Not So Far Afield

Dec. 21, 2004
Manufacturing in U.S. exurban areas is growing at twice the rate of urban areas.

Today's vocabulary word: Exurban. Meaning beyond urban and suburban, but not necessarily rural. In this case it refers to counties that the U.S. Commerce Dept.'s Bureau of Economic Analysis does not include in its grouping of 315 metropolitan statistical areas in the United States. Why should you care? Because these areas are the source of almost one-fifth of the U.S. gross manufacturing product -- and exurban manufacturing employment is increasing at twice the rate of jobs in urban areas. "Manufacturing is moving into the exurban countryside, away from central cities and their suburbs," observes Arthur C. Nelson, professor of city planning, public policy, and international affairs at Georgia Institute of Technology (GIT), Atlanta. "However, manufacturing firms remain attracted to markets, labor, and transportation facilities and, therefore, tend to avoid remote areas. Increasing numbers of firms and employment are locating outside developed urban areas, but not necessarily in the rural hinterlands." One of several cost factors driving exurban manufacturing growth is the single-floor, large-footprint construction of new manufacturing facilities. Urban and developed suburban areas generally don't have the space to accommodate the sprawling plants, attached offices, and surrounding parking lots. And for the few that do, high property taxes and prospective cleanup costs keep many manufacturers away. Site developers are finding ample room at relatively economical prices in the exurban areas, which also tend to be located along the nation's network of interstates -- another factor contributing to their growth. Easy highway access allows raw materials to arrive and product to ship out. And more important in this era of low unemployment, interstate locations allow workers to commute in from nearby suburban and urban areas. "[Ohio] communities like Napoleon, Fostoria, and Bowling Green have an industrial base to them that's hard to see, and you wouldn't guess," notes Tom Latchem, executive vice president of Toledo's private, not-for-profit Regional Growth Partnership. "That's a function of being very well connected. Rail and highway access is excellent. It's a matter of being able to be connected to your suppliers and your customers even though you're in a rural area." As you might guess from its proximity to Detroit, the exurban counties near Toledo host several large automotive supply plants, including a 4,000-employee General Motors Corp. Powertrain Division facility, a 1,700-employee Ford Motor Co. plant, and a 1,000-employee AlliedSignal Inc. operation. Ingersoll-Rand Co., American Standard Cos. Inc., Johns-Manville Corp., and Campbell Soup Co., also have substantial operations in the area. Accessibility is also key to manufacturing growth in exurban Nashville. "I think first and foremost we're in a tremendous location," says Carlyle Carroll, industrial consultant, Middle Tennessee Industrial Development Assn. We're a day's drive from two-thirds of the country's population. We have six interstates going through, and we're in the center of the mid-South." Carroll also cites Tennessee's status as a "right-to-work" state as another reason why manufacturers have focused on the area in the past couple decades. State law forbids a union shop. Even if a plant votes to go union, workers don't have to join or pay dues, making organizing extremely difficult. As a result, wages in the state trail the national average. Although not all exurban areas are in right-to-work states, it's common for them to have fewer unions, and therefore lower wages than urban and suburban areas. Some city advocates argue that government policies have actively promoted manufacturing's move out of urban areas. The national highway system, now almost 43 years old, has often been singled out as the primary instigator of suburban sprawl. Another government contributor to manufacturing's migration is the U.S. Commerce Dept.'s Economic Development Administration (EDA), which helps fund construction of industrial parks in economically depressed, often rural areas. "Eight to 10 years ago the industrial parks that the EDA helped pay for were in many cases 40-50% vacant, and are now largely full," notes Jeff Finkle, president of the Council for Urban Economic Development, Washington, D.C. Finkle also says that many of the incentives that states provide more often go to rural than urban areas. In addition to tax abatements, these incentives take the form of new roads, new sewer systems, new fire protection services, and schools. Tennessee provides few direct incentives to business, but does provide incentives. "We don't give away a whole lot. We have two things we invest in. We invest in infrastructure, and we invest in people. We don't invest in companies because companies come and go, but people and infrastructure stay," notes Tennessee's Carroll. For instance, industrial training centers across the state offer two-year technical degrees particularly valued by local employers. "The highest value-added industries, such as electronics, remain attracted to urban and suburban areas with large supplies of skilled, educated labor, but so are most industries locating in exurban areas. It is likely that those communities boasting reasonably high-quality educational and vocational training will attract more manufacturing firms than those lacking such assets," states GIT's Nelson. In the end, it's simply a matter of costs. Land in exurban regions is cheaper. Taxes are lower. And wage rates are lower. Until this situation changes -- perhaps as government incentives seek to more evenly balance the interests of urban, suburban, exurban, and rural areas, factoring in the true cost of indefinite infrastructure expansion -- manufacturers likely will continue their exurban migration.

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