Spokane Median Income Trend versus State of Washington Median Income Trend

This chart shows Spokane median household incomes versus the state of Washington’s household median income, with both adjusted for inflation in to 2010 $s.

  • Compare the red line with the green line. Green is the State of Washington and red is Spokane.
  • Compare the yellow/orange line with the blue line, where yellow/orange is the state of Washington and the blue line is Spokane.

If the data series are correct, and the inflation adjustments are correct, household median income in Washington has also fallen but remains just above the 1989 figure.

Data sources – see previous post.

I have government data for average wages per job (which is not the same as household median income). I have not yet had time to make the inflation adjustments to that data, and draw a chart, but it appears that average wages per job have gone up, which is good news.

Update: Funny quote from Taleb, paraphrasing McCluhan… “The median is not the message“. We hope!

Spokane’s economic plan du jour

Picture of the Duncan Garden at Manito Park an...

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Spokane’s future industry clusters:

  1. Retirees and transfer payments
  2. Health care services and health care academics
  3. Government, including education
  4. Manufacturing
  5. Low skill, low wage categories including retail, restaurants, hotels, recreation, trucking, warehousing.
  6. Various small categories including low skilled and high skilled workers.

Categories 1, 2 and 3 will account for 60+% of the local economy. Here’s the number of workers, per category, flipped from horizontal to vertical to present the relative size differences.  Retirees and transfer payments are not shown in the chart but would be in the top 3.

Here is the impact of transfer payments. As you can see, transfer payments are a large component of the local economy. For more information on transfer payments please see “Trend of Transfer Payments into Spokane County“.

Data Data from washington.reaproject.org

Retirees

Previously, many people retired from Southern California and took their large real estate capital gains to low cost Spokane. That source of retirees is diminished due to the housing collapse and its return in the future is not predictable. This is an important driver for health care, housing and service sectors.  Inbound migration may be at reduced levels for a long time.

Clusters

The State adopted an industrial clustering policy where the state selects the industry clusters to be supported in each region. The primary clusters for Spokane are health care, education, and trucking and warehouse operations. Manufacturing has been in a slow national decline for 30 years.

Health care is on a growth streak due to retirees, a doubling in individual use of medical services over the past 30 years, and more recently by expectations of “ObamaCare” leading to an expectation of increased demand for services primarily paid for by someone else.

Risks

The loss of retirees from Southern California produces risks to the area’s current strategy and may be why the 2011’s local economy continues to remain stuck well below 2007 levels. On the plus side, the nation’s overall large “baby boom” approaches retirement years. However, where they choose to settle in their retirement years will have a big impact – and some think relocating as part of retirement may be thing of the past, not of the future.

There is a risk that the health care act might not play out as expected. It is possible that court challenges may limit the growth in the health business sector.

There is a risk that shifting more money into health care services without addressing the exorbitant prices charged and excess consumer demand for health services paid for by other people means less money for the production side of the economy. This is not a sustainable path.

Spokane’s future is based on retirees and health care – but that future has risks. And a big risk is there is no plan B.

Low Wages Are By Design

Greater Spokane says our region’s primary competitive advantage is low wages and low land and housing costs (or stated another way, poverty). Per Greater Spokane, our region’s competitive advantage is low prices. And no one in power wants that to change.

Spokane will be the state’s low wage, low cost housing and low cost land destination. This appears to be by design.

Outside of the key clusters, wages and opportunities will be limited.

The substantial quantity of data collected on this web site, and reviews of all the economic plans going back to the 1980s show that the chronic low wages and limited opportunities are endemic to Spokane. Every one of the plans mentions these problems. These problems remain because not many people want to embrace change – low wages are a feature and are by design.  The area is settling into a future as a comfortable government-funded enclave of government and health care workers, and retirees collecting benefits.

Everything on this website has been mentioned before, often many times, in prior economic studies about Spokane. What I present on this website is not my opinion but is backed by data and numerous studies. This view is shared by business leaders of the past, by various politicians, current and former academic administrators and many more. The data tell this story, not me.

Why?

See the recommendations links at the right of this page. Lots of bad decisions were made in the past.

Hiatus

It’s been an interesting experience to go from wondering why so many businesses disappeared to finding out what really happened. The answer was not at all what was expected.

Unfortunately, no one cares. It’s always been this way in Spokane. As a friend said to us in the 90s, “It’s just a big small town, only bigger.” So true. (Well, at least one other person gets it…)

And nothing will change.

This web site will now be updated primarily for major events or changes.

Spokane and Kootenai County economic zones to be merged into one

The Spokane County statistical zone used for economic and other data reporting by government will be combined with Kootenai County starting in 2013.

The main impact is that by combining two smaller entities into one larger group, the combined group moves in to the “top 100” lists of economic reporting zones.

And “It could also help the region collect more federal funding.

But that might not be so good …

Read more of this post

Spokane County income charts

Spokane County per capita income versus that of Washington and the U.S. As indicated by the red line diverging further from the green and blue lines, Spokane County has been gradually falling further and further behind the income growth of the state and the country.

The divergence between Spokane County per capita income and the State has been getting wider over the past 30 years and is now twice as much as 30 years ago.

Spokane area per capita income growth in the 2000-2009 decade has been awful except for a brief spike around 2006. My belief is that Spokane never recovered from the 2001 recession based on this chart, the diverging income chart and that unlike past recessions, when the transfer payments spiked up in 2000/2001, they did not fall back down as they had done during previous recessions.

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.

Recommendations 2: Part 1 – Charts

Eastern Washington University

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Recommendation 2: Part 1: Charts!

Part 1 is the boring part. Parts 2-4 are much more interesting 🙂

In early 2009, I wondered what happened to so many manufacturing and technology firms that used to be around Spokane? I started collecting data, which grew into an amusing hobby.

A lot of data is available, and thanks to the Internet and Google, its is not too hard to find if you are a little persistent in digging. I have featured the EWU logo because they have many excellent resources available on their web site.

Much of the data about our area is presented as individual numbers, sometimes tables of numbers, and rarely, charts. It is hard to identify patterns or trends in individual numbers and tables of numbers – unless the data is converted in to some type of chart or we run the original data through a statistical analysis.

Translating data from numbers in to charts converts data into information and then into knowledge. We can quickly see at a glance that poverty has been increasing or that the percent of high school seniors taking the SAT have been dropping or that EWU graduations have increased while enrollment at WSU Spokane has decreased in the last two years.

In most cases, local data has been presented poorly probably because no one thought to take an extra step and turn the data into a form that would be readily accessible to the public: in other words, a chart.

Unfortunately, in other cases, the data has been hidden in hard to find places. Some agencies have translated data into charts, but selected start or end dates to present the trend they wished you to see and not what the complete set of data actually shows. Some provide the data in PDF files which cannot be copied into a spreadsheet. Turning the data into knowledge requires manually re-typing the data tables which discourages the public from turning data into useful information.

To improve local planning – and understanding – all local organizations that are producing data, and especially all public agencies, should present their data as data tables that can be downloaded, and as charts that can be quickly viewed by interested members of the public. This should be easily accessible and viewable on their respective web sites.

There is a fancy name for this called data visualization – its possible to produce some creative charts and interactive data explorers. That would be nice – but a good first step would be to provide the data and a simple chart!

Therefore, the first recommendation is Charts – and  – “share the data”. A sub recommendation is to provide the data table and explain why the data starts where it does and why it ends where it does. No more censoring the data to show the trend some one wanted.

Several agencies or organizations do an outstanding job of displaying the data they collect in relatively easy to use tables and charts. They are doing wonderful work that is under appreciated.

Examples:

  • Community Indicators of Spokane, operated by Eastern Washington University. Outstanding web site.
  • WorkForceExplorer.com, operated by the Washington State Employment Security Department. Click on Researchers/data analysts, and then Numbers and Trends or Industry Trends.
  • City of Spokane Mayor’s Office 2011 Budget Proposal. Good news is that the downloadable Powerpoint presentation has lots of charts.  The bad news is that this should be on a web page and not require installing special software, and the data itself is in text tables in a PDF file. It should be available in an .xls or .csv file format so that others can ask “What if?” questions. There also need to be some long term trend charts. How much was spent in 1995? 2000? 2005?  How much tax revenue was collected in past years?  How many employees were there in 2000 or 2005? See how the data could be turned into useful information?
  • This year, the City of Spokane produced a map showing where roads had been plowed of snow, and which roads were up next. Bravo!
  • Washington Regional Economic Analysis Project. “Regional analysis … without paralysis.” As they say, “Retrieve-Organize-Synthesize-Analyze-Diagnose … with the click of a mouse!”  Another outstanding web site.
  • Washington Office of the Superintendent of Public Instruction “State Report Card”. Excellent. Some school districts republish selected data on their own web sites (very good), some provide prominent links (very good too), some provide slightly hidden links on sub-menus or pages, and some provide no links (not good at all).
  • Washington State University Office of Institutional Research. Raw data is available as downloadable .xls spreadsheet files. Would be nice to have some charts of the data right on the web site but otherwise, this is very useful.  Strangely enough, though, an amusing example from WSU’s press releases will be featured in Part 2 regarding hiding something.
  • Spokane Community College Office of Institutional Research. Good but I could not find contemporary graduation rates, a rather important metric to understand how they are doing.
  • Eastern Washington Office of Institutional Research.

All of the above provide great templates for local government, other agencies and organizations to use in designing their own ways to improve their sharing of data with the public.

Recommendations 2: Part 1

This seems obvious but it is not yet widely adopted:

  • Use existing web sites to deliver the raw data and information directly to the public
  • Provide data tables in downloadable formats for public access
  • Present all data in readily accessible charts
  • Provide an explanation for the data – how was it measured, acquired, and why is data available only for the selected dates.

I worry that we may not see many charts from local agency and organization web sites today because they never created them for internal use either. They could be managing in the dark, making decisions without access to critical information, and making less than ideal choices.

Part 2 will look at great ways to “hide the decline”. When stuff goes south, there are many tricks to use to hide that from the public. Part 2 will look at some local examples.

Relative wage distribution in Spokane County

Notice anything unusual about the wage distribution in Spokane County?

What this chart shows

This chart is an attempt to capture the relative impact of industry wages, by sector. The normal way of looking at sectors is as a count of total employees in each sector, or sometimes as average wages by sector. This chart is a little different.

The data comes from the WorkForceExplorer. The average wage for each sector, from that data source, is multiplied by the percent of the workforce of each sector.  This weights each sector according to income (or if you prefer, weights income according to sector).

Government and health care combined are just over 40% of all wages in Spokane County. (WorkforceExplorer produces a similar chart as the above but sorts the columns and draws them as a horizontal bar chart. Our brain judges relative sizes in the vertical direction better than in the horizontal direction. When the columns are left unsorted, and drawn as vertical columns, the distribution of wage income is apparent.) The government category, as provided by WorkforceExplorer includes public schools and colleges.

Retail trade accounts for two-thirds the number of jobs found in health care and government but wages are very low. When the impact of retail trade is weighted by the low wages the importance of retail wages falls to a low level considering how many people work in retail.

If you squint at the chart for a bit, you can see that Spokane has two large clusters: government and health care. Plus three small clusters: manufacturing, retail trade and finance and insurance. The latter two are not really competitive advantage clusters – every comparable city has similar sized retail and finance industries.

What does it mean?

It means that the next time some one tells you that Spokane has a greatly diversified economy that its okay for you to ask them how much they have been drinking. There are several groups in town that incorrectly claim the local economy is highly diversified. Perhaps they drink too much 🙂

In seriousness, the chart shows that Spokane does not have a diversified economy. Related:  the incoherent cluster strategy that I have described elsewhere on this web site does not include government as a cluster even though it is the largest employer and produces the largest portion of wages.

Another component not shown is that transfer payments, primarily from government, for unemployment, disability, retirement and other benefits programs are not included. These total almost 20% of all local income. There is not an easy way to include this data in the above chart (we do not know how many recipients there are nor how to split out the portion of benefits that would end up being counted in health care).

If we could include the transfer payments, the top three clusters would be government, health care, and transfer payments. This is no way to run an economy.

What it does not mean – this chart does not directly reflect wages in each category. For example, Management shows up as a small column but the average wage in this category is very high – but has relatively few people working in that category.  Health care and government wages, on average, are slightly higher than the overall average (about 10%), but the relative size of the columns in the chart is due to how many people are employed in those categories.

Update: If the medical school is ever built in Spokane, the economy will become even less diverse as the proportion of income due to health care will rise much higher.

Questions

  • Should we have a diversified economy?
  • Do we want to have a diversified economy?
  • How do we develop a diversified economy?
  • What steps need to be undertaken to diversify the economy?
  • Are government policies enhancing diversity or limiting diversity?
  • What new policies are needed to improve diversity of income sources?
  • Is data, such as the above chart useful for decision making?

Related: