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ECONOMIC ANALYSIS: Urban growth crucial for regional prosperity

April 10, 2006

Oakland County, Mich., located northwest of the city of Detroit, is home to some of the wealthiest communities in the nation. Its per capita income consistently ranks it nationally in the top-five counties, and a visual tour of its majestic homes, well-funded private schools and sumptuous amenities confirms the material wealth of its residents.

So why aren't economic developers trekking north to Michigan to discover the secrets of this county's economic success? The answer is simple: Oakland County is also embedded in the Detroit metropolitan area, one of the worst-performing large urban areas in the nation.

One of the five most-populous cities in the nation as recently as 40 years ago, today the city is home to fewer than 1 million people. The cream of the economic crop may be gathered in one of its suburban counties, but the engine creating that wealth has been sputtering for decades.

That lesson should not be lost on us as we examine growth in our own communities. Growth that occurs as people and businesses move from one side of a county, city or township line to another is nice. But it is the health of the entire region-on both sides of the tracks, if you will-that matters when it comes to creating a more durable wealth and prosperity.

The most visible case for this point for our state is the Indianapolis metropolitan statistical area (MSA), now renamed the Indianapolis-Carmel MSA. The fringe counties of the state's largest MSA consistently rank as the wealthiest, fastest-growing areas in the state. Indeed, the comparison between Hamilton County and just about any other non-central Indiana county makes you wonder if you're looking at the same state.

But for all the amazing growth in the fringe counties of Indianapolis-and it has been truly amazing-one stubborn and perhaps surprising fact remains: Most of the jobs, particularly the highpaying jobs, in the metro area remain in the city of Indianapolis.

In the 11-county MSA in 2004, almost three-quarters of metro-wide payroll came from Marion County. That lopsided result prevails despite the fact that growth in jobs and payroll since 1990 has been twice as fast outside the center county as within.

And that's only part of the story. Average earnings per job in Marion County have consistently remained roughly 20-percent higher than wages paid by employers in the outlying counties. In 2004, Marion County employers paid $41,285, on average, to each worker, while those in outlying counties paid only $33,575.

Of course, that's an apples-to-oranges comparison. Indianapolis is a concentrated, urbanized area, with headquarters, skyscrapers and state government within its jurisdiction that its suburbs and exurbs can't match. So let's make it a better comparison and bring in some other similarly sized, similarly situated urban areas from nearby states.

The outlying counties of the Indianapolis-Carmel MSA-all except Marion-posted a blistering 197-percent growth in payroll over the years 1990-2004. That reflects inflation, real wage growth and, of course, increases in the number of jobs. That was better than Columbus, Ohio, which had 143-percent growth in payroll, and Minneapolis (191 percent), but worse than Nashville, Tenn.'s 216-percent growth in payroll in its respective outlying counties.

But the central-county comparisons across these same metro areas are much worse for us. Marion County's 89-percent growth in payroll in the 15-year period was significantly below Columbus (107 percent), Minneapolis (106 percent) and Nashville (112 percent) central counties over the same period.

In a sense, the conclusion is obvious. The health of the body is what's important, not the health of the separate limbs. But when those limbs are in different political jurisdictions, with different legacies, leadership and tax bases, we often lose this focus. Let's hope our leaders never do.



Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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