Cost of living a factor, but perhaps not a major one

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Published: June 5,2006

The cost of living is a factor in attracting new industry. Certainly all other things being equal, a community with a lower cost of living might have an edge over competitors. But it is likely that a number of other factors rank higher when it comes to site selection.

“It is part of the criteria,” said John H. Turner, director of economic development, Entergy Mississippi. “We do use the statistical data that is generated, and we consider a lower cost of living a strength for Mississippi It is a factor that is looked at directly and indirectly. Most of the time, it is more an indirect than a direct issue. It really depends on the type of prospect that you are dealing with whether an industrial manufacturer, an automotive supplier or a data center, for example.”

There is a correlation between what a business needs to pay employees and what it takes to live in a community. Turner said an example right now within the State of Mississippi is the cost of living in DeSoto County is higher than other parts of rural Mississippi.

“It is just a natural phenomenon with the growth in DeSoto County that the cost of living would trend higher,” Turner said.

The quality and availability of the workforce is often the top consideration. And sometimes cost of living factors into that. Turner said in a project they worked on recently, the consultant looked at cost of living as key factor because the prospect he was representing was looking for a workforce with an average salary range of $35,000 to $40,000 per year.

“The cost of living would have a big impact on where they could go and find that type of workforce,” Turner said.

The cost of doing business in the community is usually a bigger overall consideration. Prospects always look at cost of doing business factors such as labor rates. Turner said cost of labor is one reason for the large growth in the automotive industry in the Southeast.

“You don’t have to pay people as much if it doesn’t cost as much to live here,” Turner said. “Fifty thousand per year is worth a lot more here than it is in Detroit, Mich.”

Brenda Lathan, director of research and business development, Columbus-Lowndes County Link, said cost of living seldom works into the equation early in the hunt.

“As far as initial attraction, it doesn’t come into play at all,” Lathan said. “Cost of doing business is a factor. Cost of living isn’t. Wages are more important. The South has lower costs for labor and benefits. They are going to look at the availability of workers and the average wages of workers. They are very interested in unemployment numbers and the availability of workers. Cost of living issues may come into play later when they start bringing in workers.”

Lower costs of doing business can really make a project. For example, on the SeverCorr Project, a steel mill development in Lowndes County, lower electrical rates provided by TVA were the biggest factor that attracted them to the area, Lathan said.

Cost of living does impact economic development in areas such as attracting retirees. Arna Salazar, vice president of tourism and retirement development, Greater Starkville Development Partnership, said one of the key marketing tools to attract retirees to Mississippi is the state’s lower cost of living.

“That is the first thing that relocators are going to look at,” Salazar said. “Then they will compare it to what their salary will be if they are going to get a job. They will compare the cost of living here to where they are coming from, mainly the North, California, Florida and the Mid-West.”

“Certainly to the retirement program, the cost of living is quite important,” agrees Tommy Hart, executive director, Industrial Foundation of Washington. “Retirees are looking for a much lower cost of living area. At the same time, they want excellent health care. They want access to retail goods and services. Cost of living is something that affects everyone, every segment of the economy.”

Areas that are attractive for relocating retirees generally have a lower cost of living. Hart can think of several markets in Florida and Arizona that play off their low cost of living indexes to attract retirees.

Hart has found that cost of living is also a significant factor for new medical developments. Hospitals and medical clinics are very interested in the cost of doing business and living in the area. In turn, good health care and physicians are especially important to the retiree community.

Hart said the cost of living issue isn’t one that comes up very often with new prospects.

“It isn’t a factor that has entered into much discussion in the industrial projects we have worked on,” he said. “They ask everything else in the world. But that doesn’t seem to be a general question. The cost of energy, transportation advantages, wage and fringe benefit costs, so many more things come into the picture. Certainly if you are in competition with another community, then you will research and find out about the other community in every category imaginable. What matters is you are looking for positives to offset the negatives. I may be higher on water costs and lower on sewer costs. Everyone approaches their numbers with slightly different math. You add it up and at the bottom of the page, are you better or worse overall? I may have slightly higher transportation costs, but slightly lower labors costs and it equals out. Now you cross out most of the features and get to the critical item. Then cost of living may be very important at that point.”

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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