Voice For Liberty

Tag: Sedgwick county government

  • Wichita jobs and employment, March 2020

    Wichita jobs and employment, March 2020

    For the Wichita metropolitan area in March 2020, the labor force is up, the number of unemployed persons is up, the unemployment rate is down, and the number of people working is up when compared to the same month one year ago. Seasonal data shows increases in labor force and jobs from February, with the unemployment rate unchanged. It is unclear how the pandemic has affected this data.

    Data released today by the Bureau of Labor Statistics, part of the United States Department of Labor, shows an improving employment situation for the Wichita Metropolitan Statistical Area for March 2020.

    Because of the COVID-19 pandemic, it is difficult to assess the meaning of the March data. BLS gathers this data through two survey programs. For employment data derived from the Current Employment Statistics (CES) program, also known as the payroll survey or the establishment survey and which counts jobs, the estimate is for the pay period that includes the twelfth day of the month. For data from the Current Population Survey, which counts people, the estimate is for the “reference week,” which is usually the week that includes the twelfth day of the month. For the Wichita metropolitan area, here are the dates of some major events that would be expected to affect employment:

    • March 13: President Trump declares a national emergency that began on March 1.
    • March 16: Social distancing guidelines announced for the nation.
    • March 24: Kansas City metro area stay-at-home order takes effect.
    • March 25: Sedgwick County stay-at-home order takes effect.
    • March 30: Kansas stay-at-home order takes effect.

    As noted, the BLS data is collected nearer the start of the month than the end. For Wichita, these events that should affect employment occurred mostly towards the end of the month. There were also these two major events that affected employment in recent months: Spirit Aerosytems announced layoffs (2,796) that started January 22 1, according to news reports, and Textron (875) the month before 2.

    BLS also offered this guidance, and more, for the March data:

    We cannot precisely quantify the effects of the pandemic on the job market in March. However, it is clear that the decrease in employment and hours and the increase in unemployment can be ascribed to the effects of the illness and efforts to contain the virus. It is important to keep in mind that the March survey reference periods for both surveys predated many coronavirus-related business and school closures in the second half of the month. 3

    Click charts and tables for larger versions.

    Total nonfarm employment rose from 302,800 last March to 307,100 in March 2020. That’s an increase of 4,300 jobs (1.4 percent). (This data is not seasonally adjusted, so month-to-month comparisons are not valid.) For the same period, employment in the nation grew by 1.0 percent. The unemployment rate in March 2020 was 3.5 percent, down from 3.6 percent one year ago.

    Considering seasonally adjusted data from the household survey, the labor force rose by 800 persons (0.3 percent) in March 2020 from February 2020, the number of unemployed persons rose by 95 (0.9 percent), and the unemployment rate was 3.5 percent, unchanged from February January. The number of employed persons not working on farms rose to 307,367 in March from 306,662 the prior month, an increase of 705 persons (0.2 percent).

    The following chart of the monthly change in labor force and employment shows the positive trend in employment and labor force over the last year. In some months the change has been small, but always positive, with one exception.

    The following chart of changes from the same month one year ago shows a slight decline in the rate of growth of both employment and labor force, but with both still growing.

    The following chart of changes in employment from the same month of the previous year shows months when the Wichita MSA performed better than the nation. Over the past 12 months, the average monthly job growth for the nation was 1.33 percent, and for the Wichita MSA, 1.56 percent.

    The following two charts show changes in jobs for Wichita and the nation over longer periods. The change is calculated from the same month of the previous year. For times when the Wichita line was above the nation, Wichita was growing faster than the nation. This was often the case during the decades starting in 1990 and 2000. Since 2010, however, Wichita has rarely outperformed the nation and sometimes has been far below the nation.

    —
    Notes

    1. https://www.kansasworks.com/ada/mn_warn_dsp.cfm?id=2021 ↩
    2. Textron, Inc. Form 8-K, December 5, 2019. Available at https://www.sec.gov/ix?doc=/Archives/edgar/data/217346/000110465919070378/tm1924597-1_8k.htm. ↩
    3. Bureau of Labor Statistics. Frequently asked questions: The impact of the coronavirus (COVID-19) pandemic on The Employment Situation for March 2020. Available at http://www.bls.gov/cps/employment-situation-covid19-faq-march-2020.pdf. ↩
  • Wichita jobs and employment, February 2020

    Wichita jobs and employment, February 2020

    For the Wichita metropolitan area in February 2020, the labor force is up, the number of unemployed persons is up, the unemployment rate is up, and the number of people working is up when compared to the same month one year ago. Seasonal data shows increases in labor force and jobs from January.

    Data released yesterday by the Bureau of Labor Statistics, part of the United States Department of Labor, shows a mostly improving employment situation for the Wichita Metropolitan Statistical Area.

    Click charts and tables for larger versions.

    Total nonfarm employment rose from 302,300 last February to 307,000 this February 2020. That’s an increase of 4,700 jobs (1.6 percent). (This data is not seasonally adjusted, so month-to-month comparisons are not valid.) For the same period, employment in the nation grew by 1.6 percent. The unemployment rate in February 2020 was 3.8 percent, up from 3.6 percent one year ago.

    Considering seasonally adjusted data from the household survey, the labor force rose by 1,594 persons (0.5 percent) in February 2020 from January 2020, the number of unemployed persons rose by 192 (1.8 percent), and the unemployment rate was 3.5 percent, up from 3.4 percent in January. The number of employed persons not working on farms rose to 303,935 in February from 302,533 the prior month, an increase of 1,402 persons (0.5 percent).

    A note regarding recent layoffs and COVID-19

    This data is for February 2020. Spirit Aerosytems announced layoffs (2,796) that started January 22 1, according to news reports, and Textron (875) the month before 2. The effect of these layoffs should be realized in these statistics. For employment data derived from the Current Employment Statistics (CES) program, also known as the payroll survey or the establishment survey, the estimate is for the pay period that includes the twelfth day of the month. For data from the Current Population Survey, which counts people, the estimate is for the “reference week,” which is usually the week that includes the twelfth day of the month. This data was collected well before there was any talk of closing businesses due to the COVID-19 pandemic.

    The following chart of the monthly change in labor force and employment shows the positive trend in employment and labor force over the last eight months.

    The following chart of changes from the same month one year ago shows a decline in the rate of growth of both employment and labor force, but with growth returning the past six or seven months.

    The following chart of changes in employment from the same month of the previous year shows months when the Wichita MSA performed better than the nation. Over the past 12 months, the average monthly job growth for the nation was 1.37 percent, and for the Wichita MSA, 1.81 percent.

    The following two charts show changes in jobs for Wichita and the nation over longer periods. The change is calculated from the same month of the previous year. For times when the Wichita line was above the nation, Wichita was growing faster than the nation. This was often the case during the decades starting in 1990 and 2000. Since 2010, however, Wichita has rarely outperformed the nation and sometimes has been far below the nation.

    —
    Notes

  • Wichita jobs and employment, January 2020

    Wichita jobs and employment, January 2020

    For the Wichita metropolitan area in January 2020, the labor force is up, the number of unemployed persons is down, the unemployment rate is down, and the number of people working is up when compared to the same month one year ago. Seasonal data shows increases in labor force and jobs from December.

    Data released yesterday by the Bureau of Labor Statistics, part of the United States Department of Labor, shows an improving employment situation for the Wichita Metropolitan Statistical Area.

    Click charts and tables for larger versions.

    Total nonfarm employment rose from 299,400 last January to 303,100 this January 2020. That’s an increase of 3,700 jobs (1.2 percent). (This data is not seasonally adjusted, so month-to-month comparisons are not valid.) For the same period, employment in the nation grew by 1.5 percent. The unemployment rate in January 2020 was 3.7 percent, down from 3.9 percent one year ago.

    Considering seasonally adjusted data from the household survey, the labor force rose by 1,149 persons (0.4 percent) in January 2020 from December 2019, the number of unemployed persons rose by 79 (0.7 percent), and the unemployment rate was 3.4 percent, unchanged from December. The number of employed persons not working on farms rose to 302,522 in January from 301,452 the prior month, an increase of 1,070 persons (0.4 percent).

    The following chart of the monthly change in labor force and employment shows the positive trend in employment and labor force over the last nine months.

    The following chart of changes from the same month one year ago shows a decline in the rate of growth of both employment and labor force considering the entire year, but with growth returning the past five or six months.

    The following chart of changes in employment from the same month of the previous year shows months when the Wichita MSA performed better than the nation. Over the past 12 months, the average monthly job growth for the nation was 1.38 percent, and for the Wichita MSA, 1.80 percent.

    The following two charts show changes in jobs for Wichita and the nation over longer periods. The change is calculated from the same month of the previous year. For times when the Wichita line was above the nation, Wichita was growing faster than the nation. This was often the case during the decades starting in 1990 and 2000. Since 2010, however, Wichita has rarely outperformed the nation and sometimes has been far below the nation.

    A note regarding recent layoffs

    This data is for January 2020. Spirit Aerosytems announced layoffs that started January 22, according to news reports. The effect of these layoffs is probably not realized in these statistics. For employment data derived from the Current Employment Statistics (CES) program, also known as the payroll survey or the establishment survey, the estimate is for the pay period that includes the twelfth day of the month. For data from the Current Population Survey, which counts people, the estimate is for the “reference week,” which is usually the week that includes the twelfth day of the month.

    Photo credit unsplash-logoDorrell Tibbs

  • Intrust Bank Arena economic impact holds mistake

    Intrust Bank Arena economic impact holds mistake

    A report on the economic impact of the first ten years of operation of the Intrust Bank Arena in downtown Wichita incorrectly reported tax revenue.

    Recently Intrust Bank Arena in downtown Wichita promoted the results of an analysis of the economic impact of the arena through its first ten years of operation. 1 The arena partnered with the Center for Economic Development and Business Research at Wichita State University to conduct the study. 2

    In all, the report claims $2.7 million over ten years in Sedgwick County guest tax revenue paid by out-of-town arena visitors who stayed in local hotels. But while the county has a guest tax, it does not raise nearly the dollars shown in the report.

    The transient guest tax, sometimes called a guest tax or bed tax, is a tax on a hotel bill. It is collected in addition to retail sales tax. In the City of Wichita, hotel guests pay 7.5 percent retail sales tax, an additional six percent guest tax, and an additional 2.75 percent city tourism fee. If the hotel is located within a Community Improvement District, an additional tax of up to two percent is collected.

    The guest tax for Sedgwick County was last revised in 2006. 3 The rate is five percent. The ordinance says that the tax “… shall be levied in the unincorporated area of Sedgwick County, Kansas …”

    The term unincorporated area is key, meaning the portions of the county that are not within an incorporated town or city. Reports from the Kansas Department of Revenue show there is just one establishment in Sedgwick County that files a guest tax report. 4 For comparison, 108 establishments in the City of Wichita file guest tax reports. These are located in the city limits and are not in the unincorporated area of the county, and therefore not subject to the county guest tax.

    How much does Sedgwick County collect in guest tax? The reports from the Kansas Department of Revenue don’t say. The value is suppressed to protect confidentiality, given that there is just one filing establishment in the unincorporated area of the county.

    We do know, according to the economic impact report, that the one hotel in unincorporated Sedgwick County collects $351,656 per year in guest tax (annualized over the period 2015 to 2019.) Since the guest tax rate is five percent, that implies $7 million in annual sales, which would be collected by a hotel selling 191 rooms per day at a rate of $100 per day, 365 days per year.

    Is there such a hotel in unincorporated Sedgwick County? It’s unlikely. Consider this one hotel with $351,656 in guest tax collections by arena visitors compared to the $421,987 reported for all hotels in the City of Wichita, again for arena visitors. (The Wichita guest tax rate is slightly higher at six percent, so the comparison is not strictly equal.)

    Remember: According to the analysis, this level of activity is generated just by visitors attending events at Intrust Bank Arena.

    I think it’s safe to say there is a mistake. Correspondence with CEDBR, the organization that prepared the analysis, confirms that county guest tax was incorrectly estimated, and a new version reports $0 in county guest tax. 5 CEDBR says no numbers were changed other than the county guest tax and totals that included it.

    While it is unfortunate that CEDBR made this mistake, the use of the analysis by downstream consumers teaches us something about economic development, the data supporting it, and its practitioners.

    As an example, the management of Intrust Bank Arena issued a press release touting the analysis and its findings. Regarding tax collections, the announcement reports, “The fiscal impact of visitors to the area for INTRUST Bank Arena events that occurred in 2010-2019 was approximately $12 million in tax revenue generated.”

    What’s interesting is that the release cites only the retail sales tax revenue. It omits the guest tax revenue, which is — according to the analysis that was available at the time of the press release — about $6 million. That’s half as much as the retail sales tax, but it was not included in a press release touting economic impact.

    An excerpt from the first page of the CEDBR analysis. Click for larger.

    Why didn’t the arena use the guest tax collections, thereby reporting $18 million in tax revenue collected from visitors rather than $12 million? It wasn’t due to concern over the accuracy of the guest tax collections, as arena management told me they were not aware of CEDBR’s error. But because the press release did not mention the erroneous guest tax, arena management says there is no need to correct the press release. This is correct, and it reveals the mistake in not including guest tax revenue.

    Adding to our learning about the use of data in economic development is this: Of the sales tax collected by hotels in Wichita, about 87 percent belongs to the State of Kansas, with the remainder shared by Wichita and Sedgwick County. For guest tax, however, all is returned to the city, except for a small administrative fee of two percent. So of the $12 million in retail sales tax revenue promoted by arena management, about $1.5 million was shared by the city and county. 6 For the purported $6 million in guest tax revenue, all went to the city and county, except for the administrative fee.

    We also learn about the diligence of Sedgwick County Commissioner Pete Meitzner (district 1) in examining this data. He is quoted in the arena’s press release. But it’s quite easy to see that the analysis erroneously reports county guest tax revenue.

    Besides this mistake, there are other areas of concern regarding this analysis of the economic impact of the arena. One is that this report mentions revenue but not costs. 7

    The second is that before Intrust Bank Arena opened in downtown, the county owned another arena. That former arena generated economic activity and economic impact, too, including NCAA men’s basketball tournament games. A thorough analysis should look at the marginal activity created by the new arena.

    —
    Notes

    1. INTRUST Bank Arena Reports Economic Impact Study Results Through First 10 Years. February 14, 2020. Available at https://www.intrustbankarena.com/release/366/intrust-bank-arena-reports-economic-impact-study-results-through-first-10-years/. ↩
    2. Analysis by CEDBR, version 2, dated 1/6/2020. The document does not seem to be available online at either the arena website or Sedgwick County, but it has been preserved. Available at https://drive.google.com/file/d/11LZfbEXxYPfjLs02zE2fdUaWrQYJiUzm/view. ↩
    3. Sedgwick County. A charter resolution exempting Sedgwick County, Kansas, from the provisions of k.S.A. 12-1692, 12-1693, 12-1694, 12-1694a, 12-1695, and providing substitute and additional provisions on the same subject relating to the levy of a transient guest tax in the unincorporated area of Sedgwick County and providing for purposes of expenditure of such funds; and repealing charter resolution #32. Available at https://library.municode.com/ks/sedgwick_county/codes/code_of_ordinances?nodeId=SECOKACO_APXACHRE_NO._59. ↩
    4. Kansas Department of Revenue. Transient Guest Tax Rate and Filer Report. Available at https://www.ksrevenue.org/pdf/tgratesfilers.pdf. ↩
    5. Analysis by CEDBR, version 3, dated 2/26/2020. Available at https://drive.google.com/file/d/1uhLJBr5PXJ_Y6RaiP13bHNRAK08fEVg4/view. ↩
    6. Specifically, the analysis reports $983,449 in sales tax to the city and $703,714 to the county, for a total of $1,687,163. ↩
    7. It’s common for officials to talk as though there is no cost or expense in owning the arena, because a sales tax was used to pre-fund the arena. After the funds were in place, the arena was built. But, see Weeks, Bob. The finances of Intrust Bank Arena in Wichita. Available at https://wichitaliberty.org/sedgwick-county-government/the-finances-of-intrust-bank-arena-in-wichita/. For annual expenses, in a presentation to Sedgwick County Commissioners in February, county staff reported $1,991,471.99 in expenses charged to the arena’s reserve fund. This was offset by $722,933.65 in revenue, mostly from a revenue-sharing agreement with the arena’s operator and from the sale of naming rights. The declining balance in the arena’s reserve fund led Commissioner David Dennis to wonder if a special tax district could be established to provide more revenue to cover these expenses. See https://drive.google.com/file/d/1UbAfjQaIWQOzrYzIWqKdBIbrqFMDlfX-/view ↩
  • From Pachyderm: Commissioner Pete Meitzner

    From Pachyderm: Commissioner Pete Meitzner

    From the Wichita Pachyderm Club: Sedgwick County Commissioner Pete Meitzner. He is the chair of the commission this year. This audio presentation or podcast was recorded on February 14, 2020.

  • Wichita to Ghana, again

    Wichita to Ghana, again

    News of a Sedgwick County Commissioner’s trip to Africa has raised some controversy, and something like this has been tried before.

    The Wichita Eagle reported this regarding Sedgwick County Commissioner Lacy Cruse’s visit to the West Africa country Ghana: “She said she focused her efforts on economic opportunities related to aviation and education. She said she talked to Ghana’s minister of aviation about potentially establishing an aviation school and setting up an aviation maintenance shop at the Tamale International Airport in Ghana. She didn’t make any formal deals on behalf of the county or any local companies. She said forming a trade relationship with Ghana isn’t something that can happen overnight.” 1

    Something like this has been tried before, and not too long ago. In 2011, Wichita Mayor Carl Brewer and a delegation traveled to Ghana on a trade mission, seeking business opportunities for Wichita companies. The aircraft industry was prominently mentioned.

    The host country, however, may have misunderstood the mission of the visitors from Wichita. A news release on the Official Portal of the Government of Ghana published after the visit included this: “[District Chief Executive (DCE) of Lower Manya Krobo District, Mr Isaac Abgo Tetteh] announced that the Mayor has pledged to furnish Nene Sakitey II with an Aircraft for his private use.” 2

    I had thought that perhaps this promise of an airplane to the overlord was a case of something being lost or mangled in translation, but then I realized that English is the official language of Ghana.

    There was a follow-up visit in 2014. The Wichita Eagle reported the goals of then-Mayor Brewer: “Brewer’s particular interest on the trip is building business relationships overseas that could lead to opportunities for small and midsize aviation businesses in Wichita.” 3

    The trips weren’t very successful in stimulating aviation exports. With the exception of 2011, the Census Bureau reports little in the way of aviation-related exports to Ghana. The data includes the entire State of Kansas.

    —
    Notes

    1. Swaim, Chance. Commissioner Lacey Cruse’s trip to Africa raises concerns from other commissioners. Wichita Eagle, February 9, 2020. Available at https://www.kansas.com/news/politics-government/article239797448.html. ↩
    2. Government of Ghana Official Portal. Wichita City to Partner Manya Krobo For Development. November 25, 2011. “An unprecedented visit by the Mayor of Wichita City, Kansas State USA, Mr Carl Brewer, his Deputy, Mrs Lavonta Williams and the Council of Elders were welcomed by the overlord of Manya Krobo Traditional Area, Nene Sakitey II at the Palace. At a grand durbar organised in honour of the Mayor and his delegation, the District Chief Executive (DCE) of Lower Manya Krobo District, Mr Isaac Abgo Tetteh, urged the people of Manya Krobo to set an initiative in order to get a push from the Mayor for the realisation of the sister city project by the city of Wichita and the Manya Krobo municipality. Mr Tetteh also announced at the gathering that, the sister city concept is to assist Lower Manya to attain the standard of a city by helping in the direction of education and other infrastructural development. He announced that the Mayor has pledged to furnish Nene Sakitey II with an Aircraft for his private use.” Image available here. ↩
    3. City Council members plan trip to Africa. Wichita Eagle, September 16, 2014. Available at https://www.kansas.com/news/politics-government/article2127093.html. ↩
  • Wichita jobs and employment, December 2019

    Wichita jobs and employment, December 2019

    For the Wichita metropolitan area in December 2019, the labor force is up, the number of unemployed persons is down, the unemployment rate is down, and the number of people working is up when compared to the same month one year ago. Seasonal data shows small increases in labor force and jobs from November.

    Data released today by the Bureau of Labor Statistics, part of the United States Department of Labor, shows a slowly improving employment situation for the Wichita Metropolitan Statistical Area. (Of note, this data was gathered before the announcements of layoffs at Spirit Aerosystems in Wichita.)

    Click charts and tables for larger versions.

    Total nonfarm employment rose from 303,600 last December to 305,300 this November. That’s an increase of 1,700 jobs (0.6 percent). (This data is not seasonally adjusted, so month-to-month comparisons are not valid.) For the same period, employment in the nation grew by 1.4 percent. The unemployment rate in December 2019 was 3.2 percent, down from 3.4 percent one year ago.

    Considering seasonally adjusted data from the household survey, the labor force rose by 288 persons (0.1 percent) in December 2019 from November 2019, the number of unemployed persons rose by 40 (0.4 percent), and the unemployment rate was 3.4 percent, unchanged from November. The number of employed persons not working on farms rose to 301,452 in December from 301,204 the prior month, an increase of 248 persons (0.2 percent).

    The following chart of the monthly change in labor force and employment shows the rising trend in employment and labor force over the last eight months.

    The following chart of changes from the same month one year ago shows a decline in the rate of growth of both employment and labor force considering the entire year, but with growth returning the past four or five months.

    The following chart of changes in employment from the same month of the previous year shows some months when the Wichita MSA performed better than the nation. Over the past 12 months, the average monthly job growth for the nation was 1.58 percent, and for the Wichita MSA, 1.27 percent.

    The following two charts show changes in jobs for Wichita and the nation over longer time periods. The change is calculated from the same month one year ago. For times when the Wichita line was above the nation, Wichita was growing faster than the nation. This was often the case during the decades starting in 1990 and 2000. Since 2010, however, Wichita has rarely outperformed the nation and sometimes has been far below the nation.

  • Wichita aerospace manufacturing concentration

    Wichita aerospace manufacturing concentration

    Wichita leaders want to diversify the area economy. Has there been progress?

    In the wake of layoffs at Textron Aviation (875) 1 and Spirit Aerosystems (2,796), 2 Wichita’s leaders shift their attention to the need to diversify the Wichita metropolitan area economy. This has been a recognized need for a long time. 3

    One way to measure the concentration of an industry in a location is by the proportion of employment in that industry. The Bureau of Labor Statistics provides employment by industry for metropolitan areas. I’ve gathered the data for the Wichita MSA for two industries: Aerospace Product and Parts Manufacturing (NAICS code 3364) and all manufacturing. I’ve gathered this data for the Wichita Metropolitan Statistical Area and compare it to total private sector employment. This data is not adjusted for seasonality, as some are available only in that manner. Data is through November 2019.


    As the charts illustrate, there was a large shift in the two industry’s share of employment around the time of the Great Recession. Since then, the ratios have been more stable, with a slow decline until a small reversal of that trend over the last two years.

    The chart of employment ratio changes from the same month one year ago confirms: Manufacturing and aerospace employment has grown faster than total private employment for the last two years or so.

    Another way to measure the concentration of industry is through location quotients. The Bureau of Labor Statistics provides these, most notably for counties as part of the Quarterly of Census and Wages. 4 As described by BLS, “Location quotients are useful for studying the composition of jobs in an area relative to the average, or for finding areas that have high concentrations of jobs in certain occupations. As measured here, a location quotient shows the occupation’s share of an area’s employment relative to the national average.” 5

    Further: “For example, a location quotient of 2.0 indicates that an occupation accounts for twice the share of employment in the area than it does nationally, and a location quotient of 0.5 indicates the area’s share of employment in the occupation is half the national share.”

    This data is available by industry. I’ve gathered data for Aerospace Product and Parts Manufacturing (NAICS code 3364) for Sedgwick County and present it in a nearby chart.


    First, note that the location quotient is large, averaging around 32 in recent years. This means the concentration of workers in this industry in Sedgwick County is 32 times the concentration nationwide.

    Second, the location quotient fell from 2007 through 2014. Since then, it has been steady.

    Has the Wichita area diversified its economy? Based on these two measures, the answer is yes. That increase in diversity coincided with a large decline in aviation-related employment, with that decline being larger than the decline in all Wichita-area private-sector employment. That was not planned or desired. It was a result of worldwide trends, most notably the Great Recession.

    But since 2014, concentration in aviation-related employment has changed little, meaning no progress in diversification.

    —
    Notes

    1. Textron, Inc. Form 8-K, December 5, 2019. Available at https://www.sec.gov/ix?doc=/Archives/edgar/data/217346/000110465919070378/tm1924597-1_8k.htm. ↩
    2. https://www.kansasworks.com/ada/mn_warn_dsp.cfm?id=2021 ↩
    3. See, for example: Roe, John. Where To From Here? Surviving The Coming Bad Times Will Require A Direction, Wichita Eagle, February 7, 1993. ↩
    4. Bureau of Labor Statistics. Quarterly Census of Employment and Wages. Available at https://www.bls.gov/cew/datatoc.htm. ↩
    5. Bureau of Labor Statistics. Using Location Quotients to Analyze Occupational Data. Available at https://www.bls.gov/oes/highlight_location_quotients.htm. ↩
  • Can Wichita learn from a setback?

    Can Wichita learn from a setback?

    What can Wichita learn from the news of layoffs at Spirit and Textron?

    While the Wichita metropolitan area is facing immediate stress due to layoffs at two large employers, we need to look at the long-term horizon and evaluate whether our economic development strategy needs adjustments.

    Like many areas, Wichita relies on economic development incentives to lure companies, or to persuade them to stay rather than leave for elsewhere. There is much research finding incentives playing a minor part in business decisions. Nathan M. Jensen, for example, found this:

    In my own study of 80 incentive offerings in Texas, published in October in the journal Public Choice, I found that numerous companies applied for incentives after they had already broken ground and, in some cases, after they had completed building. A few even noted in their applications that they weren’t looking at other states for their investments. Yet all of these companies received taxpayer dollars for doing what they would have done anyway.

    This points to the open secret of economic development: Though incentives are rarely effective in changing firms’ investment decisions, they do allow politicians to attend ribbon-cutting ceremonies where they can highlight their own role in attracting a new company (or retaining an old one) and creating jobs. 1

    Timothy J. Bartik found this: “Reviewing 34 estimates from research studies of incentives’ effects, Bartik found that typical incentives only tip 2 to 25 percent of location decisions — that is, the company wouldn’t have located there ‘but for’ the incentive.” 2

    So how can we know if incentives are needed in a particular instance? It’s difficult, as neither party has an incentive to be forthright. If a business executive does not ask for incentives, the firm’s owners are justified in asking why not. And it’s difficult for politicians and bureaucrats to turn down opportunities to bask in the glory of groundbreaking and ribbon-cutting ceremonies and their improved chances at re-election.

    Incentives increase the cost of government for those who don’t receive them. Yes, cities like Wichita promote a benefit-cost analysis that shows that for each dollar spent or forgone for incentives, the city receives even more. But this happens with all economic activity, even that which is not incentivized. This leads to the important question: Is the incentive necessary? With so much evidence showing incentives are not necessary, Wichita spends a lot on companies that don’t need incentives, with everyone else paying their cost.

    Even before the Spirit announcement, Wichita was looking at a slowly-growing economy. The Center for Economic Development and Business Research at Wichita State University provides forecasts for the Wichita economy. For 2020, CEDBR wrote in its October forecast, “For 2020, growth is expected to be more modest, as the Wichita economy is projected to add approximately 1,600 new jobs and grow 0.5 percent.” 3 For comparison, total nonfarm employment rose by 2,800 jobs (0.9 percent) from November 2018 to November 2019. For the same period, employment in the nation grew by 1.5 percent. CEDBR forecast a slowing of the growth of the Wichita economy, and that was well before the announcements of layoffs at Texron and Spirit.

    What to do?

    A Wichita Eagle editorial suggests diversifying the local economy. That’s been a goal for decades. But it hasn’t happened. 4

    The Eagle also advises “swift, decisive action,” taking “economic development off the back burner, where it’s languished for years.” This is surprising, as organizations like Greater Wichita Partnership are devoted to the task of economic development. GWP tells us, “Fast-forwarding economic growth is at the heart of the Greater Wichita Partnership’s mission. 5 The cost of employing its two top executives topped $485,000 in 2018. It also paid $115,000 to share an executive with another agency. 6 If the Eagle thinks this is practicing economic development at a slow simmer, we need to make a few big changes.

    The Eagle also calls for “generous funding streams.” This may be a reference to the common perception that Wichita has few economic development incentives available. But we have about the same as everyone else: Forgiveness of property and sales taxes, tax increment funding, refunds of employee state withholding taxes, sales tax districts, investment tax credits, historic tax credits, loans, parking easements, grants, and regulatory relief. The city says it no longer uses cash incentives, which is not true.

    The Eagle notes some bright spots, mentioning specifically, “Cargill’s decision to stay in Wichita.” But that was a decision to stay, and it came at great cost to the city.

    We need to say no to incentives for large firms.

    There’s plenty of evidence that young business firms are the key to economic growth. 7 But Wichita’s economic development policies, as evidenced by the lavishing of subsidy on Spirit and Cargill, are definitely stacked against the entrepreneur.

    These subsidies and practices are harmful to the Wichita economy, creating a strangling effect on entrepreneurship and young companies. As large subsidized companies escape paying taxes, others have to pay. This increases the burden of the cost of government on everyone else — in particular on the companies we need to nurture.

    Instead, Wichita relies on targeted investment in our future. Our elected officials and bureaucrats believe they have the ability to select which companies are worthy of public investment, and which are not. It’s a form of centralized planning by government that shapes the future direction of the Wichita economy. It hasn’t been working.

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    Notes

    1. *The Amazon HQ2 Fiasco Was No Outlier.* Available at https://www.wsj.com/articles/the-amazon-hq2-fiasco-was-no-outlier-11544800749. ↩
    2. Upjohn Institute. Available at https://www.upjohn.org/research-highlights/how-effective-are-local-economic-development-incentives. ↩
    3. Center for Economic Development and Business Research at Wichita State University. Wichita Employment Forecast. October 3, 2019. Available at https://www.cedbr.org/content/2019/eoc/2020-wichita-forecast.pdf. ↩
    4. Weeks, Bob. Wichita aerospace manufacturing concentration. Available at https://wichitaliberty.org/economics/wichita-aerospace-manufacturing-concentration/. ↩
    5. https://greaterwichitapartnership.org/about_us/about_us. ↩
    6. IRS form 990 for 2018. ↩
    7. Jason Wiens and Chris Jackson. *The Importance of Young Firms for Economic Growth. * Available at https://www.kauffman.org/what-we-do/resources/entrepreneurship-policy-digest/the-importance-of-young-firms-for-economic-growth. ↩