Recommendations 2: Part 3 – Wages and pouring concrete

The Spokane Club at 1002 Riverside, in Spokane...

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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).


From: Spokane’s Economy in Two charts

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:

Source: Relative Wage Distribution in Spokane County

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.

Source: Trend of Transfer Payments in to Spokane County.

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?

Why?

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.

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2 Responses to Recommendations 2: Part 3 – Wages and pouring concrete

  1. Ron the Cop says:

    Mr. X,

    Excellent piece. I will take this several steps further. Here’s an email I just sent to some friends that think as I do. BTW here’s a link for the Francher Report – see right side rail for PDF copy.

    Ron the Cop

    *****

    Mr. X has a new post up at his blog. Mr. X’s final installment will be posted tomorrow. I’ve warned Mr. X to watch his back as he’s letting the cat out of the bag a little too much for the comfort “of the few.” I sense the Deathstar may be energizing to target Mr. X.

    FYI – I think Mr. X sees the same common element that we all do but from our discussions he wants to show the data and let others make their own conclusions. I think I’ll send him a copy of the Fancher Report:-)

    In my opinion the wage base is artificially low in the Spokane Area because of the operation of the criminal enterprise “of the few” that engages in predatory, unfair and illegal business practices/competition. The cost of entry into this market for those that don’t want to play ball with “the few” is too high and they simply go elsewhere. These others would bring new jobs that would begin to raise the prevailing wage base.

    We have a cluster of universities and colleges in this town but many upon graduating must go elsewhere to earn a decent living unless as Mr. X suggests they go to work for government and or the health care profession. I won’t even go into the national ranking of Gonzaga Law School (very low) but I will say this, most of their law students don’t attend legal ethics and or sleep through class from my observations of those in town that service “the few.”

    Because of the regional hub nature of Spokane other sector businesses should be encourage to locate here as the health industry has, to draw business/clients from Canada, Idaho, Eastern WA & OR. Spokane/CDA are undiscovered country that is ready to grow substantially if we cast off the dampening yoke “of the few.”

    Actually I chose to locate here because of the many fine amenities and other qualities of this area has to offer. Unfortunately I did not study local government but this is fixable if enough of us who “get it” choose to make a difference and demand better.

    The downfall “of the few” has actually began with the new/alternative/social media ability to push information that so far “the few’s” lock on the local media has been able to control. The tipping point will soon come when the masses realize that they’ve been lied to for many years. Information is very dangerous thing. This is why the work of Mr. X’s is so damning as it quantifies/visualizes what we all know to be the truth of the operation of the criminal enterprise in this town.

    As Mr. X notes re “the few”:

    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.

    I’ll go one step further – “the few” have so co-opted/corrupted local government (yes there a good argument this continues all the way up the food chain to the federal level) to ensure its gets the most of the public benefit for its own personal benefit to the detriment of all others. In the process this spills over into why we have incompetent law enforcement leadership. It would be too dangerous to “the few” to have uncoopted police leadership as they might not turn a blind eye to the criminal activity of “the few.” So “the few” have condone the status quo and are elected reps will not take action to correct the situation with local law enforcement.

    OK in full disclosure I’m a capitalist and free market person. I’m not bent on a socialistic redistribution of wealth. However government exists to prevent the tragedy of the commons when a few impose significant negative externalities on the many. In short certain things are criminal and folks should go to jail e.g., Barney Frank, Chris Dodd and many others (Watch the movie Inside Job and read this article in the Rolling Stone).

    This is why we have laws to provide a level playing field for all to succeed on their own merits, ingenuity and creativity. No one or a few should be above the law because they’ve successfully gamed the system. Looked I’m no big fan of corporate America either but the referees and the cops are on the take and off the playing field. This is not good as this makes us vulnerable to attack from the radical left to exploit the loss of hope and fairness within the general public.

    Where the Hell are the sheepdogs that should be guarding the flock from the wolves?

    OK and for the conspiracy theorists out there you can chose to go down this rabbit hole:-)

    When our enforcers are toothless and or paper tigers and they don’t hang the hides of the financial cons on the wall that gambled with other people’s money and suffered no personal loss, the trust in the fairness of our system is greatly diminished in the eyes of the general public.

    The danger of not enforcing our laws and ensuring that no one is above the law is that we expose our financial/economic underbelly to attack by the leftist that will seek to sow the seeds of chaos to destabilize our government for the purpose of instituting their Utopian goal of the redistribution of wealth to achieve this desired fairness.

    The only problem is that those in charge become corrupted, despotic and tyrannical – the USSR, the Third Reich, the NORKS, Venezuela, Zimbabwe, Libya, Syria, the Iranian Regime and the House of Saud to name just a few. Is there a common element here – Communism, Fascism, Nazism, Maoism, Islamofasciam – I could go on but I think you get the generally idea. These ideologies have failed because power corrupts absolutely, they don’t recognize the universal truths that all men and women are equal and free will. These ideologies have failed to deliver an equitable distribution of goods, services and wealth.

    See

    The Left’s Economic Terrorism Playbook: The Chase Campaign by a Coalition of Unions, Community Groups, Lawmakers and Students to Take Down US Capitalism and Redistribute Wealth & Power

    Ron the Cop

  2. inlandnw says:

    Wow, that’s amazing background. I think I saw bits of that a long time ago but forgot about it

    http://www.girlfromhotsprings.com/news-monopoly.html

    It seems that I stumbled into this from a different perspective of trying to understand why the local economy is just weird. It really is weird here and its been unusual for a long time. My hypothesis is that it comes down to pouring so much money into some narrowly defined projects/geography which benefits a few but not the overall area. Fancher explains why in his Harvard thesis. I’ve downloaded the thesis and will review it when I have some time.

    Also, here is the old web site on the Spokane waste to energy plant that you mentioned. Says Spokane pays more than twice the national average for disposal – lots of other interesting items there.

    http://replay.waybackmachine.org/20070210133658/http://spokanewasteofenergy.com/

    Looks like I will be leaving town soon…. 🙂

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