Recession amplified national trend: It’s often cheaper, more practical to move lower-paying jobs to the burbs
Dan Horn reports:
Nearly one in four jobs in downtown Cincinnati vanished between 2000 and 2010. That’s a loss of about 20,000 jobs from the region’s biggest and most important employment center. So what happened to all those workers?
The lousy economy claimed some of them, but U.S. Census figures suggest high-growth suburbs may have grabbed some, too. Mason, West Chester Township, Hebron, Symmes Township and parts of Covington and Fort Wright all made significant gains as downtown Cincinnati suffered losses.
Downtown wasn’t alone. Dozens of other communities, including solid suburbs like Blue Ash and Milford, also got socked by the years-long economic slump.
None took a bigger hit, however, than downtown Cincinnati, which suffered not only from the bad economy, but also from the continued movement of workers from the center city to the suburbs.
In the span of a decade, those forces have changed the balance of the region’s economy and the lives of thousands of working families.
Downtown now has fewer, but higher-paid workers. Many suburbs have stronger tax bases and more office buildings. Companies have more choices when it comes to investing and leasing.
And employees have less certainty about their workplaces and their commutes.
“I don’t think that trend will change,” said David Ginsburg, president and CEO of Downtown Cincinnati Inc. “It really is a big transformation.”
Although that transformation is dramatic, economists and others say it doesn’t mean Downtown is doomed or that successful suburbs are thriving solely at the expense of the city’s core.
Instead, they say, the change mirrors a national trend in which a growing number of companies abandon downtown skyscrapers for suburban office parks, where rent is generally cheaper, parking is often free and payroll taxes tend to be lower.
For some companies, especially those with many low- and middle-wage workers, the suburbs are less expensive and more practical.
“Companies are getting smarter about where they put their workers,” said Doug Bolton, managing principal of Cassidy Turley, a commercial real estate firm. “It’s not getting any easier to operate a business these days, so I think it’s a trend that’s going to continue.”
Downtown boosters say it can survive if it adapts.
To do so, they say, it must sell itself as a “premier” location that attracts company headquarters and higher-paid workers by giving them what the suburbs can’t: a vibrant place to work that’s also at the center of the region’s economy, government and legal system.
Downtown might cost more, they say, but that’s the price of being where the action is.
“We see it as a good evolution,” Bolton said. “Nothing on the horizon tells us Downtown is going to lose its place as a major hub for the region.”
The Census data offer some support for that argument. Even as Downtown’s job total fell from about 84,000 to 64,000, its total payroll increased by about 8 percent, from $4.5 billion to $4.85 billion.
That raised the average annual pay of Downtown workers from about $53,000 to $75,000.
Some of the payroll increase may have been fueled by the recession, because payroll figures include lump sum payments for severance and buyouts. But economists say those one-time payouts don’t account for the entire increase.
Columbus, Indianapolis and Cleveland also suffered significant job losses in their respective downtowns, but none gained as much in payroll as downtown Cincinnati.
“You had more jobs before, but they were lower-paying jobs,” Ginsburg said. “Downtown has become the home to more high-value, creative class jobs.”
The flip side of that is it has also become home to fewer lower- and middle-wage workers, either because of the recession or moves to the suburbs.
“The low man on the totem pole, the lower paid jobs, are usually the first ones to go,” said Janet Harrah, senior director of the Center for Economic Analysis and Development at Northern Kentucky University.
A new strategy to attract new jobs
Walk around Downtown on a typical workday and evidence of the job exodus is plain to see.
There are fewer people coming and going to work, fast-food restaurants are harder to find, and buildings once used for office space have been converted to hundreds of new apartments and condos.
Some of those changes are part of what Downtown boosters hope is a broader transformation of the center city, from a place where people work, to a more dynamic place where people work, live and play. Ginsburg said that’s why development projects at the Banks, in Over-the-Rhine and on Fountain Square are so important.
But the millions of dollars spent to overhaul residential, retail and entertainment space in Downtown and Over-the-Rhine don’t guarantee large numbers of jobs will follow, or that the kind of jobs once prevalent Downtown will continue to thrive.
So finding ways to keep and add jobs is essential, city officials say.
“The economic core is crucial for the entire region,” said Michael Cervay, the city of Cincinnati’s director of community development. “It’s a major job of the city to keep that going.”
The city’s strategy is twofold. First, keep and attract big companies that put a high value on Downtown because of its prestige, central location and proximity to other big firms.
Then, pursue higher-wage and “creative-class” jobs that are typically held either by young people who want to be Downtown for lifestyle reasons, or by older workers who make enough money not to worry about Downtown’s higher costs.
“The Gen Y population wants to be Downtown,” said Brian Graham, research director for Colliers International in Ohio. “They want to be in the urban core. They want to live, work and play in the same area.”
DunnhumbyUSA’s decision to expand its headquarters and double its workforce to about 1,000 is perhaps the best – and biggest – example of the kind of jobs growth city officials hope to see Downtown.
When the company announced its plans last year, CEO Stuart Aitken cited Downtown as a “cultural fit” for its employees.
“We have a young, dynamic group of people,” he said.
Suburbs offer lower costs, room to grow
City officials know the pressure to attract new jobs is on because many of the lost jobs are unlikely to return any time soon.
Most of those jobs disappeared before the recession hit in late 2007, which suggests decisions by companies to scale back or shift operations to the suburbs may have caused more Downtown job losses than the weak national economy.
Real estate experts say the reasons for those decisions are no mystery.
Downtown rent is anywhere from $1 to $3 more per square foot than in most suburbs. Parking can cost more than $100 a month for a single car, while open-air lots in the suburbs often charge nothing.
And Cincinnati’s 2.1 percent payroll tax is about double the tax in Mason, Fort Wright, Blue Ash and other suburbs.
“When the only thing that matters is price, you go to the cheapest place,” Ginsburg said.
For big companies, that often means shifting call centers, information technology teams and customer service representatives to bigger and less expensive locations in the suburbs.
Kroger, for example, doubled its Downtown workforce to about 2,000 people in the past decade, primarily in management positions. But the company also bought three buildings in Blue Ash that now house about 1,000 employees in a sprawling customer service center.
“Blue Ash offered additional space that our general office Downtown didn’t have,” said Kroger spokesman Keith Dailey.
Mason City Manager Eric Hansen said room to grow is a priority for most companies that come to the suburbs. He said Procter & Gamble’s health care research center has expanded significantly since opening in the 1990s and now is Mason’s largest employer, with about 2,000 workers.
“We use every tool we can to make sure that every company that locates here is also set up to expand,” Hansen said. “We’ve had a lot of job growth from the expansion of companies here. It’s not necessarily that jobs located in Cincinnati have walked away and landed in Mason.”
When change comes, mixed worker feelings
While companies and communities often get all the attention when a big move is made, the employees feel the impact most.
Many have mixed feelings about swapping Downtown for the suburbs.
Tyna Anderton, who works for Goettsch International, was worried when her company moved from Carew Tower to a Blue Ash office park 15 years ago. She loved the view and being close to Downtown restaurants and events, such as Party in the Park.
Over time, though, the move turned out to be a good fit for her changing life, which included buying a house in West Chester and having a child. She said Downtown had its perks, but now she’s glad to be close to a grocery store, her daughter’s school and a recreation center.
“I liked Downtown,” she said. “But I don’t think I’d like to go back to work there.”
Ginsburg said he gets that. For some companies and workers, he said, Downtown is no longer the first choice.
He said that’s why Downtown must compete in a different way and go after the kind of “high-value” jobs that are most likely to stick around. He said cities around the country will either learn that lesson or see their downtowns suffer.
“It really is a transformation of urban America,” he said.