Recommendations 2: Part 3 – Wages and pouring concrete
March 24, 2011 2 Comments
Local promoters and others present a chart showing that wages in Spokane have risen consistently over time.
That would be fine except it misses the full story. Unfortunately, Spokane wage growth lags the rest of the State. By a lot.
As you can see in the following chart, while Spokane (red line) wages have increased, average wages in the state (blue line) have increased faster. Over several decades, wages in the State have increased at twice the rate of wages in Spokane. Stated another way, the longer we stay in Spokane the further behind we fall.
Average wages are about 80% of the rest of the State, yet our costs of living are closer to 100%. We have to spend close to the national average to live here (somethings, like health care, are priced higher than the national average).
The above is still not the full picture. The distribution of wage income in Spokane County is odd as you can see in this chart:
Most of the wage income is produced by government and health care jobs. This is not a diversified economy, although plenty of reports and promoters claim it is.
Finally, we see that Spokane has a high poverty rate and it is getting worse – its about 50% higher than the rest of the state:
Source: Spokane Poverty Rates
A side effect is that increasing numbers of residents are dependent on the government (other taxpayers) to provide for them such that nearly $1 out of every $5 of income in this county is a check from the government (this does not include government worker wages). This trend is also occurring outside the Spokane area.
This is not a short term problem. Low wages and an elevated poverty rate are a chronic, long term problem, described in every economic study, report, and proposal going back at least 30 years. Dr. Gary Livingston, former Chancellor of the Community Colleges of Spokane, and Whitworth University President Dr. Gary Beck both described this problem in the past year.
A side effect of low incomes and poverty is that less tax revenue is collected by local government. Bringing up local wages would result in increased budgets for local government to fund the projects that citizens would like to have.
How do we solve this? I do not know but I do have an idea of a possible root cause that I explain below.
Since all of the past plans made the same findings and the same recommendations, should we do more plans? I doubt it.
Did anyone read the old plans and try to implement ideas from those plans? I doubt it, but if they did, then why have comparative wages continued to slide?
I do not know and can only make a stupid guess: Do we focus too much on real estate related projects?
This is just a guess – an idea to think about.
$3.7 billion has poured into downtown Spokane during the past decade (both public and private $s). Downtown is much nicer than it was. And we are not done yet – there’s big plans for even more spending in downtown.
- Did this focus on downtown neglect other important improvements?
- Has this distorted government spending and zoning changes to benefit a few landowners at the expense of many?
- Buyers of luxury homes in Kendall Yards will not pay property taxes for 12 years. A nice little subsidy from the less well to do in Spokane who still have to pay taxes. And a nice way to increase downtown land values.
- Light rail, which was rejected by voters a few years ago, is back in the news again. Light rail projects would tremendously benefit landowners near proposed light rail stations.
- We’ve built a $570 million dollar freeway to no where – called the North side freeway way up in north Spokane where it goes between who knows what and where ever. It won’t connect to I-90 for at least another 20 years; in the meantime its a great big piece of concrete that is not adding value comparable to its $570 million investment. That is a big asset that will mostly be idle for 20 more years. When the full freeway does open, Division may turn into empty store fronts just like Sprague Ave did when I-90 was built. For now, this is a very expensive largely unused asset.
- $191 million has gone in to recent airport improvements where usage has been roughly flat for 15 years.
- We bought a $95 million remodel of the Convention Center in 2005 and now propose spending another $65 million. Convention center visitors help help create more (low wage) restaurant and hotel jobs – and increase the value of downtown land. After the last $95 million expansion, airport usage went down and a big local hotel went out of business. Read what they are thinking about convention centers over in Tacoma… (I have no idea if this was a good project or not – I am just observing that the benefits might not be as envisioned.)
- There’s a proposed $8 million bicycle bridge over the railway from WSU-Spokane to the “International district” on east Sprague.
- And then there’s the proposal to build a new electric trolley car in downtown Spokane. Because downtown Spokane needs more investment funded by a general sales tax increase and possibly a property tax increase for those who actually benefit. Perhaps because so many buildings are empty or in foreclosure?
After all that spending, wages have fallen further behind. The poverty level has gone up.
May be this focus on mega real estate projects isn’t working out so well?
We pour lots of concrete partially because the Federal government hands out a lot of grants for pouring concrete. And we really like to spend money on downtown Spokane, delivering large benefits to a few. When we spend money on X it means we are not spending money on Y – and around here, Y is everything else.
(Update: After this blog post went live, a reader passed along some information about “The Fancher Report”. My hypothesis turns out to be very old and was a fundamental finding in the Fancher thesis, written for a Harvard Masters degree in 1977. You can find a summary here and can download and read the whole thesis at the bottom of the page. He found that local interests, notably connected to the Cowles family, had successfully obtained taxpayer funding for programs that benefited a core group of downtown landholders by taxing everyone. My idea was that our “no go” economy came from malinvestment. The Fancher report explains how that came to be.)
What if a little bit of this money had been spent on a medical school in Spokane? (I know, we can get grants for pouring concrete but not building medical schools.)
Or creating the comprehensive research university that local leaders have talked about over and over and over again for 20+ years?
Or setting up our own fund for local entrepreneurs? VC money for Spokane area start ups is harder to come by than for start ups over on the coast. Because we don’t have the ecosystem here.
Perhaps we need to invest in people and ideas, not concrete.
The 21st century is about creative people building innovative solutions. But Spokane is pouring concrete to recreate a central down town core of a bygone era.
Pouring concrete creates (temporary) jobs often funded by some one else (taxpayers) and tends to provide big benefits to a small number of well connected locals – and I do not mean just the one landowner that everyone thinks of first around here – there’s more than a few that benefit. Apparently others have noticed this too – darn – I am late again. It is not a conspiracy as some suggest – it is just a well connected group that understandably does a good job of looking out for their own rational self interests.
Spokane will pour concrete to eternity rather than invest in people and ideas. Think about it.
Or I could be completely wrong and this idea is nothing more than a stupid guess. But at least it is a different idea than that presented in 30 years of local economic plans (more on this in Part 4.) Spokane is not the only town with these symptoms. A lot of small and mid-sized cities are dealing with this.
Part 4 – Plans – Aiming High – Seeking Excellence
- Where “good enough” is no longer good enough.
All ideas are welcome, provided it does not involve writing yet another economics strategy study that no one reads, and does not involve pouring more concrete.
- Relative wage distribution impacts in Spokane County (inlandnw.wordpress.com)
- Spokane becoming major retirement community (inlandnw.wordpress.com)
- Spokane County average wages (inlandnw.wordpress.com)
- Spokane County’s Working Population Decreasing (inlandnw.wordpress.com)
- Greater Spokane, Inc continues to promote poverty as Spokane’s comparative advantage (inlandnw.wordpress.com)
- Spokane’s Low Cost of Living (inlandnw.wordpress.com)
- The Specter of Wage Declines (economix.blogs.nytimes.com)
- America’s Economic Malady: A Bad Case of ‘Baumol’s Disease’ (dailyfinance.com)
- How the Past 40 Years Have Treated You Depends on Sex (fool.com)
- Employers Haven’t Added Enough Jobs — And The Ones They Did Pay Low Wages (crooksandliars.com)