In Kansas, a struggle to keep big employers

Changes at Sprint and Boeing are a sign of the challenges facing Plains-state economies.

By , Correspondent of The Christian Science Monitor

To say you could hear a pin drop would be too much.

But the Sunflower State was rendered a bit speechless after two mid-December announcements.

First it was Sprint - that telecommunications company with oh-so-clear service. On Dec. 15 officials announced that the Kansas-based company planned to merge with Nextel and move the company's headquarters from Overland Park, a suburb of Kansas City, to Reston, Va., near the nation's capital.

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Two days later, word came from Boeing. Any decision to sell the commercial side of its Wichita plant would not be announced until next year, officials said. The announcements, while not unexpected, are significant in their symbolic impact. The companies are the state's biggest, together employing about 26,000 people in Kansas. Sprint is the state's only Fortune 500 company. And Wichita, dubbed the Air Capital of the World, identifies with Boeing and the commercial-aviation unit it may sell.

"[The announcements are] reflective of the challenges that smaller places face in general in trying to compete," says Joshua Rosenbloom, professor of economics at the University of Kansas.

Indeed, Kansas and other Midwestern states have lagged behind the rest of the country economically in recent years, says Professor Rosenbloom, who also serves as director of the Center for Economic and Business Analysis at the KU's Policy Research Institute.

The quest for a secure and diverse supply of jobs is a central economic challenge everywhere. But Kansas and other Plains states face particular hurdles. They haven't benefitted from the population-driven boom of the Sun Belt or the tiers of elite professionals who congregate in cities like Chicago and Seattle. Other factors have hit Kansas as well. Moving call-center service jobs overseas had a surprisingly quick impact on local economies. Now the state is in the process of luring them back. And while the popularity of high-protein diets have bolstered livestock sales, farming and energy - pillars of state economy - have suffered losses in recent years.

Population trend: flat as the terrain

Added to that, the state's population grew by just 0.4 percent in the 12 months leading up to July 1 of last year, according to recently released Census figures. That number gave Kansas a growth rate in the bottom 10 in the country. And low population numbers may be having a ripple effect on output. Although Kansans have high educational attainment, a recent study by the Kansas Chamber gave the state a "D" in productivity. Kansas used to be a low-cost place do business, Rosenbloom says. Today, wages here are still relatively low. But for whatever reason, Kansans have become less efficient than their counterparts across the country, eliminating their advantage.

"There are lots of different things that could be at work," Rosenbloom says, citing both the types of business attracted to the state and a lack of population density. "The thing to bear in mind is, it reflects not just on what the workers in Kansas are doing but what their employers are doing."

By some estimates, the Wichita area is starting to join in the nation's economic recovery, with one forecast for a gain of 4,300 new jobs in 2005 - the first upswing in jobs since 2001.

But when large employers like Boeing and Sprint decide to leave, the impact is felt throughout the community, impacting everything from local businesses to community leadership.

The mood at Annex Lounge

Nancy Bowlby, co-owner of the Annex Lounge, a bar and burger joint in Wichita, says Boeing has become so interwoven with the town's identity she can't imagine life without it. She's noticed lately among her regular customers who are Boeing employees that more than just a few are watching their pennies when they come in for her famous hamburgers.

"For the most part, they're unsure and they don't like it," says Ms. Bowlby. "Most of them will say, 'I'd like to retire with Boeing, but it doesn't look like I'm going to.' "

For Bernie Koch, vice president for government relations with the Wichita Area Chamber of Commerce, the possible Boeing sale is just the last in a line of changes.

Twenty years ago, most of the city's aircraft industry was family owned, as were local innovations such as Rent-A-Center, Pizza Hut and The Coleman Company. Today, all are owned by companies with headquarters in different places.

In most cases, the sales weren't a result of dissatisfaction with the city or its workforce, rather they were motivated by factors such as convenience. For example, Rent-A-Center moved to Dallas because that's where its owner lived.

Likewise, Sprint has tied the decision to move to its hopes of maintaining a significant presence in both Kansas and Virginia.

There is much the state could do to become more business friendly, says Koch, pointing to incentive programs and corporate tax structure. Even then, however, Kansas would have to overcome its image as an out-of-the-way place.

For now, although workforce reductions may occur as a result of the Sprint merger and outsourcing by Boeing, they are not expected to be immediate or drastic.

Sprint plans to keep its operational headquarters in Overland Park. Boeing is selling only the commercial side of the plant, not the military side, and wants the buyer to continue to manufacture its parts.

"Boeing has been here forever," says restaurateur Bowlby. If and when it sells, "it won't be the same."

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