EconSouth (Second Quarter 2005)

GRASSROOTS

Tri-Cities Adjusting to
Employment Shifts

Photo courtesy of East Tennessee State University
With nearly 2,000 employees, East Tennessee State University is a significant employer in the Tri-Cities region. The school’s Sherrod Library (above) has a capacity of 800,000 volumes.

Nestled in the mountains of northeast Tennessee is an economic microcosm of the United States. Like many communities across the country, the Tri-Cities area—comprising Bristol, Tenn. and Va., Johnson City, Tenn., and Kingsport, Tenn.—is making the transition from a manufacturing-based economy to one increasingly reliant on service jobs.

Manufacturing still matters
Even in the face of this transition, the region retains a strong manufacturing base. While the number of manufacturing jobs in the Tri-Cities has declined, the sector is still strong and boasts companies that would be the envy of many regions. The area’s largest manufacturer is Kingsport-based Eastman Chemical Co., a chemical, fiber, and plastic maker that employs nearly 15,000 worldwide and about 7,500 locally, according to company data. Eastman, a Fortune 500 company and a linchpin of the local economy since its founding in 1920, had sales of $6.6 billion in 2004.

Bristol-based King Pharmaceuticals represents a more recent success story. The company began operations in 1994 and now employs more than 1,500 people regionally. Other local manufacturers include Bristol Compressors (2,500 employees), Quebecor World (1,450), American Water Heater (1,200), and Exide Battery (1,000).

“People tend to think of this as a farming area with a bunch of Snuffy Smith types running around, but manufacturing accounted for a higher percentage of employment in the southern Appalachian region than any other part of the country, including Michigan in the mid-’80s,” said Dr. Steb Hipple, an economist at East Tennessee State University (ETSU) in Johnson City. “We’re much more reliant on manufacturing than most other areas, but we were starting out at a much higher point than most parts of the country.”

Bristol, Tenn. and Va.; Johnson City, Tenn.; and Kingsport, Tenn.  
Population: 388,218 (metro area)
Households: 160,689
Median Household Income: $31,882
 
Source: U.S. Census Bureau

Data from the Bureau of Labor Statistics (BLS) bear out Hipple’s point. Manufacturing employment in the two metropolitan statistical areas that make up the Tri-Cities region—Johnson City (Carter, Unicoi, and Washington counties in Tennessee) and Kingsport-Bristol (Hawkins and Sullivan counties in Tennessee and Scott and Washington counties in Virginia, as well as Bristol, Va.)—accounted for 19 percent of all employment, compared with 11 percent nationally. But in 1990, manufacturing jobs made up 30 percent of the region’s employment, according to the BLS.

Employment on the rise
Overall employment growth over the past two years has averaged 1.1 percent—above the national rate and the fastest two-year rate for the Tri-Cities area since 1995–96. In addition, the area’s unemployment rate declined from an average of 5.7 percent in 2003 to an average of 5.5 percent in 2004, according to the BLS. Reflecting the national trend, the region’s service employment is growing. Service employment rose 2.2 percent in 2004 and 2.8 percent in 2003 in the Tri-Cities area. Call centers such as CITI Commerce Solutions and Cingular Wireless represent the region’s emerging service sector employers.

Health care is another growth industry, not surprising for a region whose residents are aging. (The 2000 Census put the regional median age at 39.2 years, higher than the national median age of 35.3 years.) Wellmont Health System and Mountain States Health Alliance are both significant regional employers.

As with most shifts from manufacturing jobs to a service base, the result is often lower-paying jobs. “Manufacturing jobs tend to pay higher wages and salaries than those in service-related industries,” Hipple said. “As a result, the region’s overall payroll may be declining despite a net gain of jobs.”

Photo courtesy of East Tennessee State University
East Tennessee State University’s Stanton-Gerber Hall is the school’s new $36 million science building. The construction was a partnership between the state and federal governments.

Telling the Tri-Cities’ story
The Tri-Cities’ business leaders recognize the need to confront the gradual decline of higher-value jobs. Newt Raff, chairman and chief executive officer of First Tennessee Bank, is the treasurer of the Tri-Cities Economic Development Alliance, an outgrowth of the Tri-Cities Business Alliance, whose goal is the creation of higher-paying jobs in the region. Raff said the alliance, a public-private partnership, is halfway toward its $5 million fundraising goal to sustain a five-year marketing push even though the fundraising campaign has not officially begun. Alliance backers hope the effort creates 7,200 high-paying jobs.

Facts about the Tri-Cities
  • Bristol is legally two cities that straddle the Tennessee-Virginia state line.
  • Johnson City is home to the Museum of Ancient Brick.
  • In 1999 the Tri-Cities became the first region ever to win the All-America City Award from the National Civic League.

Raff said the region’s recently improved transportation infrastructure—especially the newly completed expansion of Interstate 26 between Tennessee and North Carolina—will make it easier to attract business to the Tri-Cities. Interstate 81, which connects Tennessee with Virginia, crosses I-26 in the Tri-Cities. “These highways have created a flow of commerce between Tennessee and North Carolina that wasn’t really practical before because you had two-lane roads,” he said. Nearby Tri-Cities Regional Airport is crucial, Raff said, to the Alliance’s goal of selling the region globally.

Another boost to the region could come in the form of a regional office of the World Trade Center Association (which has more than 300 offices worldwide). This initiative got under way separately from the business alliance’s efforts, but the region’s business leaders quickly embraced it, according to Raff.

Such developments have convinced Raff that the Tri-Cities can reverse the recent economic trends that have eroded its manufacturing base and slowed wage growth. “The quality of life here is fantastic, and we’ve got a great story to tell,” he said. “We see the growth in cities all around us, like Greeneville [Tenn.] and Nashville, and I know we can achieve that same growth.”

This article was written by Tom Heintjes, a managing editor of EconSouth.

 

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