Economic Competitiveness: Cost

The Kansas City area is a relatively inexpensive place to do business. This is often cited as one of our biggest competitive advantages.

ACCRA Composite Cost of Living Index,
3rd Quarter 2004

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Cost of Living Index
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Source: ACCRA Cost of Living Index, 3rd quarter 2004. The Index reflects cost differentials
for professional and executive households in the top income quintile.

Overall, the cost of living here ranks second lowest among the peer metros. In practical terms, however, the cost differentials are exceedingly slight except for comparisons against Minneapolis and Portland.

Percent of Housing Available
to Median Household Income by Metro, 3rd Quarter 2004

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Available Housing
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Source: National Association of Home Builders: Housing Opportunity Index

The differences are more marked with respect to the cost of purchasing a home. Nearly 90 percent of the housing in the Kansas City area could be purchased by people with a median household income. Only Indianapolis has a higher percentage.

Lower-than-average costs of living might be expected to translate into lower-than-average costs of labor.

Average Hourly Wage, 2004

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Average Hourly Wage
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Source: Bureau of Economic Analysis, table CA34, adjusted from annual to hourly wage by MARC

Instead, metropolitan Kansas City finds its wage costs on a par with a middle group of peers that includes St. Louis and Indianapolis. While average wage costs are significantly lower in the Kansas City area than in Austin, Denver or Minneapolis, they are also significantly higher than in Salt Lake City and Omaha.

 

Manufacturing Productivity
Output Per Production Worker Hour, 1997-2002

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Manufacturing Productivity
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Census of Business, 1997 and 2002.

In addition, the Kansas City region's edge in labor productivity appears to be slipping. Between 1987 and 1997, Kansas City area manufacturing workers were 50 percent more productive than the U.S. average. In 2002, this slipped to 40 percent. As a result two peers — Portland and Indianapolis — have caught up to Kansas City.

At $200 per production work hour, Austin's manufacturing workers remain the most productive in the peer group. This is largely due to their specialization in high-tech electronics manufacturing.

Next: Employment Change
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