Cost of NWA Living Higher Than LR; Wages Still Lower

Although the cost of living in Northwest Arkansas has dropped since the construction boom of the mid-1990s, statistics indicate it still costs more to live here — especially when salary is considered — than in the two nearest metropolitan areas.

According to the American Chambers of Commerce Research Association, it costs more to live in the Fayetteville-Springdale-Rogers metropolitan area (referred to elsewhere in this article as Northwest Arkansas) than in the Little Rock-North Little Rock metropolitan area and, during most recent quarters, it cost more here than in Tulsa, Okla.

Also, according to the most recent statistics, workers in Northwest Arkansas made less money than workers in those cities.

According to 1995 figures (the most recent available) from the federal Bureau of Labor Statistics, the average annual income in Northwest Arkansas was $23,312. The average income that year was $26,168 for Little Rock residents and $27,232 for those in Tulsa.

In addition to full- and part-time laborers, the incomes of business owners — such as Don Tyson of Tyson Foods and other magnates of the local economy — are included in the income figures, skewing the amount to a higher dollar figure than if wage-earners alone were considered.

According to ACCRA, it is somewhat less expensive to live in Northwest Arkansas than in the average of the 300 largest cities in America. With an average ranking of 100 for those cities, Northwest Arkansas was ranked 90.5 in first-quarter 1997, but that’s down from 96.9 in the first quarter of 1995, when the building boom was still underway. Northwest Arkansas had a ranking of 92.9 in the first quarter of 1996.

Northwest Arkansas’ rating was up in the second quarter of 1997 to 91.8. The Northwest Arkansas Business Journal, however, used first quarter 1997 stats since the Little Rock Chamber of Commerce didn’t report figures for the second quarter of that year so no comparison could be made with that city.

The Little Rock-North Little Rock area received a rating of 86.7 for first quarter 1997 and 87.2 for first quarter 1995 (the year for which the most recent salary stats were available). Tulsa was rated 91.3 in first quarter 1997 and 89.4 for first quarter 1995.

According to ACCRA, groceries, housing, health care and miscellaneous goods and services cost more in Northwest Arkansas than in Little Rock for the first quarter of 1997. Utilities and transportation cost more in Little Rock. Groceries cost more in Northwest Arkansas than in Tulsa that quarter, but Tulsa was more expensive in the other categories listed.

But not all estimates agree with those from ACCRA. According to Salary Calculator, an Internet web page constructed for The Center for Mobility Resources, a Fayetteville resident would have to earn slightly more money in Little Rock to have a comparable lifestyle, but living in Tulsa would be cheaper.

A Fayetteville resident making $23,000 per year would have to earn $23,122 per year in Little Rock or $22,671 annually in Tulsa to have a comparable lifestyle (based on second quarter 1997 stats), according to Salary Calculator. The web page uses a variety of sources for its estimates. ACCRA figures are furnished by Chambers of Commerce from around the United States.

Housing

Housing accounted for 28 percent of the composite score from ACCRA. Northwest Arkansas received a rating of 84.7 in the housing category for the first quarter of 1997. That compares with a rating of 79 for Little Rock and 81.5 for Tulsa.

During the first quarter of 1995, housing in Fayetteville was rated 89.6, compared with 74.5 for Little Rock and 82.2 for Tulsa.

ACCRA listed an average house in Northwest Arkansas as $112,350, compared with $109,000 for the Little Rock area and $102,471 for Tulsa.

But information from state Multiple Listing Services — books that list property for sale by real estate agencies in various cities — indicate it costs more to buy a house in Little Rock than in most parts of Northwest Arkansas. The average price of a house sold in Little Rock in 1997 was $107,256, according to the MLS.

Average selling prices for Northwest Arkansas homes in 1997 were: $105,534 for Fayetteville, $97,676 for Springdale, $98,189 for Rogers, $101,503 for Beaver Lake homes near Rogers, $145,809 for lakefront homes at Beaver Lake, $107,893 for Bentonville $94,491 for Bella Vista, $234,888 for Bella Vista lake homes and $75,999 for Bella Vista townhouses.

The ACCRA figures reportedly took in an average of all those Northwest Arkansas areas. In addition, ACCRA included rentals as well as houses sold. For renting a two-bedroom apartment, ACCRA says the cost was $489 per month in Northwest Arkansas, compared with $436 in Little Rock and $503 for Tulsa.

The construction boom in Northwest Arkansas tapered off considerably in 1997. A total of about $280 million in building permits were issued for construction in Washington and Benton counties during the first three quarters of 1997. That compares with about $334 million for the first three quarters of 1996. Residential construction was down in 1997 while commercial construction was on the rise.

Job recruitment

Traditionally, the low cost of living has been a selling point when Northwest Arkansas employers recruit workers from other parts of the country. Historically, it has given employers an excuse to offer potential employees less money than they make elsewhere on the grounds that it’ll cost them less to live here.

But things changed during the mid-1990s. The cost of living had been rising in Northwest Arkansas and wages weren’t keeping pace. When both factors were considered, it was more expensive to live in Northwest Arkansas than in many surrounding cities.

But Donna Davis, the family employment manager for the University of Arkansas, thinks that’s now changing. Davis helps find jobs for spouses and partners of new employees at the UA and 150 area companies.

“I’m not having nearly the complaints I had a year ago,” Davis says. “Because of the housing market, the cost of living seems to have stabilized as compared to other parts of the country … and our salaries have come up in some cases.”

Davis says she was shocked by prices here when she moved from Atlanta four years ago.

Davis says she’s up front with potential employees, telling them it may cost more to live in Fayetteville than they expect.

Cost of living figures for the entire state are low, and that’s what many people see before deciding to move here, she says.

“I think they look at state figures,” Davis says. “In Northwest Arkansas, there’s competition. It’s a great place to live. The school systems are good, but our salaries haven’t escalated as much as the cost of living.”

Davis says buying a house — a barometer by which area economies are judged — is often a shock for newcomers.

In 1995, Fayetteville was ranked by the National Association of Home Builders as the seventh least-affordable housing market in America (based on the percentage of the population that could afford to buy a median-priced home).

“For most people, yes it’s a shock,” says Davis, “but it doesn’t alter their plans to move here.”

Davis says she used to be able to tell people that property taxes, at least, were low, but after a recent reappraisal of Washington County property, taxes have skyrocketed.

In working with more than 250 “trailing spouses” since 1993, Davis says 95 percent of them took pay cuts to move to Northwest Arkansas.

Davis says she believes times are changing: Money isn’t as important to families as education and quality of life.

Comparisons

Many items are cheaper in cities because of competition between stores and greater buying volume.

Energy costs are higher in Northwest Arkansas than in Los Angeles, because the temperate climate in Southern California requires fewer days of air conditioning and heating, says Don Market, a UA professor of economics.

“Generally speaking,” says Market, “the variations in cost of living from place to place are largely determined by housing and taxes. Housing costs are driven not so much by construction costs, but by land costs. As a result of that, you can’t necessarily compare states with high salaries with

other states.”

Market says the UA generally pays the national average for particular positions to recruit faculty members.

“If you want to recruit in the nation, you have to pay the average in the nation,” he says. “We don’t say come to Fayetteville because it’s a cheap place to live, and we really can’t say that it is. It would probably be wrong to say that it’s cheaper to live here than in most other places.”

Market says growth has caused housing prices to rise, but they may be leveling off now. He says salaries will eventually catch up with the cost of living here, especially in an area like Northwest Arkansas where unemployment is below 4 percent.

“When the demand for labor is high,” he says, “wages tend to go up. … I have no reason to believe wages will stop increasing. Over the long haul, wages tend to rise as productivity increases.”

When comparing wages, says Market, the kinds of employment must be considered. He says surrounding cities, where average wages are higher, may have industries that pay more for workers than the poultry industry that’s prevalent here.

Market says he expects the rate of growth here to level off in the next 10 years.

“I don’t expect growth to go down,” he says, “but to be at a slower rate. We can’t maintain in the next 10 years the growth rate we had in the last 10.” n