Editor’s Note: Excerpts are from the Federal Reserve Bank of St. Louis’ “
Metro Profile: A Familiar Name with an Economy Facing Familiar Challenges.” The Fed Reserve of St. Louis this year also conducted an economic survey of area business owners and operators.
Click here for the results.
The Springfield area has the air of Americana, with it being the birthplace of the legendary Route 66 and sharing a name with other midsize cities that seem to reflect the heartland of the country. While the origin of the city’s name is contested, some presume it resulted from early settlers’ remembrances of distant Springfields.
The southwest Missouri city is the largest of the eight cities that share the Springfield name, according to the Census. It is also the second largest of the four metropolitan statistical areas sharing the name. Robust population growth over the past few decades reflects the region's relative prosperity. Since 1970, annual growth has averaged over 1.8 percent, about three times the state average and higher than the nation’s 1 percent growth.
Springfield's real gross domestic product growth has been modest during the post-crisis recovery period, averaging 1 percent between 2010 and 2013. Based on a survey we conducted among local businesses, Springfield's low cost of living is perceived as one of the region's strengths. In 2012, Springfield's price level was 10.8 percent lower than the U.S. average. Its relative affordability is most pronounced in terms of the cost of housing. As of 2012, Springfield's rents were 31.3 percent lower than the U.S. average, 5.4 percent lower than the state average and approximately 14.6 percent lower than the average in nearby metropolitan areas, such as St. Louis. The region in southwest Missouri also has the lowest cost of living of the four Springfield MSAs in the country.
"Springfield isn't tied to one major employer, but diversified geographically by many small- and medium-sized employers." —Springfield-area retailer
In many ways, the region's distribution of workers among different sectors mirrors ongoing national trends. Seventy-five percent of the MSA’s workers are employed in the private service sector, slightly higher than the national average. The MSA’s service sector workers tend to be employed in the health care, transportation and retail sectors.
The diverse industry mix, coupled with a strong base of health care employment, has afforded the region strong job growth over the past few decades. The area was relatively stable economically even during the Great Recession and financial crisis.
Hanging on to health careMore than 17 percent, about 34,000, of the region’s workforce is employed in health care. Almost half of these workers are employed by the region's two largest employers: Mercy (9,004) and CoxHealth (7,891). Relative to the national average, this represents about 1.3 times as many workers in the health care sector.
The strong health care presence helped buffer job losses during the Great Recession; while the other sectors lost about 12,000 jobs between 2007 and 2009, the local health care sector added 2,600 jobs. As one of the fastest-growing sectors nationally, this has been a boon for the region since the recession ended: Almost a quarter of the MSA’s employment growth during this period has come from the health care sector.
The sector is thought to employ relatively high-paid people; almost 14,000 workers are employed in “practitioner and technical” occupations, earning an average of $58,000 per year, about 60 percent above the MSA’s $37,000 average wage across all industries. On the other hand, Springfield also has about 7,200 workers in health care support occupations; these workers earn an average wage of about $24,000.
Holding out for manufacturingUnlike many Midwestern cities that have relied heavily on manufacturing, Springfield has actually employed a smaller share of workers in manufacturing than both Missouri and the nation since the 1980s. At the same time, the region has closely followed the nationwide prolonged decline in manufacturing jobs: While in 1980, roughly 16 percent of the MSA’s workforce was employed in manufacturing (21 percent nationally), by 2013, only 7 percent of the MSA's workforce was employed in the sector (9 percent nationally).
"We do not have enough manufacturing jobs that have sufficient pay. We have a labor force based on service and fast food." —Springfield-area construction contact
Despite this steady decline and the smaller share of employment, manufacturing remains an important sector in the region, accounting for 12 percent of the region’s output in 2013. Multiple contacts we surveyed expressed the desire for more manufacturing jobs because of the higher wages associated with the industry. In Springfield, manufacturing jobs pay, on average, close to $42,000, which is almost 20 percent above the average pay for workers in the MSA.
Few higher-paying manufacturing jobs may explain some of the lower-wage bias in the region.
Labor productivityWages across all major occupational groups are relatively low when compared with those of other MSAs in Missouri. In St. Louis, where the cost of living is nearly the same – a fact that may surprise many – average wages across all industries are 35 percent higher at $47,800 per year. While Springfield's low wages can be seen as a comparative advantage relative to what is being paid in other MSAs, they are not without a hitch. While contacts noted that the relatively low wages in the Springfield area were important in driving job growth, regional poverty is a concern, as well, since almost 19 percent of the MSA population lives below the poverty level, higher than the national rate of 14.5 percent. The poverty rate is even more pronounced in counties such as Dallas and Polk, where it is over 20 percent.
"Paying more than a living wage would help with poverty issues in the area. —Springfield-area nonprofit contact
While many factors can fuel wage discrepancies among MSAs, these discrepancies can be most directly accounted for by city-specific differences in labor productivity.
For example, in 2013, an average worker in Springfield produced about $79,000 worth of output, while the average value of output per worker in St. Louis was $103,800, approximately 30 percent more. Differences in labor productivity, in turn, depend on multiple factors; these include workers' skill levels, often measured by educational attainment, and prior work experience.
In Springfield, nearly 26 percent of the population has at least a bachelor's degree and 8.6 percent has a graduate degree or higher, compared with 31 percent and 12 percent, respectively, in St. Louis.
Similarly, researchers have found a positive relationship between wages and city size – a 1 percent increase in wages for each additional 100,000 people. Based on this relationship alone, one would expect wages in St. Louis to be about 24 percent higher than in Springfield.
Georgette Fernandez Laris and Charles Gascon are Federal Reserve economists in St. Louis. Gascon recently spoke June 29 to 120 businesspeople at a Springfield Business Development Corp. economic briefing.
