Fort Smith Board discusses concerns with regional economy

story by Ryan Saylor

The Fort Smith Board of Directors dove into the region's economy and attempted to understand why the city has some of the highest numbers of households depending on welfare and other supplemental income and has some of the lowest number of households relying on earnings earned through employment.

According to a memo from City Administrator Ray Gosack, the study session topic came about as a result of a 2013 report from the college of business at the University of Arkansas at Fort Smith that compared "sources of household income in the Fort Smith region with the United States, Arkansas, Oklahoma, and the northwest Arkansas region."

The various sources of income, Gosack said, included earnings (wages, salaries, etc.), social security, retirement/pension, supplemental security (stipends to low income elderly, blind or disabled persons), cash public assistance and food stamp/SNAP benefits.

"The concern," Gosack wrote, "is that a smaller percentage of the Fort Smith population in the comparison group is participating in the workforce."

Dr. Kermit Kuehn, the UAFS College of Business's author of the report, explained some of the figures in depth and explained that in Fort Smith, 35% of the local population earns an income from Social Security while only 29% of the nation, 34.3% of Arkansas and 31.0% of Oklahoma does the same.

The number of people age 65 and older in Fort Smith is 12.7%, while the state as a whole has 14.4% of the population 65 and older and 14.1% of the national population is 65 or older. The study also showed that 19.7% of Fort Smith residents do not hold a high school diploma, compared with only 16.7% of Arkansas as a whole, 13.8% of Oklahoma and 14.3% of the nation.

When it comes to income, Fort Smith's median household income is $37,232 versus $40,531 across the state of Arkansas, $44,531 in Oklahoma and $53,046 nationally.

Kuehn's research, using figures from the Bureau of Labor Statistics, also shows that from January 2007 through January 2013, the total workforce declined in Fort Smith from 3.97% while the U.S. workforce has grown by 1.89% during the same period. By comparison, Arkansas' overall workforce only shrank 1.48% while Oklahoma's increased by 4.75% and the Northwest Arkansas region improved by 4.45%.

There were no simple answers to reversing the trends, he said, adding that the Fort Smith economic picture has been "consistent."

"The picture for Fort Smith has been very consistent. I did a study back in 2010 of similar characteristics of the community and that data revealed a pretty consistent picture of a community that tends to have lower income, the demographics tend to have lower education levels and thus a higher dependency on public support systems like you had mentioned Social Security, SNAP programs and these type of public assistance. You add to that the aging of the population and you begin to see fruits of that and the implications of that as far as the disposal income that becomes available as time goes on."

As a result of the lower incomes and dependence on public assistance, the entire economy suffers, Kuehn said.

"The net result is what you have is a population, a community that has probably less disposable income and probably will (continue declining) as aging of the population continues and boomers continue to retire and Social Security and disposable income decline," he said.

A continued decline in the size of the workforce and the number of employed edged the Fort Smith metro jobless rate to 6.4% in June compared to 6.3% in May. The rate was lower than the 8.2% in June 2013, but the number of employed in the region fell 2.24% in the 12-month period.

The size of the Fort Smith regional workforce during June was 126,822, down slightly from 126,971 during May, and well below the 132,323 during June 2013, according to figures released by the U.S. Bureau of Labor Statistics. The labor force reached a revised high of 140,253 in June 2007, meaning the June workforce size is down 9.57% from the peak number.

The number of employed in the Fort Smith region totaled 118,751 in June, down from 118,929 in May, and an estimated 2,726 jobs below the 121,477 employed in June 2013.

Kuehn said losses of large manufacturers has also hurt because many employers now require additional skills, even in manufacturing, and some of the only real growth in the employment sector has been in hospitality (tourism), which he said are traditionally the lowest paying jobs and hardly fill the void created by some of the highest paying jobs lost from the exodus of manufacturers in Fort Smith.

He said the costs of jobs — fuel to and from work, the cost of so-called "work" or professional clothing, babysitting costs, etc. — have in some cases disincentivized both adults in a home from working when the net benefit is only a few hundred dollars a month or less.

City Director George Catsavis asked Kuehn what the city could do in this "new frontier" to spur economic development in the absence of traditional manufacturing employment.

Kuehn said the city must focus on growth areas, pointing to the healthcare industry as a good place to start.

"One of the great things that is happening (economically is the expansion of) health services," he said. "I think we have at least one or two administrative centers here, handling or processing for regional or nationally for Golden Living and (the Shared Services Center). But in any case, these are great types of jobs that are white collar, tend to pay more than the typical service sector-type jobs. Additionally, we have two medical centers. Further, we have clinics that are going up all over the place. Further, we have a medical college that's coming. I think these are the making of a great… I'd call them clusters, meaning there's gaps in that cluster that could be the basis of emphasis on recruiting, a pursuit to do whatever to get those gaps filled. That's important for this kind of sector. And you have a different leg growing than just a manufacturing leg or hospitality-related jobs, which really don't go very far for very many people."

Catsavis also asked Kuehn's professional opinion about efforts to raise the Arkansas minimum wage to $8.50 within three years. In response, Kuehn said it would hurt the Arkansas economy, especially in Fort Smith where the overall income is lower.

He said adding income could result in companies furthering automation efforts to reduce payroll costs, leading to higher unemployment. In other areas, cuts may come in hourly workers' shifts coupled with increases in the cost of goods.

"There's always a payday. Nothing's ever free, it always works through and the consumer pays for that."