories account for 45% of all businesses. My guess – and this is just a guess – is that most of these are one or two people businesses. This would also provide a possible explanation for an increase in businesses in a bad economic downturn through 2008-2009 – while the overall unemployment rate was rising (and remains high). People who lost their job may have started  small service businesses and the count of business licenses then went up.

Data source: Washington Workforce Explorer.

I may do a later post that compares the distribution of industries between Spokane and somewhere else.  A quick look at some data in this area suggests Spokane’s “diversified economy” is not as diversified as we often claim it is. But let’s wait to see what the data looks like.

58 movies filmed in the Spokane area

Filmed in Spokane Movie Marathon | Moosicorn Ranch.

38% of Spokane’s wages and salary come from the government or health care

As of the 4th quarter of 2009, just over 38% of all wage and salary income in Spokane was from the government or health care sector.

The calculation of 38% comes from the data, presented in a table, below. The data itself comes from the Washington State Employment Security Department web site.

Somewhere I have a reference that said about 60% of all health care in Spokane is paid for by the government from Medicare, Medicaid, government employee benefits and other programs. Unfortunately I seem to have lost that reference so I can not cite a source for that estimate.

Using the 60% estimate and 60% of the health care sector wages, about 31% of the wage and salary income is derived from government payments. Transfer income for items other than medical benefits (which would be included in the health care sector) accounts for an additional 11% of total income.

Therefore, the government accounts for 42% of all income flowing into Spokane. (I think there might be some slight double counting that needs to be sorted through – might be more like 38%. See more on government transfer payments here).  Just speculating, but looking at the growth in transfer payments to Spokane, on going expansion of government programs, including a proposed medical school, it is likely that sometime before 2025, the government will account for 50% of Spokane’s economy.

Readers of this blog are sometimes shocked to learn that the reality is different than what they believe or were told. The data tends to shock me too and has certainly changed my beliefs about what I thought I knew about Spokane. I do not know much about different government systems world wide, but I suspect we are similar to European-style socialism.

Data Table (which probably crashes into the right column):

Read more of this post

Spokane Real Estate Market Update

Spokane in Spokane County

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Spokane WA Real Estate Market Update August 2010 – Spokane Real Estate Advisor.

Great web site on Spokane area real estate trends (posted here previously).  Some slight good news in sales trends in August, offset perhaps by a slight increase in available inventory during the month.

Prices mostly remain flat but months of supply has fallen to 9.91 months due to an increase in pending sales.  Usually, a subset of pending sales turn in to closed sales.

Majority of 2010’s top 20 construction project $s are from government spending

Two construction workers at work.

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According to a table on page B4 of the September 23, 2010 edition of the Spokane Journal of Business, 60% of the money spent on the top 20 construction projects in the area so far this year is government/taxpayer funded construction. 40% is private sector construction.

This is only amongst the top 20 projects – I did not look up data on other projects which may change the ratio.

With high levels of vacant commercial space and empty homes for sale, there is little new private sector construction.

The largest single construction project is to build a new sewage treatment facility and the second is to renovate a building at Eastern Washington University.

Commercial real estate vacancy rates in Spokane

As of September 22, 2010:

  • Office space vacancy rate: 17.84 (up from 17.62% on Sep 12)
  • Industrial/Flex vacancy rate: 20.26% (up from 20.18% on Sep 12)
  • Retail vacancy rate: 23.31% (up from 23.24% on Sep 12).

OfficeSpace.com – Market Statistics – All Regions.

I will try to keep a running update on the vacancy rates as it may be helpful to eventually draw a trend chart to visualize the situation.

Spokane May Not Recover From Current Recession

100 Highest ranked counties by per capita income

Image via Wikipedia

Not a good head line- what I mean to say is that Spokane may be unlikely to recover from the current recession, like it recovered from recessions before.

As I have presented on this web site, during the past decade, larger businesses in manufacturing, high tech manufacturing, and high tech, have left Spokane and the majority moved the bulk of their operations to cheaper locations over seas.

I hypothesized that Spokane benefited from past recessions because of its low wages/low costs of doing business. When recessions hit, U.S. firms sought ways to lower their own costs, and one way to do that was to move or expand operations to a lower cost city.

However, in the 1980s, U.S. firms began to move their manufacturing operations out of the country, to Mexico, South America and Asia. By the year 2000, U.S. companies were aggressively moving manufacturing and high level engineering design outside the U.S. to an expanding set of destinations, now also including China and India.

When business became globalized, Spokane was no longer the low cost provider. Why move to Spokane when you could save even more by moving to China or firing your software team and hiring programmers in India for 10 cents on the dollar?

One way to see if this hypothesis makes any sense is to look at the change in income in Spokane in relation to past recessions. In the following chart, the yellow line is intended to illustrate the approximate duration of U.S. recessions.  The blue line is Spokane per capita income compared to U.S. per capita income – and this discussion will focus on comparing Spokane to U.S. recessions.


In the 1973-1975 recession, per capita income in Spokane, relative to the U.S. rose rather abruptly from the start of the recession onwards. That’s interesting! Spokane was also the site of the 1974 World’s Fair Exposition, which gave the city prominent exposure.

In the 1980s, pure manufacturing operations were beginning to move offshore  – and incomes in Spokane were dropping relative to the nation. (There could be other reasons for this including how per capita income is calculated or what was going on elsewhere in the U.S. economy.)

In the 1990-1991 recession, Spokane’s per capita income relative to the nation increased again as we came out of the recession.

But by the 2001 recession, Spokane’s per capita income versus the U.S. did not increase – in fact, it went down.

It will be interesting to see what happens to per capita income in 2009 and 2010. Recent published data shows a sharp decline in median income and average income in Spokane – how that compares to the rest of the nation will be of interest.

This data suggests that the hypothesis that Spokane is no longer the low cost provider of manufacturing and that firms will no longer move to Spokane for that capability suggests that Spokane’s recovery could be weaker than in the past.

On the plus side, Spokane’s increasing reliance on government and health care dollars may create  floor on the downside during economic downturns. But that may also limit upside potential – think of the upside from a Boeing, Microsoft or Amazon in town?

While other areas are transitioning to a 21st century innovation economy based on knowledge work, Spokane lacks the necessary comprehensive research universities[1] and the critical mass ecosystem necessary for such clusters to thrive. Instead, Spokane seems to be converting to a government funded community – where between transfer payments, government wages and government funded benefits, 1/3d or more of the local economy GDP appears to be funded by governments. Government, government funded education, and health care are the predominate industries of the present and future.

See the next item from the Spokane Transit Authority – they are predicting that sales tax revenues from 2008 to 2016 will remain below 2007 levels … that’s an 8 year recession in Spokane …

Footnote:

[1] Spokane has several excellent universities. Only WSU-Spokane is officially a research university but is transitioning to primarily focus on health science research as the largest component of what they do there. EWU, Gonzaga and Whitworth are excellent teaching universities and their faculty do conduct some research too – but they do not (for the most part) have doctoral programs with many graduate students working on research projects.

Spokane Transit Authority Cuts Bus Services

STA Service1
Image by WSDOT via Flickr

STA has been able to maintain service at the same level until now because of careful planning and prudent financial policies. The organization is debt-free. Unfortunately, the recession continues. Even if the economy started to recover next year, STA would not return to 2007 sales tax revenue levels until early 2016 – an eight year period of reduced revenue that will never be re-captured.

“We must reduce expenses in order to live within our means,” Meyer said

via Media Notice: Proposed 2011 Service Reductions – About STA – Spokane Transit Authority (STA).

Sales tax revenues in Spokane County are evidently below year 2007 levels (I will try to get data on that at some point). I am surprised at the forecast for an 8-year long period of reduced revenues – wowA recession lasting that long puts this downturn in the depression category and is much longer than what others have said, publicly.

The last quote from the bus system CEO is amusing if you think about it.

Trend in per capita income, Spokane County 1969 to 2008

The following chart compares the per capita income in Spokane County to the per capita income average of the United States and the average for the State of Washington. The trend, over time, is for Spokane County per capita incomes to drop relative to earnings elsewhere in Washington and the United States.

The data is from the Washington Regional Economic Analysis Project, Selected Economic Indicators “Per Capita Income” table.

The trend is unfortunate and I am hoping that some how I am misinterpreting the data table. Please leave a comment if this is not right – I am reading the percentages directly out of the WREAP table. The last few years do agree with other data on average wages in Spokane versus the State.

Note that over the entire period, per capita income has gone up. Presumably, the interpretation is that Spokane incomes have not gone up as fast as else where in the State or the U.S.

In the chart below, the lag in Spokane incomes is apparent. The bottom (dark red) line is Spokane and note that over time, it falls further behind the expansion of wages in Washington (green) and the U.s. (dark blue). An eyeball (not statistical) interpretation of the chart indicates wages began diverging in about 1995.

I did some comparisons with selected locations elsewhere in Washington and  their incomes rose faster than those in Spokane.

Source: Community Indicators.