Return to Virginia Business - May 2001

Hampton Roads:  A Special Report
How to boost wages in low-paying Hampton Roads
Recruitment, job training and high tech can enhance pay scales

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by Garry Kranz

Five years ago Michel Bilè was a long way from the world of accounting. The 35-year-old Ivory Coast native was squiring passengers around Atlanta in a cab. He also managed a dry cleaning store while dreaming of a high-paying profession. He had an aptitude for numbers, but lacked formal training. So when his wife, a Suffolk native, was transferred back to Virginia, Bilè enrolled at Old Dominion University in Norfolk.

Michel Bilè scored a good job with a degree and an internship. Photo by Mark Rhodes

There, his career revved up. Bilè plowed through double degrees in accounting and qualitative analysis. ODU’s Guaranteed Internship Program helped him get an internship at Virginia International Terminal, where he performed audit reviews and other duties. That led to a financial job at Newport News Shipbuilding, where he makes twice as much as he did driving a taxi. Soft-spoken Bilè lavishes praise on the internship program, which allows students to gain work experience and credit toward their degree at the same time. "It gives you exposure and a foretaste of what the work environment will be like," he says.

Hampton Roads needs more stories like Bilè’s. While incomes in Virginia’s other major metropolitan centers have been booming in recent years, Hampton Roads’ have lagged behind. For 10 of the past 12 years, for instance, growth in per capita income has trailed state and national averages. According to Chmura Economics and Analytics, a Richmond econometrics research firm, Hampton Roads’ per capita income in 1998, the most recent year available, was $23,771 — $4,300 less than the Virginia average and $3,400 less than the national average. Chmura’s research does not include higher-paying military salaries, but that doesn’t affect the trend in the civilian sector.

Community leaders have identified slow income growth as the region’s primary economic development challenge. To combat wage stagnation, localities to the south of the James River are getting more selective about the kinds of companies they recruit: Only higher wage businesses need apply for assistance. Across the metro area, communities are mobilizing resources to upgrade skills in the work force and bolster the high-tech sector.

Pumping up the economy in a metro area of 1.5 million people, however, is like stoking up the boilers of a battleship: It takes time to gain any speed. As befits a military community, Hampton Roads is grappling with a Catch 22. Companies that pay well won’t locate in the region unless they can tap a large pool of skilled and educated employees. But those employees won’t stick around unless they can find attractive jobs. "There has not been a good supply of high-paying jobs here," notes Dr. Jo Ann Gora, director of the Career Management Center at ODU, which oversees the internships. "At Old Dominion, we’re providing students with the analytical and critical-thinking skills needed for today’s workplace. Even though we turn out talented people, they often don’t find an avenue for their talents here."

Lagging incomes in Hampton Roads can be traced directly to military cutbacks during the Clinton Administration. Before the downsizing of the Defense Department, per capita income in Hampton Roads was near the national average. Since 1987, however, nearly 59,000 highly compensated defense sector jobs — mainly in the military and the shipyards — have disappeared. The ripple effect from those losses vaporized another 30,000 jobs in the civilian sector. When economic growth resumed in the 1990s, the defense jobs, which paid about 126 percent of the regional average, were replaced mostly with lower-paying retail and service sector jobs.

Hampton Roads could experience a surge in defense spending given the Bush administration’s emphasis on upgrading military readiness. But it’s difficult to predict how new strategies and priorities will impact the region. Local leaders are determined to wean the local economy from its dependence on Washington, D.C., politics. "For many years, Hampton Roads was overly dependent on military-related jobs," says James L. Eason, president and chief executive officer of the Hampton Roads Partnership, an economic development coalition of 17 localities. "People here got comfortable with that, and there was not a call to diversify the economy. We were caught off guard by the defense cuts and tried replacing them with lower paying service jobs. But I think we’ve realized that we have too many assets to be under-performing."

In a labor-tight economy, Hampton Roads enjoys one stupendous competitive advantage: Each year about 15,000 local military personnel leave the service. Only one-third remain in the area. The others, many of whom possess valuable managerial and technical skills, are enticed to other regions by better job prospects. Stemming this "brain drain" could transform the region from an underachiever to a star performer.

Stanching the flow of workers out of Hampton Roads requires a new economic development focus. In the 1990s, economic developers sold employers on an underemployed segment of the work force — Navy wives. The economy showed a strong increase in the number of retail- and service-oriented fulfillment jobs. But these didn’t offer the kind of career paths that would entice people to stay. The focus is shifting now to upgrading work force skills and recruiting employers looking for more capable employees.

"We have about 14,800 new jobs [created] in Hampton Roads each year, but with people leaving the military, plus their spouses, we have more than 50,000 people entering the work force each year," says E. Roy Budd, president and CEO of Opportunity Inc., a work force development initiative of the Hampton Roads Chamber of Commerce in Norfolk. "We’re just the reverse of Northern Virginia: We don’t have a labor shortage, we have a labor surplus. And these are people who have military discipline, a strong work ethic and are dependable – all important factors that companies look for."

The Hampton Roads Technology Council estimates the region’s 875,000 workers, including 125,000 military personnel, comprise the largest metropolitan labor force between Washington, D.C. and Atlanta. The trick is to link them with higher paying jobs. One group trying to do just that is Opportunity Inc., which is working with educational institutions and training specialists to equip students, as well as "incumbent" or retired workers, for New Economy jobs. Opportunity Inc. is funded as part of the federal Work force Investment Act. "People don’t want to hear me say this, but we have to do a better job here of job training through occupational and technical training programs," says Budd, whose organization wants to help create 20,000 new jobs a year, reduce poverty rolls by 5,000 and increase median incomes by 1 percent a year. "We have a lot of technician jobs in our community that pay very well, such as welders, maintenance technicians, plumbers, electricians and auto technicians. We have to do a better job training our students at the kindergarten through 12th-grade levels to prepare them, because this is where the jobs are in Hampton Roads. Not everyone has to have a four-year degree."

The Hampton Roads Economic Development Alliance, composed of Chesapeake, Norfolk, Portsmouth, Suffolk, Virginia Beach and Isle of Wight County, is taking steps to help bring higher-paying jobs to the region. The Alliance, which enhances the individual localities’ economic development efforts, targets 10 specific industries to bring in new business. The program began in 1997, when per capita income was $23,920. Through 2000, the organization has been able to create new jobs paying about $30,000 a year, not including about $10,000 in benefits. In 2000, the Alliance was directly responsible for 2,254 new jobs, paying average salaries of $31,867 – about 118 percent of the average regional wage.

"We want to make sure that any new jobs that are created will pay a higher average per capita wage," says C. Jones Hooks, president of the Hampton Roads Economic Development Alliance. "Our cities in Hampton Roads have been like many others across the country. The prevailing wisdom in economic development was: ‘Any job is a good job.’ But now our economic development officials are taking a much more sophisticated look at strategies that will ensure their communities get what they need."

Still, the average worker in Hampton Roads could make even more by relocating elsewhere. Through 1998, the latest figures available from the U.S. Department of Commerce, wages in Atlanta were nearly $31,000, or 113 percent of the national average. Charlotte workers made 106 percent of the national wage, averaging nearly $29,000. And Raleigh-Durham workers averaged more than $30,000, or 112 percent of the national average.

Virginia Beach is taking a new approach to attracting high-paying jobs. Long dependent on tourism and seasonal industries, the city is reserving its financial and technical assistance for companies that create jobs with an annual minimum starting salary of $35,000. Companies qualifying for incentive packages contractually agree to achieve minimum wage targets by a specified time frame. Failure to reach goals results in payback of any money to the city. Virginia Beach’s hard-line approach appears to be working: According to city economic development director Don Maxwell, the policy helps create about 5,000 new jobs each year with wages averaging $42,500 a year. Maxwell encourages other Hampton Roads localities to set up similar standards. "As the largest city in Hampton Roads, we decided we ought to take the lead," he says.

Despite high-tech stocks tanking during the last year, triggering a rash of company layoffs nationwide (including some in Hampton Roads), economic developers still covet technology jobs. The lure of these jobs is seductive: In Hampton Roads, technology companies are paying wages about 180 percent of the average regional wage for private-sector jobs. To that end, the cities of Norfolk and Virginia Beach are co-funding an extension of the Hampton Roads Technology Incubator to help nurture technology start-ups. "Technology growth involves huge amounts of investment capital being deployed and products being developed, as opposed to government services. That type of activity is what produces jobs with high salaries," and it’s what the incubator seeks to achieve, says Executive Director Martin Kaszubowski.

Perhaps the best way to increase wealth is to stimulate growth of existing businesses. To revive the ailing Granby Street corridor, a virtual ghost town five years ago, the City of Norfolk offered economic and other incentives. Granby Street is experiencing a renaissance as a haven for technology start-ups like Great Bridge, which is developing a relationship database system using open source software. By year’s end, Great Bridge is expected to employ 200 people pocketing an average salary of about $85,000, according to Rod Woolard, the city’s economic development director. Along with other tech companies, Great Bridge provides an anchor for Norfolk’s revitalization of downtown business districts. "We afford an environment in Norfolk that is very supportive of new technology companies. We refer to it as the cool factor."

Smaller localities also have an appetite for tech companies. Chesapeake boasts some household names, including defense contractor Northrop-Grumman and database software developer Oracle Corp. Taking advantage of its manufacturing-heavy labor pool, the city is focusing economic development efforts on attracting advanced manufacturing and similar technology-oriented business. Hampton has notched several notable successes in recent years, including service centers for Gateway Computers, Nextel Communications, Science Applications International Corp., Computer Sciences Corp. and others. Hampton officials are trying to grow a burgeoning information technology industry, as well as attract R&D companies that can serve area automobile industry giants like Ford Motor Co., Siemens and Federal Mogul. Hampton also will be the site of the new Peninsula Work force Development Center, being built adjacent to Thomas Nelson Community College.

Hampton Roads is home to a large population of scientists and engineers associated with federal research labs. Literally 400 rocket scientists work in the region. Public-private partnerships are trying to move technology from the labs into the private sector. Meanwhile, defense companies are mining Pentagon technology for commercial applications in advanced manufacturing, instrumentation and control systems, biotechnology and information technology. Regional leaders contend these assets position the region to grow much as Northern Virginia did about 20 years ago, spinning out a host of entrepreneurial companies related to the defense and aerospace industries.

Bilè, the former cab driver, recalls the three months he spent at the international terminal. Each day he would receive useful feedback from his supervisor, and at the end of the semester he turned in a paper detailing his experience. His supervisor was impressed and was expecting Bilè to return. But Newport News Shipbuilding came calling with a chance to achieve his dream, offering decent wages, a benefits package and a rewarding work environment. "I think they found my experience as an intern was a positive thing," he says. "I was very fortunate to get this position."

That’s a thought the movers and shakers in Hampton Roads hope becomes a common refrain for area workers.

Return to Virginia Business - May 2001