Written by Austin Nijhuis, ICIC
Income inequality has dominated political discussions in recent weeks, with efforts to raise the federal minimum wage gaining momentum. America’s inner cities, with 2 million unemployed and nearly 10 million individuals living in poverty, will be impacted by these discussions. While federal policies are focusing on setting a minimum wage standard, are there local strategies that can be implemented to create new living wage opportunities?
There is no universal answer to this question, but one promising strategy may be supporting industrial business growth. We define industrial businesses as those in the manufacturing, construction, transportation, and wholesale sectors. Focusing on industrial growth has the potential to create well-paying jobs that are accessible to a diverse workforce. Data from the U.S. Census Bureau shows that the median annual full-time salary for industrial jobs is $45,000, which is a 200% increase over minimum wage and a 40% increase over median retail wages.
These jobs are not only higher paying, but also have lower education barriers. Sixty-five percent of construction, production, and transportation occupations do not require college educations, compared to 34% for all occupations¹. This data is encouraging for the inner city workforce, where only 15% of people between the ages of 25 and 64 have a college degree and the median household income is just $30,000². In addition, industrial jobs support many other sectors of the economy, such as retail, healthcare, education, hospitality, and tourism.
While industrial jobs have the potential to increase wages for inner city residents and bolster local economies, employment in many of these sectors has experienced a decades-long decline. A successful economic development strategy to reverse this trend can be found in Boston.
Boston saw a major decline in industrial jobs as it transitioned to a knowledge-based economy. Profitable industrial businesses left the city because of rising real estate values, inadequate space, and frustration with city bureaucracy. To improve the business climate for industrial businesses, then-mayor Thomas Menino launched the Back Streets Program in 2001, with the help of ICIC and the Boston Consulting Group. The four basic premises of the program are to:
1. Protect and create industrial land through planning and zoning;
2. Assist individual businesses with navigating through the city’s resources, permitting processes, and regulations;
3. Connect businesses with workforce training and development programs; and
4. Provide financial assistance to individual businesses for capital investments and expansion.
Newmarket Square, Boston’s inner city industrial hub located in Dorchester, greatly benefits from the city’s renewed interest in industrial businesses. The 60-acre industrial district contains Boston’s largest cluster of food manufacturing, processing, and wholesale businesses. The surrounding area is home to over 140 industrial businesses and 2,700 jobs. As a major food supplier to Boston’s 2,107 restaurants, 102 hotels, 28 hospitals, and 25 universities, it is a critical backbone to the city’s economy. These food-related businesses thrive in Boston’s inner city because of their proximity to downtown customers, relatively cheaper rent, favorable zoning regulations, and access to trucking, sea, and air transport. According to the Boston Redevelopment Authority, the Boston Back Streets program assisted over 90 companies in Newmarket Square last year, resulting in the creation or retention of more than 700 jobs. In addition to the Back Streets program, the area also benefited from investments in public transportation with the recent expansion of the MBTA’s Fairmount Line in Dorchester.
Other cities, such as New York City, understand the potential impact of industrial jobs to address rising inequality and are looking to expand their industrial corridors. At ICIC, we would caution cities against adopting an industrial growth strategy purely based on the promise of higher-paying jobs. An industrial growth strategy is not appropriate for all cities. Each city must carefully consider their unique competitive advantages in the context of economic trends. For those cities where this is the right strategy, we suggest they look to Boston for insight. Industrial businesses are able to prosper in Boston because they benefit from competitive advantages in Boston’s inner city, such as favorable zoning and convenient access to transportation infrastructure. Importantly, Boston’s industrial businesses also complement the city’s larger industries, making them critical to the local economy.
Boston has shown that cities have the potential to address income inequality not just through minimum wage increases, but also by attracting profitable industrial businesses to low-income and disadvantaged neighborhoods. An industrial growth strategy may not work in every city, but the data shows that industrial businesses have the potential to increase income for many inner city residents.
¹Bureau of Labor Statistics occupational data tables, 2012; ICIC Analysis
²ICIC’s SICE Database, American Community Survey 2007-11; ICIC Analysis