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AN ECONOMIC ASSESSMENT for THE HAMPTON ROADS ECONOMIC DEVELOPMENT ALLIANCE (HREDA)

by James V. Koch

Board of Visitors Professor of Economics and President Emeritus, Old Dominion University

25 June 2005 ECONOMIC INTERDEPENDENCE OF THE REGION: PAYROLLS

Table Three asks the question, “When $1.00 of new payroll is generated in a Hampton Roads city or county, how much of that money stays in that city or county and is earned by its residents, and how much is earned by individuals who reside in other cities and counties?” This is a variant of the question I asked in the previous section, which focused on jobs, but noted that not all jobs are the same. For example, some jobs pay far more than others. Table Three takes this into account by utilizing U.S. Census data.

Consider the example of Portsmouth. When $1.00 of new payroll is attracted to Portsmouth by HREDA, or facilitated by HREDA, individuals who reside in Portsmouth will earn $.36 of that dollar and individuals who reside elsewhere will earn the remaining $.64 of that payroll, including $.05 by individual residing on the Peninsula and $.07 by individuals who do not live in Hampton Roads. Most frequently, individuals who work in Portsmouth, but reside elsewhere, choose Chesapeake as their residence, followed by Virginia Beach.

It’s apparent in Table Three that Virginia Beach does very well when payroll is considered, not the least because the city’s residents tend to earn higher than average incomes. When $1.00 of new payroll appears in Virginia Beach, $.77 stays there and is earned by its own residents. But, residents of Virginia Beach also bring home very substantial amounts of payroll from other cities. For example, $.32 of every $1.00 of payroll in Norfolk is earned by residents of Virginia Beach, the same amount earned by its own residents. Virginia Beach residents occupy 30 percent of all jobs in Norfolk, but earn 32 percent of the income there. This implies that the Beach citizens who commute to Norfolk tend to occupy among the higher paying jobs there.

However, in addition, Virginia Beach residents bring home $.24 of every $1.00 of payroll in Chesapeake. Thus, the prosperity of the region’s most populous city, Virginia Beach, is directly tied to the other cities within the region. When jobs appear in another city in the region, chances are that a city such as Virginia Beach is going to benefit significantly from those jobs. It is closely tied to the other cities by virtue of its residents bringing home the bacon from other cities. The opposite is also true, but to a much lesser extent. Some residents of other cities work in Virginia Beach and then take their earnings to those other cities. However, this flow is much smaller than the flow of payroll and income into Virginia Beach.

At the other end of the spectrum, only $.18 of every payroll dollar in Williamsburg is earned by its own residents. The next lowest number on the Peninsula is York County, where only $.37 of every payroll dollar is earned by its own residents.

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TABLE THREE

WHEN $1.00 OF NEW PAYROLL APPEARS IN A HAMPTON ROADS CITY OR COUNTY,

HERE IS THE AMOUNT EARNED BY INDIVIDUALS RESIDING IN VARIOUS LOCATIONS

The Wage Earner Lives In

Glou-cester

The $1.00 Is Isle of Wight

James City York Chesa-

peake Hamp-ton

Newport News Norfolk Poquo-

son Ports-mouth Suffolk VA

Beach Williams-burg Other

Earned In Gloucester 0.78 0.00 0.01 0.03 0.00 0.01 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.13 Isle of Wight 0.00 0.49 0.00 0.00 0.03 0.03 0.03 0.01 0.00 0.04 0.14 0.02 0.00 0.21 James City 0.05 0.01 0.49 0.11 0.00 0.05 0.16 0.01 0.01 0.00 0.00 0.01 0.05 0.08 York 0.08 0.01 0.11 0.37 0.01 0.08 0.23 0.01 0.03 0.01 0.00 0.03 0.02 0.03 Chesapeake 0.00 0.01 0.00 0.00 0.51 0.01 0.01 0.07 0.00 0.08 0.04 0.24 0.00 0.02 Hampton 0.02 0.02 0.01 0.11 0.02 0.49 0.22 0.02 0.02 0.01 0.01 0.03 0.00 0.02 Newport News 0.04 0.03 0.03 0.09 0.02 0.18 0.48 0.02 0.02 0.01 0.02 0.03 0.00 0.05 Norfolk 0.00 0.00 0.00 0.01 0.14 0.03 0.02 0.32 0.00 0.04 0.02 0.32 0.00 0.10 Poquoson 0.00 0.02 0.01 0.13 0.01 0.15 0.11 0.00 0.59 0.00 0.01 0.02 0.00 0.00 Portsmouth 0.00 0.02 0.00 0.01 0.21 0.02 0.02 0.07 0.00 0.36 0.07 0.15 0.00 0.07 Suffolk 0.00 0.07 0.00 0.01 0.10 0.02 0.02 0.02 0.00 0.07 0.58 0.06 0.00 0.05 Virginia Beach 0.00 0.00 0.00 0.00 0.09 0.01 0.01 0.08 0.00 0.02 0.01 0.77 0.00 0.02 Williamsburg 0.04 0.01 0.34 0.14 0.01 0.05 0.16 0.01 0.01 0.00 0.00 0.01 0.18 0.05