By Christopher Thornberg, PhD.
The Inland Empire is a big economy—the 13th largest in the nation by population and in the top 20 in terms of employment. Still, the two-county region doesn’t feel like a major economy. It isn’t considered its own media market, has no major league professional sports team, and seems to get much less attention from folks in Washington DC or Sacramento than other comparably sized urban areas.
These slights likely stem from a critical issue that afflicts the region – among the largest 50 U.S. Metropolitan Statistical Areas (MSA), the Inland Empire is saddled with the lowest average private-sector wage, at just under $40,000 per year.
The region’s wages are lower than in similarly sized cities (MSAs) because it lacks high-skilled, high-wage industries such as professional services, finance, and technology. Many have blamed the absence of these high paying sectors on the Inland Empire’s relatively low-skilled workforce and the region has pursued a ‘train and retain’ strategy—a strong push to get young residents through college, and then offer a good standard of living to retain them in the community.
A deeper look, however, suggests a reversed causality: Low skilled workers do not drive low-skilled jobs, rather the prevalence of low-skilled jobs create a situation where only low-skilled workers have strong job prospects. Consider that skilled workers who live in the Inland Empire are far more likely to commute west or south to coastal job centers on a daily basis because skilled positions are simply not available locally.
The lack of skilled employment opportunities for young workers may be driven by a clear structural difference in the Inland Empire economy—the absence of a ‘downtown’ or central area(s) that is dense with jobs. The tallest building in the entire region is the Morongo Casino hotel at 22 stories. The tallest private sector office building is in the City of San Bernardino and is only 9 stories.
In the Inland Empire, jobs are spread out over a large area, with little concentration in any one location in the community. In a recent analysis we conducted at the Center for Economic Forecasting, we found that the degree of job concentration in the Inland Empire is significantly lower than it is in other comparably sized economies. In fact, the Inland Empire has a level of job concentration that is typical of an economy half its size.
The reason all of this is significant is because high-skilled, high-wage jobs tend to cluster in regions of high job density. This occurs because of what economists refer to collectively as agglomeration economies—firms operate more efficiently (and hence competitively) in environments where they are located in close proximity to each other due to the shared knowledge and specialization that naturally develops. Our analysis finds that the lack of dense job centers in the Inland Empire is inhibiting the growth of high-skilled sectors, and this, in turn, is keeping the region’s economy lower wage and lower skilled. And it will likely stay this way until zones of more concentrated employment are developed.
The reason the Inland Empire doesn’t have a job-dense center isn’t obvious. It may have to do with the agricultural and suburban roots of the region and/or the lack of a single dominant city. However, these conditions existed in Orange County and that region has created dense job zones over the past several decades. The inland Empire’s close proximity to large coastal economies has also been blamed. But Glendale and Burbank are areas within Los Angeles County that have managed to create dense job zones even while sharing the economy with “Downtown Los Angeles”.
A probable reason is the unwillingness of local governments in the Inland Empire to allow for densification—most likely a reaction to local opposition to such development. That opposition is driven by a fear of traffic congestion and other negative effects residents believe will occur.
Ultimately, however, the downsides of densification are likely to be more than made up for by the upsides. The Inland Empire needs dense job zones to attract high-end industries, which will increase local incomes. Having these kinds of job opportunities available locally will also cut down on the need for so many residents to commute out of the region—local traffic will replace the long-distance kind. Another important benefit is that areas of high job density also have the ability to support greater cultural and entertainment attractions and opportunities. This is key to retaining younger skilled workers in the region and preventing them from moving away to… well… job-dense areas.
It isn’t as simple as ‘build it and they will come.” Such changes will require the careful coordination of public and private investment, something that can only come from strong government intervention. What we can say is that if we don’t build it, they definitely will not come. It’s time to grow ‘up’ Inland Empire.
Christopher Thornberg, PhD is Director of the UC Riverside School of Business Center for Economic Forecasting and Development and an Adjunct Professor at the School. Learn more at UCREconomicForecast.org.