Are Lower Wages in the Inland Empire a Result of Low Job Density?
The region needs a job-concentrated “downtown” to escape current economic limitations
By Richard Chang
RIVERSIDE, Calif. — Although counted among the largest economies and employment centers in the nation, the Inland Empire looks strikingly different than its peers along some very important measures, according to an analysis released today.
Among the top 50 U.S. Metropolitan Statistical Areas (MSA), the Inland Empire is the 19th largest employment center, at just under 1.1 million payroll workers, but is saddled with the lowest average annual private-sector payroll wage, which is under $40,000.
“That is a particularly conspicuous imbalance because large, urban areas usually have higher average wages,” said Christopher Thornberg, director of the Center for Economic Forecasting and Development and one of the report’s authors. “This is a region that employs more workers than world famous metropolises such as San Francisco, San Jose, and Tampa. We would expect to see wages and industries that are more in line with a typical large, urban city.”
Compared to peer economies of roughly equal size; however, higher paying industries are significantly underrepresented in the Inland Empire. On the other hand, the region has a much higher than usual share of jobs in sectors that typically pay lower than average wages.
While the Inland Empire does have a “skills gap,” given its significant population of residents with only a high school education or less, it is not enough to explain the structural gap in the region’s industries, according to the analysis. A key contributor is a lack of job density. Among the nation’s top 50 MSAs, the Inland Empire is at the bottom of job concentration (tied for 49th place), with an average of 647 jobs per square kilometer. In fact, it has a job density that is typical of an economy less than half its size.
“High-wage industries, such as professional services, finance, and information technology require an intense specialization and knowledge-sharing that goes hand in hand with employment dense regions,” Thornberg said. “There is little doubt when we look at the observable data: high-wage industries concentrate in job-dense areas, low-wage sectors concentrate in places with less job density.”
The Inland Empire may be the most glaring example, given the vast disparity between its workforce size and average annual wage, Thornberg added. Despite its size, the region has no downtown and no central zone that is dense with jobs and workers. Instead, employment is spread widely – a characteristic that is limiting economic growth, according to the report.
Creating job density in the Inland Empire will be a significant challenge, requiring a strong coordinated effort by local authorities that would include zoning changes and infrastructure investment. “This is no easy task – substantial anti-development barriers to densification will undoubtedly be thrown in the path, and the concern is understandable,” Thornberg said. “But the Inland Empire can learn from the mistakes of other metro regions and properly plan for the inevitable challenges that face dense economies, making necessary adjustments to minimize negative effects and help the region become the formidable economic force it can be.”
source: The University of California, Riverside