Economic Analysis of the Greater South Haven

Transcription

Reports
Upjohn Research home page
1996
Economic Analysis of the Greater South Haven
Area: Choices & Consequences
George A. Erickcek
W.E. Upjohn Institute, [email protected]
Christine R. Fahndrich
W.E. Upjohn Institute
Citation
Erickcek, George A., and Christine R. Fahndrich. 1996. "Economic Analysis of the Greater South Haven Area: Choices &
Consequences." Report submitted to the South Haven Industrial Fund.
http://research.upjohn.org/reports/149
This title is brought to you by the Upjohn Institute. For more information, please contact [email protected].
FINAL DRAFT
Economic Analysis
of the Greater South Haven Area:
Choices & Consequences
Submitted to the
South Haven Industrial Fund
George A. Erickcek
Christine R. Fahndrich
February 9, 1996
W.E. Upjohn Institute for Employment Research
300 South Westnedge Avenue
Kalamazoo, Michigan 49007
Executive Summary
The economic future of the Greater South Haven Area is plagued by uncertainty, but still
holds promise for its residents and business community. 1 The area's strengths are the envy of
many similar-sized communities: an excellent market and recreational location, good
transportation access, a competitive workforce, and a strong economic development effort.
Moreover, the area's economy is supported by a diversified economic base consisting of an
agricultural sector, tourism, a stable manufacturing sector, and several service firms, including a
regional medical facility.
The community faces several serious economic challenges, however. Employers are very
concerned about the availability of qualified workers. In addition, there exists a perceived
shortage of medium-valued housing, although evidence suggests the area's housing difficulties
arise due to lack of income more than the lack of affordable housing. Furthermore, economic
trends suggest that the area's economy is losing ground relative to other lakeshore communities.
Compared to other Lake Michigan communities, a higher percentage of the residents in the
Greater South Haven Area live below the poverty level, achieved lower levels of education, and
are unemployed. The area's 1995 unemployment rate is estimated to be 9.0% according the
Michigan Employment Security Commission. Approximately 775 individuals are unemployed in
the area. Finally, limited economic statistics indicate that the area's tourism sector is lagging
behind that of other communities.
Table 1
Comparative Economic Trends
Other Lakeshore Communities
Economic Characteristics
Greater South Haven Area
Percent of residents living
below poverty, 1989
19.8%
13.4%
Unemployment Rate, 1990
11.0%
6.9%
Percent of Household Earning less
than $15,000 in 1989
35.2%
25.2%
Percent of Persons 25 years or
older without a high school degree
30.5%
23.4%
Population Growth 80-90
-0.1%
-0.3%
Population Growth 90-94
4.5%
0.5%
Source: U.S. Census and Michigan's Office of Management and Budget
Greater South Haven Area includes the City of South Haven, Casco Township, Covert
Township, Geneva Township and South Haven Charter Township.
The community also faces the partial closure of its largest manufacturer. Karl Schmidt Unisia,
Incorporated announced that as a result of its workers' second rejection of its contract offer at its
South Haven plant, the company has no choice but to end its production activities at the plant.
The plant currently employs 422 workers, of which 308 are production workers. The company
plans to maintain its research and development activities. We estimate the overall impact of the
curtailment of production activities will be the loss of approximately 650 total jobs in the Greater
South Haven area. 2
The economic future of the Greater South Haven Area depends, in large part, upon the future
economic conditions nationwide. Unfortunately, most forecasters are expecting the latter part of
the 1990s and the first years of the 21st century to be a period of slow national growth and
growing international competition. The national economy is expected to grow at a moderate 2 to
2.5 percent annual rate for the next ten years. If true, much of this growth will be achieved
through improvements in productivity and not by adding more workers. Manufacturers will
continue to face international pressures to cut costs, while maintaining or improving quality. In
short, South Haven cannot depend upon a strong national tide to lift its struggling economy
upward. Success will require the implementation of a focused economic development strategy.
We offer four alternative growth scenarios for the Greater South Haven Area as shown on
Table 2. The baseline forecast of the Greater South Haven area rests upon our assessment of the
area's relative production costs and the residential impact of last year's water and sewer agreement
reached by the City, Casco Township and South Haven Charter Township. It also includes the
impact of the closing of Karl Schmidt Unisia's South Haven manufacturing facility and the
expected downsizing at the Palisades Nuclear facility after 1998. The three alternative growth
scenarios are based on the success of aggressive economic development efforts.
The W.E. Upjohn Institute for Employment Research prepared this report for the South
Haven Industrial Fund to provide the groundwork for a community-wide economic development
strategic planning effort. While this report does not provide a strategic plan for the community,
it does offer an economic assessment of the area that will assist area leaders in the development of
such a plan. Fortunately, area business and political leaders have a strong foundation on which to
construct an effective economic development strategy. By capitalizing on last year's water and
sewer agreements and by taking full advantage of the City's well-regarded economic development
office, area leaders have an opportunity to plan the future course for the area's economy.
2The impact analysis is based on a total loss of 370 jobs at the plant.
Table 2
Economic Growth Scenarios
Forecast Scenario
Percent Change in
Employment
1995 to 2006
() Avg. Annual Change
Percent Change in
Per Capita Income
1995 to 2006
0 Avg. Annual Change
Percent Change in
Population
1995 to 2006
Q Avg. Annual Change
Baseline Forecast
8.9 (0.8)
36.4 (2.8)
10.2 (0.9)
Strong Manufacturing
Growth 1
16.8 (1.4)
37.6 (2.9)
13.7 (1.2)
Residential Growth 2
47.9 (3.6)
54.0 (4.0)
40.0 (3.0)
Motel Convention
Center 3
10.6 (0.9)
36.3 (2.9)
11.3 (1.0)
1. 500 new manufacturing jobs.
2. Population growth of 3.0 percent per year through 2006.
3. The construction of a motel/convention facility.
The major highlights of the report include:
The primary problem facing the residents of the Greater South Haven Area is the lack
of income growth stemming from a changing economy.
Data indicate that while more residents were employed in 1990 than in 1980, the area lost
hundreds of manufacturing jobs. These jobs have been replaced but primarily by professional
positions for which former production workers are ill-equipped to fill. In other words, many
of the area's economically-disadvantaged workers may be unemployed because they do not
have the skills demanded by the changing structure of the area's economy. The area's
relatively high unemployment rate and low labor participation ratio add further evidence of its
workers' dislocation problems.
The economic development strategy should be built upon the following strengths of the
area:
Land Availability for Development - The recent water and sewer agreement between the
city and surrounding townships has opened new acreage for commercial, industrial, and
residential development. In addition, the City has already established industrial parks that
offer both existing and new firms ample space for growth.
in
Lakeshore and the Black River - Lake Michigan and developments on the Black River
enhance the area's quality of life and make the area a more attractive business, tourism,
and residential location. South Haven is a great location for overnight tourists from
Chicago, Detroit, Indianapolis and the other major cities in the Great Lakes area. The
Lake and the River are unique resources that should be carefully managed to avoid overuse
and should not be jeopardized by conflicting or misguided land uses.
City of South Haven Government Service - The city's water, sewer and electrical
distribution systems are capable of servicing future economic growth at very competitive
rates. Moreover, the city supports a professionally-staffed economic development office.
Business Market Location - South Haven offers a good market location for firms interested
in accessing markets in Chicago, Detroit, Fort Wayne, and/or Grand Rapids. In addition,
the West Michigan region hosts a wide range of business services, manufacturing services,
and parts suppliers that can support the needs of South Haven manufacturers.
At the same time, the area's economic development strategy must not ignore the area's
weaknesses which include:
Large Number of Poorly Trained Workers - A reported lack of qualified workers could
impede economic development efforts in attracting new firms and could discourage existing
firms from expanding in the South Haven area. Surveyed manufacturers report that 44
percent of job candidates for unskilled positions lack basic skill requirements, and a greater
54 percent of the job applicants for skilled positions lack the appropriate skills. In
addition, area employers are reporting a drug dependency problem among many of their
workers.
Lack of Affordable Housing - Housing in the $75,000 to $100,000 range in stable
neighborhoods is perceived to be in short supply. However, a survey of realtors in South
Haven, Holland, and St. Joseph/Stevensville indicate that housing prices in South Haven
are not exceptionally high. In addition, census data suggest that the area's low income
residents face a housing affordability problem.
Outdated School Facilities - The South Haven school district is limited by the physical
structure of its buildings, with several existing buildings not conforming to current or
future teaching needs.
Lack of Interaction Between Educators and Business. Employers expressed concern that
educators are not adequately preparing students to meet the needs of business. However,
many businesses have ignored opportunities to speak with school officials regarding
revising of school curriculum.
IV
Poor Community Attitude Regarding Tourism - Several tourism and retail businesses
believe that many community leaders do not understand the economic importance of
tourism. Such a community attitude could discourage new retailers from establishing
businesses that would serve local residents and tourists. Such negative attitudes could also
hinder efforts to improve area cultural and recreational opportunities for residents and harm
the quality of life. At the same time, others argue tourist-related businesses should keep
more uniform hours that meet the needs of both residents and tourists. The lack of
uniform hours limits revenue earnings by all of the area's stores and, in addition, creates a
generally negative environment for area visitors.
Financing Needed for Infrastructure Improvements - Due to a lack of long-term planning in
the past, the city's streets, storm sewers, sidewalks, and some sewer lines have been
allowed to deteriorate during the past 20 years. The City in its efforts to rebuild this
infrastructure is now facing reductions in federal and state funding.
The area's economic development strategy should recognize that agriculture,
manufacturing and tourism are mutually supportive. Manufacturing can provide a yearround economic base capable of supporting tourist-related businesses during the off-season
and providing needed nonfarm employment opportunities for area farmers. The principal
occupations of nearly 50 percent of all farm operators in Van Buren County are not farmrelated. At the same time, tourist-related activities, such as festivals, cultural events and new
recreational facilities enhance the area's quality of life, which is becoming a more important
component in industrial site selection. Finally, area farms are a part of the area's tourist
industry, drawing thousands of visitors each year to pick fruit or buy produce at roadside
stands.
The area's economic development plan must not underestimate the spillover of
economic activity across political boundaries. It is crucial for community leaders to be
aware that actions in neighboring townships or cities have economic impacts for their
residents as well. Economic boundaries rarely follow political borders. A survey of area
manufacturers showed that although most of the plants are located in the City of South
Haven, less than 25 percent of their workers reside within its borders.
At the same time, the area's economic development plan must not be based on
overestimated economic spillover effects of area growth. Small area economies, such as
the Greater South Haven Area, are quite porous. Earnings and revenues quickly escape the
local area through the purchases of services and goods not produced and often not sold in the
area. Using too robust economic multiplier estimations will only discredit regional economic
development efforts.
Our strongest recommendations for area leaders in their efforts to develop an economic
strategic plan are the following:
A regional approach to economic development would best serve the interrelated needs
of area's residents and businesses. Individuals rarely work, shop, and live in the same local
governmental unit. The fruits of the economic development efforts of one community are
shared by individuals in another. A farm operator in South Haven Charter Township may earn
secondary income by working at a factory in South Haven. Tourist-related opportunities
offered in the City of South Haven could be the deciding factor for a family in buying a home
in Casco Township. A resident of Covert Township may work in South Haven and on the
weekends buy produce at a roadside stand in Geneva Township.
Currently, the City of South Haven funds the sole economic development program in the
region. Its impact spills across political boundaries in terms of wage and salary earnings and
consumer expenditures. Yet, it is currently receiving no financial support from the
surrounding townships. An economic development agreement among the townships and the
city would best address the interrelated needs of the area's residents.
An area-wide economic development strategy should focus on the generation of income
through the creation of good-paying jobs. Manufacturing and some tourist-related
businesses can provide good-paying jobs to area workers who are job-ready. Unfortunately,
many of the area's current workforce are not. While the yearly graduates from the area's
schools make up only a small portion of its total workforce, the schools offer the most
accessible means to reach tomorrow's workers. Working with ongoing efforts of the Van
Buren Intermediate School District, a renewed effort should be made to establish an ongoing
dialogue between business and schools. Business leaders should be invited to speak to
students regarding the demands of the workplace, and teachers should be offered the
opportunities to visit and explore the work environment of the area's businesses. The
challenges facing area schools are large, and it must be remembered that local problems in
education are shared by all localities.
If economic development efforts remain targeted at area residents, then the needs of the
unemployed in the area must also be addressed. Economic research suggests that in the longrun many of the new jobs generated in a community are filled by outsiders, leaving many of
the area's economically-disadvantaged still unemployed.
VI
Section I
Introduction
Purpose of the Study
On December 28, 1994, the City of South Haven, South Haven Charter Township, and Casco
Township entered a historical agreement that will provide water and wastewater service to
existing and future residents in the townships. Ending years of confrontation between the local
units of governments, the agreement opens a new era of area cooperation. Since the historical
agreement, the City of South Haven and the surrounding townships have explored other
cooperative efforts that will provide more efficient government services to area residents. A year
earlier, the City of South Haven, Casco Township, Covert Township, South Haven Charter
Township also co-sponsored the 2002 Partnership in Progress that helped create benchmark data
to assist future efforts by area stakeholders in planning for the future.
Given this more cooperative economic development environment among the area's
governmental units, the South Haven Industrial Fund contracted the W.E. Upjohn Institute for
Employment Research to prepare this study to:
Provide an economic assessment of the Greater South Haven Area, including demographic
and economic trends.
Present a strengths and weaknesses report based in large part on the experiences and
perceptions of members in the area's business community.
Develop a baseline and alternate growth forecasts for the Greater South Haven Area. The
Baseline Forecast projects future economic conditions for the area, if no further initiatives
are taken by area governments and economic development organizations. The Growth
Forecasts, of which there are three, offer the alternative futures that may result from the
implementation of a comprehensive, cooperative economic development strategy.
Suggest elements of a comprehensive, cooperative economic development strategy. We
define a comprehensive, cooperative economic development strategy as one that offers
direction for area stakeholders to join in a collaborative endeavor to build a healthy economic
environment for area residents. Building on the strengths and shared goals of area residents,
businesses, and governmental units, the strategy should address community factors such as
housing, quality education, as well as economic development concerns such as adequate
industrial space and a work-ready labor force.
The study's progress was monitored by a Study Taskforce whose members included:
Al Vanderberg,
Tom Hanson,
Mike Conlisk,
Ron Hartgerink,
City of South Haven
South Haven Public Schools
Ed Matthewson,
Elaine Suppes,
Mark McClendon,
Ross Stein,
Don Maxwell,
Nancy Whaley,
Jerry Samo,
Al Ruppert,
Pullman Industries
Lakeshore Convention and Visitors Bureau
Do-It Corporation
South Haven Township
Casco Township
Geneva Township
Covert Township
Clementines
Purpose of Economic Development
Economic development has been defined in many different ways, and each has it own
limitations. We suggest that the following four key elements should be included in any definition
of economic development.
Business - If nothing else, economic development is the effort to promote area business
activities and growth.
Residents - An economic development effort should be focused on improving the economic
conditions of area's existing residents. The skills and experience of the area's existing
workforce must be taken into consideration when preparing an economic development
strategy.
Quality - Economic development efforts should be designed to enhance the quality of life for
area residents and business community. New economic activities should not cause undue
harm to the area's existing environment, cause negative spillovers onto the area's other
economic activities, or have a negative impact on the economic/social make-up of the existing
economy. Job development efforts should focus on the generation of quality jobs for area jobseekers
Fiscally Responsible - Economic development efforts must be fiscally sound. Governmental
resources are extremely limited at all levels: federal, state and local. In this tightfisted
environment, an economic development effort must stand the test of a cost-benefit analysis.
Of course, the cost of an economic development effort are much easier to document than are
the benefits. Nevertheless, thoughtful consideration regarding the probable benefits to be
gained by of any economic development effort should be made.
In summary, we propose that the Greater South Haven Area work toward the development
of a fiscally responsible economic development strategy that assists business growth that
will provide quality jobs and enhance the quality of life of area residents.
Structure of the Report
The next section provides an analysis of the economic and social characteristics of the Greater
South Haven Area. In several cases a comparative analysis is used, which contrasts the South
Haven's experience with those of similar and competing communities along Lake Michigan. The
following section offers a strengths and weaknesses report of the area based upon the six focus
groups and over twenty interviews we conducted. The complete list of individuals involved in the
study is given in Appendix A. The fourth section provides a long-term baseline forecast of the
local economy and presents different alternative growth forecasts based upon the establishment of
successful economic development initiatives. In the final section of the report, we suggest the
components that should be considered during the development of an economic development plan.
Section II
Demographic and Economic Trends
Population Characteristics
In 1994, the population of the Greater South Haven Area, which includes the City of
South Haven, South Haven Charter Township, Covert Township, Casco Township, and Geneva
Township, reached 19,457 (Table 3). After being stagnant during the 1980s, the area's population
grew at a 1.1 percent annual rate during the 1990-to-1994 period.
The area was not alone in suffering a lack of population growth during the 1980s. Many
of the townships and cities on the lakeshore lost population during the decade. As shown in Table
3, other lake shore communities from the Indiana border to northern reaches of Muskegon
County also lost population. Lakefront townships in Ottawa County are the noticeable exception.
The townships of Grand Haven, Park, and Port Sheldon grew at or greater than 2.7 percent
annual rate during the decade.
The Greater South Haven Area experienced more rapid population growth in the first half
of the 1990s. Population grew at a 1.1 percent annual rate in the first four years of the decade.
Population in the other lakeshore areas increased at a slower 0.2 percent annual pace.
The growth experienced in Park and Grand Haven Townships was due in large part to 1)
soil characteristics allowing the usage of septic tank systems and 2) location to growing local
economies. Unfortunately, soils around South Haven are not generally as suitable for septic tank
use.
While Park and Grand Haven Townships offer water and sewer services to at least some
residents, township officials did not attribute their population growth solely to these
their
of
services. Stewart Visser, Park Township Supervisor, estimates that approximately 20 percent of
Park Township residents are served by public sewer while a much greater share, up to 80 percent,
are served by water. While Mr. Visser did not believe the availability of sewers made a strong
difference, the availability of water did. Port Sheldon Township offers no water or sewer services
to its growing population base. Finally, Grand Haven Township officials expressed their belief
that their area's growth was not dependent upon their limited water and sewer services.
Employment opportunities and quality of life factors, including acceptable commuting distances to
larger urban areas such as Grand Rapids, Muskegon and Holland, play a greater role in the
population expansion of these high-growth townships than public services.
From 1980 to 1990, population in the Greater South Haven Area was stagnant. A
negative out-migration flow during the 1980s erased the area's natural rate of population increase
(births over deaths). If during the 1980s, the area's net migration was zero, it would have housed
an estimated 1,442 more individuals in 1990. According to our estimates, as shown in Table 4,
the largest number of individuals leaving the area were between the ages of 15 to 29 years and
retirees. The area's declining population of young children, less than 5 years old, is reflective of
the out-migration of young adults in the child rearing ages. The lack of job growth in the 1980s
was the most likely cause of the out-migration of young adults, while rising property values may
have encouraged retirees especially with fixed incomes to move elsewhere
Comparative
Lakeshore Communities
in Michigan
Census
Count
4/1/80
Table 3
Population Growth
Census
Count
4/1/90
South Haven Area
18,646
18,621
South Haven
South Haven Twp
Covert Twp
Geneva Twp
Casco Twp
5,943
4,174
2,706
2,984
2,839
5,563
4,185
2,855
3,162
2,856
81,555
2,839
948
2,009
4,332
1,079
3,780
Berrien County
Benton Charter Twp
Benton Harbor
Bridgman
ChikamingTwp
Grand Beach
HagarTwp
Lake Charter Twp
Lincoln Twp
Michiana
New Buffalo
New Buffalo Twp
Shoreham
Stevensville
St. Joseph
St Joseph Twp
19,457
Annual
Percent
Change
1980-1990
-0.0
Annual
Percent
Change
1990-1994
1.1
5,697
4,444
3,158
3,383
2,775
-0.7
0.0
0.5
0.6
0.1
0.6
1.5
2.6
1.7
-0.7
90,509
2,856
1,040
2,124
4,888
954
1,876
96,087
2,775
967
2,113
4,573
968
2,022
1.0
0.1
0.9
0.6
1.2
-1.2
-6.8
1.5
-0.7
-1.8
-0.1
-1.7
0.4
1.9
171,276
19,120
14,707
2,235
4,302
227
4,943
2,212
13,520
333
2,821
2,878
742
1,268
9,622
9,961
161,378
17,163
12,818
2,140
3,717
146
4,113
2,487
13,604
164
2,317
2,109
737
1,230
9,214
8,876
161,734
16,456
13,186
2,334
3,502
101
4,347
2,855
13,136
147
2,217
1,954
704
1,197
9,131
9,224
-0.6
-1.1
-1.4
-0.4
-1.5
-43
-1 8
1.2
0.1
-68
-1.9
-3.1
-01
-0.3
-0.4
-1.1
0.1
-1.0
0.7
2.2
-1.5
-8.8
1.4
3.5
-0.9
-27
-1.1
-1.9
-1.1
-0.7
-0.2
1.0
Muskegon County
FruitlandTwp
Laketon Twp
Montague
Muskegon
Muskegon Twp
North Muskegon
Norton Shores
White River Twp
Whitehall
157,589
4,168
6,327
2,332
40,823
14,557
4.024
22,025
1,215
2,856
158,983
4,391
6,538
2,276
39,809
15,302
3,919
21,755
1,250
3,027
163,436
4,728
6,857
2,470
40,639
15,373
3,809
22,061
1,317
3,310
0.1
0.5
0.3
-0.2
-0.3
0.5
-0.3
-0.1
0.3
0.6
0.7
1.9
1.2
2.1
0.5
0.1
-0.7
0.4
1.3
2.3
Ottawa County
Ferrysburg
Grand Haven
Grand Haven Twp
Holland
Park Twp
157,174
2,440
11,763
7,238
26,281
10,354
187,768
2,919
11,951
9,710
25,806
13,541
Port Sheldon Twp
Spring Lake
Spring Lake Twp
2,206
2,731
9,5 88
2,929
2,537
8,2 1 4
205,338
3,041
12,857
11,226
26,070
15,324
3,240
2,694
8,506
1.8
1.8
0.2
30
-0 2
27
29
-07
-15
2.3
1.0
1.8
3.7
0.3
3.1
2.6
15
09
Van Buren County
Covert Twp
South Haven Twp
South Haven
66,814
2,706
4,174
5,943
70,060
2,855
4,185
5,563
73,848
3,158
4,444
5,697
0.5
05
00
-07
1.3
26
15
06
Allegan County
Casco Twp
Douglas
Ganges Twp
Laketown Twp
Saugatuck
SaugatuckTwp
-
Population
Estimate
7/1/94
SOURCE Office of the State Demographer, Michigan Department of Management and Budget
Table 4
Population Growth and Estimated Outmigration
for the Greater South Haven Area
By Age Group
Population by Age Group
1 980 Actual
1990 Actual
1990 Population
Estimates Without
Migration*
Out-Migration*
Under 5 years
1 ,490
1,433
1,582
-149
5 to 9 years
1,582
1,686
1,544
142
10 to 14 years
1,692
1,502
1,550
-48
15 to 19 years
1,729
1,355
1,593
-238
20 to 24 years
1 ,473
1,004
1,619
-615
25 to 29 years
1 ,404
1,304
1,577
-273
30 to 34 years
1,318
1,491
1,488
3
3 5 to 3 9 years
1,004
1,447
1,366
81
40 to 44 years
884
1,222
1,210
12
45 to 49 years
877
969
1 ,030
-61
50 to 54 years
955
827
912
-85
55 to 59 years
927
813
865
-52
60 to 64 years
887
900
853
47
65 to 69 years
750
752
702
50
70 to 74 years
595
687
575
112
75 and over
1 ,078
1,229
1,598
-369
TOTAL
18,646
18,621
20,063
-1,442
Source: U.S. Census and estimates (*) by the W.E. Upjohn Institute
During the first half of the 1990s, the area's migration trends reversed, and the area's
population grew at a faster than natural rate as shown in Table 5. According to U.S. Bureau of
the Census, the area's population grew 1.8 percent in 1991, of which only a third could be
explained by natural growth. The area's population increases approximately by 100 individuals
naturally (births over deaths) each year from 1990 to 1994. Net Migration was positive in 1991,
1992 and 1993, before turning slightly negative in 1994.
Table 5
Population Growth 1990 to 1994
for the Greater South Haven Area
Components of Change
YEAR
Population
Change Due to
Natural Increase
(Births - Deaths)
Net Migration
1990
18,621
1991
18,949
105
223
1992
19,121
99
73
1993
19,397
100
176
1994
19,457
105
-45
Source: U.S. Bureau of the Census and the W.E. Upjohn Institute
As shown in Table 6, 78 percent of the area's residents are white and not Hispanic,
compared to nearly 90 percent for all of Van Buren County. The area's non-Hispanic AfricanAmerican community represents nearly 18 percent of the area's population and accounts for nearly
72 percent of the county's entire non-Hispanic African-American population. The area's black
community is centered in Covert Township where black, non-Hispanics represent 48 percent of
the population.
During the 1980s, the racial composition of the Greater South Haven Area changed very
little. In 1980, non-Hispanic African-Americans represented 19 percent of the area population
and non-Hispanic whites accounted for 78.6 percent. The area's Hispanic population remained
small during the 10 year period, rising from representing 1.3 percent to 2.8 percent of the area
population.
Family structure in the Greater South Haven Area has suffered the same turmoil as
nationwide, with an increasing share of families being kept by only one adult. In 1990, nearly 20
percent of the area's families did not have a husband present, up from 13.3 percent in 1980. While
the number of families in the area remained constant during the 1980s, the number of femaleheaded families increased nearly 50 percent from 658 in 1980 to 978 in 1990. The number of
married-couple families fell by nearly 10 percent during the ten years. County wide, the total
number of families rose 7.4 percent with the number of married-coupled families increasing a
slight 0.5 percent and female-headed families without a husband rising by nearly 40 percent.
The deterioration of the area's family structure reflects nationwide trends and should not
be taken as a problem unique to the area. At the same time, it should not be taken as unimportant
either, since a strong correlation exists between single-parent households and poverty.
Table 6
1990 Racial Composition
Total
Population
White NonHispanic
Black NonHispanic
Hispanic
Other
South Haven
5,563
4,596
(82.6)
841
(15.1)
55
(1.0)
71
(1.3)
CascoTwp.
2,856
2,539
(88.9)
128
(4.5)
143
(5.0)
46
(1.6)
Covert Twp.
2,855
1,332
(46.7)
1,368
(47.9)
135
(4.7)
20
(0.7)
Geneva Twp.
3,162
2,574
(81.4)
444
(14.0)
110
(3.5)
34
(1.1)
South Haven Charter Twp.
4,185
3,498
(83.6)
552
(13.2)
83
(2-0)
52
(12)
18,621
14,539
(78.1)
3,333
(17.9)
526
(2.8)
223
(1.2)
27
23.3
71.8
23.3
270
70,060
62,337
(89.0)
4,643
(6.6)
2254
(32)
826
(1.2)
South Haven Share of County
Van Buren County
Source: 1990 Census (Percentage)
Income Characteristics
A greater percent of the residents of the Greater South Haven Area lived below the
poverty level in 1990 than in other lakeshore areas. As shown in Table 7, nearly 20 percent of the
Greater South Haven Area residents live below the poverty level compared to 13.4 percent in
other lakeshore areas. Moreover, the number of individuals living in poverty grew by 26.7
percent in the Greater South Haven Area in contrast to a 18.1 percent increase in the other Lake
Michigan communities. In fact, the five governmental units of the Greater South Haven Area
ranked in the top 10 of the 42 lakeshore communities according to the percent of individuals
living below poverty. Covert Township was second only to Benton Harbor (Table 8).
Not surprisingly, a greater number of the Greater South Haven Area households are poor.
In 1989, 55.2 percent of the area's households earned less than $25,000 compared to 43.0 percent
in other lakeshore areas (Table 9). Moreover, the median income of area's five governmental
units fall in the bottom third of lakeshore communities (Table 10).
Table 7
Poverty Status of Area Residents Comparative Analysis, 1979-1989
1979
Number
of Persons
South Haven Area
2,868
Poverty
Rate
Number
of Persons
Poverty
Rate
Increase in number
of
persons living
below poverty
r
15.6
3,633
19.8
26.7
1989
South Haven
778
13.6
901
16.9
15.8
South Haven Twp
563
13.4
721
16.9
28 1
Covert Twp
782
29.5
1,040
38.2
33.0
Geneva Twp
481
16.1
485
15.4
0.8
Casco Twp
264
9.3
486
17.1
84.1
24.2
84.1
6,795
8.5
Casco Twp
264
9.3
8,442
486
9.5
17.1
Douglas
107
11.3
123
13.1
15.0
7.0
-39.3
109.4
Allegan County
12.2
148
LaketownTwp
64
1.6
134
3.0
Saugatuck
93
8.6
106
10.9
14.0
322
8.6
215
7.6
-33.2
22,683
4,227
13.5
22.3
23,281
4.696
14.7
27.6
2.6
11.1
30.1
Ganges Twp
Saugatuck Twp
Berrien County
Benton Charter Twp
244
5,667
387
7,370
58.0
Bridgman
1 16
5.8
190
9.3
63.8
Chikaming Twp
479
11.2
201
5.4
-58.0
12
5.2
4
2.7
-66.7
HagarTwp
819
16.6
353
8.6
-56 9
Lake Charter Twp
115
51
154
6.2
339
Lincoln Twp
712
5.3
472
3.5
-33.7
26
76
8
49
-69 2
New Buffalo
218
7.8
185
8.0
-15 1
New Buffalo Twp
161
5.6
271
115
68.3
Shoreham
21
2.8
48
65
128.6
Stevensville
67
5.3
48
3.9
-28.4
St. Joseph
569
6.2
624
7.2
9.7
St Joseph Twp
322
3.2
347
3.6
7.8
19,011
123
23,506
15 J
23.6
249
6.0
249
5.7
0.0
-10.9
Benton Harbor
Grand Beach
Michiana
Muskegon County
Fruitland Twp
Laketon Twp
322
5. 1
287
4.4
Montague
210
9.2
206
9.1
-1.9
Muskegon
7,484
19.3
9,615
26.5
28.5
Muskegon Twp
1,374
9.6
1,852
12 3
34.8
125
32
143
38
144
1,030
4.7
1,570
7.2
52 4
87
7.2
43
3.4
-50.6
185
67
242
8.3
30.8
9,275
6.0
10,892
6.0
17.4
246
8.4
86.4
280
North Muskegon
Norton Shores
White River Twp
Whitehall
Ottawa County
Ferrysburg
132
5.5
Grand Haven
862
7.5
1,103
96
Grand Haven Twp
23 1
32
259
27
121
2,128
8.6
2,960
128
39 1
280
27
265
20
-54
-66 7
Holland
Park Twp
66
30
22
07
Spring Lake
142
52
138
55
-28
Spring Lake Twp
460
48
372
35
-19 1
Port Sheldon Twp
Source U S Census
Table 8
Ranking of the Percentage of Individuals Living in Poverty, 1 979- 1 989
1979
Poverty
Rate
1989
Poverty
Rate
Increase in
number of
individuals
living below
poverty
South Haven Area
South Haven
South Haven Twp
Covert Twp
Geneva Twp
Casco Twp
15.6
13.6
13.4
29.5
16.1
9.3
19.8
16.9
16.9
38.2
15.4
17.1
Benton Harbor
Benton Charter Twp
Muskegon
Douglas
Holland
Muskegon Twp
New Buffalo Twp
Saugatuck
Grand Haven
Bridgman
Montague
Hagar Twp
Ferrysburg
Whitehall
New Buffalo
Saugatuck Twp
St. Joseph
Morion Shores
Ganges Twp
Shoreham
Lake Charter Twp
7ruitland Twp
Spring Lake
Chikaming Twp
vlichiana
âketon Twp
Stevensville
Morth Muskegon
St. Joseph Twp
Jncoln Twp
Spring Lake Twp
White River Twp
âketown Twp
Grand Haven Twp
Grand Beach
Dark Twp
Port Sheldon Twp
38.7
22.3
19.3
11.3
8.6
9.6
5.6
8.6
7.5
58
9.2
1 6.6
5.5
6.7
7.8
8.6
62
4.7
12.2
2.8
5. 1
6.0
5.2
11.2
7.6
5. 1
5.3
3.2
3.2
5.3
4.8
7.2
1 .6
3.2
5.2
2.7
30
58.0
27.6
26.5
13.1
12.8
12.3
11.5
10.9
9.6
9.3
9.1
8.6
8.4
8.3
8.0
7.6
7.2
7.2
7.0
6.5
6.2
5.7
5.5
5.4
4.9
4.4
39
3.8
3.6
3.5
3.5
3.4
3.0
2.7
27
20
0.7
Source U S Census
10
Rankings
26.7
15.8
28 1
33 0
0.8
84.1
1989
Poverty
Rate
5
8
7
2
9
6
Percent
Increase
17
18
15
11
26
4
30. 1
11.1
28.5
15.0
39 1
348
683
14.0
28 0
63 8
-19
-56.9
86.4
308
-15 1
-33.2
9.7
52.4
-393
1286
33 9
0.0
-2.8
-58.0
-69.2
-10.9
-28.4
14.4
78
-337
-191
-50.6
109.4
12.1
-66 7
-54
-66 7
1
3
4
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
13
23
14
19
8
9
5
21
16
6
28
39
3
12
32
35
24
7
37
1
10
27
29
40
43
31
34
20
25
36
33
38
2
22
42
30
41
Table 9
Distribution of Households by Income Groups, 1989
Less than
$5,000
$5,000$9,999
$10,000$14,999
$15,000$24,999
$25,000$34,999
$35,000$49,999
$50,000$74,999
$75,000$99,999
$100,000
or more
South Haven Area
Percent of Household
Cumulative
South Haven
South Haven Twp
Covert Twp
Geneva Twp
Casco Twp
548
7.7%
7.7%
135
89
198
92
34
1,039
14.7%
22.4%
351
175
217
101
195
904
12.8%
35.2%
234
209
151
174
136
1,419
20.0%
55.2%
312
392
209
243
263
1,232
17.4%
72.6%
378
326
150
233
145
1,083
15.3%
87.9%
359
247
57
236
184
546
7.7%
95.6%
264
78
45
50
109
127
1.8%
97.4%
64
30
31
2
183
2.6%
100.0%
83
42
24
10
24
Other Lakeshore Areas
Percent of Household
Cumulative
5247
5.5%
5.5%
10410
10.9%
16.3%
8496
8.9%
25.2%
17061
17 8%
43.0%
16055
16.7%
59 7%
18207
19.0%
78.7%
13587
14.2%
92.8%
3583
3.7%
96.6%
3288
3.4%
100.0%
Source- U S Census
__
Table 10
Median Household Income
Comparison Analysis, 1 979- 1 989
Rankings
Median Household Income
Comparative Lakeshore
Communities in Michigan
South Haven
South Haven Twp
Geneva Twp
Casco Twp
Covert Twp
Grand Beach
Park Twp
Port Sheldon Twp
St. Joseph Twp
Grand Haven Twp
Laketown Twp
White River Twp
Lincoln Twp
North Muskegon
Shoreham
Laketon Twp
Spring Lake Twp
Ferrysburg
Lake Charter Twp
Fruitland Twp
Norton Shores
Michiana
Hagar Twp
Holland
New Buffalo Twp
New Buffalo
Saugatuck Twp
Spring Lake
Bridgman
Chikaming Twp
Grand Haven
St. Joseph
Montague
Ganges Twp
Whitehall
Stevensville
Muskegon Twp
Douglas
Saugatuck
Muskegon
Benton Charter Twp
Benton Harbor
Source U S Census
PpiYVMit
1979
1989
14,038
16,347
13,665
15,698
10,710
18,611
23,581
24,527
24,312
23,020
22,197
19,464
21,364
22,939
22,031
22,184
20,214
19,788
18,158
19,867
20,906
21,875
16,349
17,176
17,718
17,827
15,740
18,247
17,983
15,446
16,117
15,151
18,638
15,923
16,639
17,024
16,980
14,963
15,182
12,045
12,390
9,074
25,967
23,635
22,750
21,743
14,265
50,000
47,220
45,313
41,303
41,140
39,898
37,955
37,771
37,281
37,083
37,066
36,222
35,643
35,304
35,064
33,646
33,438
31,206
30,469
30,250
30,065
30,023
29,811
29,293
29,215
28,989
28,566
28,170
28,147
26,359
26,207
25,058
24,022
23,792
18,748
18,240
8,866
12
Change
185.0
144.6
166.5
138.5
133.2
268 7
200 2
184 7
169. 9
178.7
179. 7
1950
176. 8
162. 5
168. 3
167. 1
179. 2
180. 1
194. 4
176. 5
160. 9
152. 9
190. 9
177. 4
170. 7
168.6
190. 7
163.4
162.9
189. 1
179. 9
188. 5
151. 1
1768
158.4
153.9
147.6
160.5
156.7
1557
1472
977
1989
Median
Income
Growth
9
32
39
36
25
37
40
38
41
41
1
1
22
10
3
21
4
15
5
13
6
3
7
17
8
28
9
23
10
24
11
14
12
11
13
4
14
19
15
29
16
35
17
5
18
16
19
20
20
22
21
6
22
26
23
27
24
7
25
12
26
8
27
36
28
18
29
31
30
34
31
37
33
30
34
32
35
33
39
38
40
42
42
Educational Achievement
Many residents are hindered by a lack of education. As shown in Table 11, just over 30
percent of persons 25 years of age or older living in the Greater South Haven Area have less than
a high school education. For an additional 32.3 percent, formal education stopped at high school.
The education achievement levels of the area's residents are below that of other lakeshore
communities, as shown in Table 11. Not surprisingly, the faster growing areas also have the
higher education achievement levels. For example, residents of Port Sheldon, Park and Grand
Haven Townships, the fastest growing townships on the shores of Lake Michigan, are clearly
better educated than are the residents in the Greater South Haven Area.
Equally disturbing according to the 1990 Census, young adults, 18 to 24 years of age, living in
the Greater South Haven Area are falling educationally behind their counterparts in the other
lakeshore areas (Table 12). Nearly 40 percent of the study area's 18 to 24 year olds ended their
formal education with high school, compared to just only 30 percent in the other shoreline areas.
Moreover, only 21.3 percent of the young adults in the area have some college or an associate
degree compared to 38 percent in the other areas.
13
..
, . ,
. j,. , .
Table 1 1
Education Achievement Levels of Persons 25 years and over
(Percentage")
Associates Degree
Less than High school Some college
,
, .
,. , , ,
no degree
graduate
Academic
high school
Occupational
Bachelors
_ ,
Graduate or
Professional
South Haven Area
South Haven
South Haven Twp
Covert Twp
Geneva Twp
CascoTwp
30.5
24.3
27.7
48.7
28.5
32.0
32.3
30.3
36.5
27.9
35.1
31.2
17.2
16.5
18.1
13.5
22.5
14.9
3.1
4.2
2.3
1.6
3.0
3.8
2.3
3.0
30
1.5
1.4
1.5
9.5
14.0
7.6
3.7
6.8
12.0
5.1
7.7
4.9
3.0
2.8
4.5
Other Shoreline Areas
23.4
30.4
20.3
4.4
3.6
12.1
6.4
Allegan County
LaketownTwp
SaugatuckTwp
25.6
15.4
22.2
39.5
33.9
32.5
16.9
23.7
18.6
3.8
4.6
3.3
2.3
4.6
28
7.9
12.3
13.6
4.0
5.6
7.0
Berrien County
Benton Charter Twp
Benton Harbor
ChikamingTwp
HagarTwp
Lincoln Twp
St. Joseph
St. Joseph Twp
25.3
39.1
52.6
19.5
28.3
15.0
15.6
14.3
31.9
30.9
24.2
33.9
36.9
27.8
252
277
19.1
15.6
16.6
19.0
17.9
19.4
234
214
4.1
3.6
1.5
33
5.6
6.7
33
46
2.9
27
1.8
19
1.4
41
43
46
10.4
4.9
2.2
14.7
8.0
187
163
18.0
6.3
3.2
1.1
7.6
1.9
8.3
118
95
Muskegon County
FruitlandTwp
LaketonTwp
Muskegon
Muskegon Twp
North Muskegon
Norton Shores
Whitehall
25.8
20.4
13.8
31.3
27.4
15.3
19.2
20.8
34.2
48.2
31.7
31.8
40.9
20.6
30.1
37.2
21.0
34.6
24.5
22.3
19.5
18.7
20.7
22.4
4.2
8.8
6.1
3.1
3.6
4.7
4.7
3.7
3.7
7.9
6.4
3.4
2.9
61
4.8
2.9
7.7
20.0
11.9
5.7
3.2
22.8
13.6
8.7
3.5
7.0
5.7
2.5
2.4
11.8
6.9
4.4
Ottawa County
Ferrysburg
Grand Haven
Grand Haven Twp
Holland
Park Twp
PortSheldon
Spring Lake
Spnng Lake Twp
20.2
16.1
19.8
1 4.5
26.4
119
20.3
176
140
34.0
30.1
31.3
30 1
26.2
295
278
281
292
18.8
18.1
21.5
21 .5
17.9
199
174
196
195
5.2
7.4
4.1
53
4.5
4.5
3.8
53
73
30
36
33
39
2.5
3.8
56
3.6
39
12.6
15.2
11.7
16.5
145
20.3
153
178
164
6.2
9.5
8.2
82
8.0
10.1
9.8
80
9.8
Source 1 990 U S Census
14
in Michigan
Table 12
Education Achievement Levels of Persons 18 to 24 Years Old
(Percentage)
Some college
High school
Total
or associate
gradu*ite only
18-24 years
Bachelor's
1*440
444
382
208
224
182
39.5
45.9
41.1
26.9
42.9
30.8
21.3
16.0
27.7
14.4
25.9
22.5
4.9
6.8
1.8
0.0
14.3
1.1
25,148
30.5
38.2
6.4
7,860
439
1 46
39.5
23.2
51.4
28.7
36.2
32.9
3.9
13.0
6.8
Berrien County
Benton Charter Twp
Benton Harbor
Chikaming Twp
Hagar Twp
Lincoln Twp
St Joseph
St. Joseph Twp
1 5,5 1 4
1 ,789
1 ,43 3
300
390
1,035
914
623
31.9
31.9
35.0
19.7
41.8
32.7
30.1
25.8
34.4
33.8
17.7
27.0
17.9
38.6
269
34.4
57
15
1.3
0.0
4.9
12.7
228
135
Muskegon County
Fruitland Twp
Laketon Twp
Muskegon
Muskegon Twp
North Muskegon
Norton Shores
Whitehall
14,538
295
449
4,756
1 ,264
22 1
1 ,6 1 6
202
35.0
26.8
25.8
32.3
41.1
24.9
30.1
43.6
35.2
42.4
40.8
35.2
35.3
45.2
40.4
42.6
34
5.1
13.8
2.0
1.2
72
67
2.0
Ottawa County
Ferrysburg
Grand Haven
Grand Haven Twp
Holland
Park Twp
PortSheldon
Spring Lake
Spring Lake Twp
2 1 ,797
277
1,039
744
4,803
1,057
221
205
930
30 8
22.0
32.2
28.2
23.0
44.4
22.2
220
28.8
46.4
44.8
35.2
487
51.3
30.2
367
395
49 6
68
4.7
6.4
11.0
87
96
63
34
35
South Haven Area
South Haven
South Haven Twp
Covert Twp
Geneva Twp
CascoTwp
Other Shoreline Areas
Allegan County
Laketown Twp
Saugatuck Twp
Source 1990 US Census
15
Labor Force Characteristics
Low educational achievement can make it more difficult for a person to find employment, as
well as, earn a decent income. In 1990 and 1980, the unemployment rate in the Greater South
Haven Area remained well above the average for other lakeshore areas, as shown in Table 13. In
1990, the area's unemployment rate stood at 11 percent, well above the 6.9 percent, which is the
average unemployment rate for the other areas. Residents in Covert Township faced an 18.2
percent unemployment rate in 1990. MESC currently estimates that unemployment n the Greater
South Haven area stands at 9.0 percent compared to 6.5 percent for all of Van Buren County and
4.2 percent for the state.
Poor labor market conditions may also be contributing to the low labor force participation rate
of individuals 16 years or older in the Greater South Haven Area. As shown in Table 13, 58.9
percent of all individuals, 16 years or older in the area were in the labor market compared to 63.6
percent in other lake shore communities in 1990.
The relatively high unemployment rates in the area may be causing wage expectations of job
seekers to be lower than in other areas. According to data recently developed by the Michigan
Employment Security Commission (MESC), wage expectations for South Haven andVan Buren
County job seekers for benchwork, processing, machine trade, structural work and professional
occupations are substantially below the wage expectations ofjob seekers in surrounding areas as
shown in Tables 14 through Table 18. For instance 53.5 percent of the individuals seeking
benchwork occupations, registered with MESC employment services at South Haven-based Van
Buren County MESC branch offices, have minimum pay demands of $5.50 or less per hour. Of
the registered job applicants in the Dowagiac Grand Rapids, Holland and Kalamazoo area labor
markets, fewer than 40 percent would accept wage offers that low.
In fact, employers in the Greater South Haven Area may be enjoying a wage advantage over
employers in surrounding areas, as individuals of similar degree attainment and work experience
appear to be willing to accept lower wage offers. For example, employers looking for workers in
machine trade occupations in South Haven will be drawing from a labor pool of whom over 63
percent will accept $7.00 per hour or less compared to only 44.7 percent in Holland
and 45.3 percent in Kalamazoo according to MESC. Surprisingly, the average job seekers in the
South Haven area looking for production related occupations have nearly the same level of
educational achievement and experience as registered job applicants in the two other areas.
Hence, although the area's overall educational achievement level is low relative to
surrounding areas, individual looking for production related occupations have education
levels that are similar to other market areas.
In terms of employment growth from 1980 to 1990, the Greater South Haven Area (Table 13)
nearly matched the 8.0 percent rate averaged rate by other lakeshore areas. The problem facing
area residents may not be a question of employment growth but the quality of the jobs being
offered. From 1980 to 1990, the Greater South Haven Area lost 24.2 percent of its
manufacturing jobs, while picking up 16.1 percent more retail positions and 40.8 percent more
16
Table 13
Labor Market Analysis
(percentages)
1980
1990
1980
1990
Employment
Growth
1990-1980
1 2.5
10.4
12.6
16.9
12.1
13.1
11.0
10.6
9.2
18.2
9.0
11.6
56.4
64.2
55.8
45.6
56.9
56.1
58.9
60.5
58.1
53.5
63.6
58.1
7.9
-1.9
3.2
20.4
27.5
5.8
9J
6.9
61.7
63.6
8.0
Allegan County
CascoTwp
Douglas
Ganges Twp
Laketown Twp
Saugatuck
Saugatuck Twp
8.5
13.1
11.1
11.9
5.3
7.6
8.7
6.1
11.6
7.4
7.2
2.9
6.4
6.3
63.1
56.1
65.1
63.2
64.1
64.6
60.5
672
58.1
57.8
65.3
662
66 5
64.1
23.1
5.8
67
15.9
25.4
-3.8
-13.9
Berrien County
Benton Charter Twp
Benton Harbor
Bridgman
Chikaming Twp
Grand Beach
HagarTwp
Lake Charter Twp
Lincoln Twp
Michiana
New Buffalo
New Buffalo Twp
Shoreham
Stevensville
St Joseph
St. Joseph Twp
10.6
14.6
31.9
64
76
1 9
120
6.4
67
5.4
9.2
8.3
3.7
7.2
7.6
4.1
73
13.3
28.9
4.5
3.9
0.0
77
5.0
3.6
24
56
5.6
2.9
2.2
2.3
4.1
61.8
55.6
53.6
60.8
53.3
556
69.0
61.1
70.6
66 1
60.6
58.8
70.1
68.4
60.3
66.6
64.3
58.3
47.9
61.2
62.3
48.1
65.9
669
71 2
56 2
69 3
60.0
64.0
64.1
61.2
65.9
5.5
-2.0
-15.6
3.8
11.3
-373
-11.6
27.0
10.7
-54 3
67
-9.0
-5.6
-27
5.1
-1.0
Muskegon County
FruitlandTwp
Laketon Twp
Montague
Muskegon
Muskegon Twp
North Muskegon
Norton Shores
White River Twp
Whitehall
10.9
11.6
7.6
90
11.2
10.0
3.4
9.0
10.0
109
8.6
4.6
4.9
7. 1
11.3
96
3 1
5 1
4.9
88
59.6
65.1
69.3
62.0
53.5
62.9
54 9
63 6
60.2
58.7
60.2
67.3
70.5
65.2
51.4
62 4
53.4
66.7
66 5
58 3
6.3
21.0
11 1
47
-44
67
-6 3
10.9
28 3
48
5.9 '
65
7.6
89
58
32
4.1
71
5.7
49
53
40
66
84
72
3.6
29
42
66.9
66.5
609
71 1
63 7
712
69.2
62 6
686
72.7
75 1
614
746
67 7
797
77 5
65 0
713
34 3
43 3
6.2
509
-02
491
57 1
60
242
Comparative
in Michigan
South Haven Area
South Haven
South Haven Twp
Covert Twp
Geneva Twp
CascoTwp
Ottawa County
Ferrysburg
Grand Haven
Grand Haven Twp
Holland
Park Twp
Port Sheldon
Spring Lake
Spring Lake Twp
Source U S Census
Participation Rate
Unemployment Rates
-
17
Table 14
Benchwork Occupations
South
Haven
Applicants
1,284
Holland
9,085
Benton
Harbor
2,026
Grand
Rapids
Dowagiac
K.alamazoo
Vluskegon
1,918
4,262
4,214
1,599
19.6
39.9
31.6
8.9
100
37.2
37.4
22.3
3.1
100
Minimum Pay/Hourly
$5.50 or less
$5.51 -$7.01
$7.01 -$10.00
More than $10.00
Total
53.5
30.9
13.4
2.1
100
36.4
34.7
24.0
5.0
100
(Percentage of Applicants)
41.2
43.4
37.1
33.2
35.6
36.3
18.2
19.1
21.6
4.3
5.0
5.1
100
100
100
Education in Years
Less than 12
12
13-15
16
More than 16
Total
22.1
64.1
12.9
0.7
0.2
100
22.8
62.6
12.7
1.3
0.5
100
22.4
63.8
12.6
0.8
0.4
100
17.2
59.6
200
2.6
0.7
100
152
65.2
17.9
1.3
0.4
100
22.5
61.0
13.5
2.3
0.7
100
25.5
62.5
10.6
0.9
0.5
100
Degree
No Degree
High School/GED
Certificate
Associate's
Bachelor's
Master's
Doctorate
Total
24.6
61.3
8.8
4.2
1.1
00
0.0
100
29.7
61.4
4.1
3.1
1.4
0.2
0.1
100
22.0
67.6
5.9
3.3
1.0
0.2
0.0
100
16.8
64.9
7.9
6.6
3.3
0.4
0.0
100
15.2
69.1
8.4
5.2
1.8
0.2
0.0
100
23.7
61.7
6.2
5.0
2.8
0.4
0.0
100
24.6
67.1
5.1
2.0
1.0
0.2
0.0
100
Months of Experience
Less than 6
6-11
12-23
24-48
More than 48
Total
37.7
9.6
11.1
17.4
24.2
100
36.2
7.0
11.8
10.9
34.2
100
32.2
10.4
11.6
138
32 1
100
37.1
15.5
167
12.8
17.9
100
44.9
117
117
11.2
204
100
21.8
10.0
26.3
140
278
100
43.8
12.4
124
122
19.2
100
MOTE: "Applicants" represents a cumulative total of both active and inactive candidates.
SOURCE: Michigan Employment Security Commission, September and November, 1995 reports.
18
Table 15
Processing Occupations
South
Haven
Applicants
1,536
Benton
Harbor
Holland
2,357
1,219
Kalamazoo Muskegon
Grand
Rapids
Dowagiac
2,065
1,065
1,045
40.7
44.9
32.5
21.0
34.4
28.2
21.8
23.6
24.6
6.4
12.3
9.6
100
100
100
19.5
31.2
39.4
9.8
100
31.8
29.5
31 1
7.7
100
1,903
Minimum Pay/Hourly
$5.50 or less
$5.51 -$7.01
$7.01 -$10.00
More than $10.00
Total
61.8
23.4
12.8
2.0
100
35.2
26.3
29.0
9.5
100
Education in Years
Less than 12
12
13-15
16
More than 16
Total
33.8
55.4
9.5
1.3
0.0
100
35.8
53.7
80
2.0
0.6
100
31.5
58.4
9.1
0.5
0.6
100
17.7
602
17.7
37
0.8
100
25.1
60.9
12.3
1.3
0.4
100
25.6
586
12.1
2.8
0.9
100
33.4
56.8
8.6
08
0.4
100
Degree
No Degree
High School/GED
Certificate
Associate's
Bachelor's
Master's
Doctorate
Total
36.3
54.6
5.7
2.2
1.3
0.0
0.0
100
40.9
51.4
2.8
2.4
2.3
0.2
0.1
100
30.1
63.6
3.8
1.8
0.6
0.2
0.0
100
18.0
64.9
6.8
5.3
4.4
0.4
0.2
100
25.8
62.0
6.9
3.5
1.5
0.2
0.1
100
27.6
57.9
5.3
5.2
3.3
0.7
0.1
100
33.7
60.1
3.3
1.9
1.0
0.1
0.0
100
Less than 6
6-11
12-23
24-48
More than 48
Total
389
14.8
126
132
206
100
41.8
7.9
119
10.6
27.8
100
25.4
135
141
13.6
33.4
100
33.4
155
164
151
196
100
408
97
9.1
10.3
301
100
21.7
113
228
166
27.6
100
27.0
164
133
13.6
29.6
100
"JOTE: "Applicants" represents a cumulative total of both active and inactive candidates
SOURCE: Michigan Employment Security Commission, September and November. 1995 reports.
19
Table 16
Machine Trades Occupations
South
Haven
Applicants
1,428
Benton
Harbor
Holland
7,785
\
Kalamazoo Muskegon
Grand
Rapids
Dowagiac
3,921
3,369
2,006
258
19.1
24.4
26.7
26.2
29.8
31.8
37.8
32.3
15.6
16.9
13.5
100
100
100
12.5
27.5
38.9
21.0
100
15.6
33.1
38.1
13.3
100
2,554
3,153
Minimum Pay/Hourly
$5.50 or less
$5.5 1 -$7.01
$7.01 -$10.00
More than $10.00
Total
34.9
29.9
25.8
9.3
100
18.6
26.1
39.1
16.2
100
Education in Years
Less than 12
12
13-15
16
More than 16
Total
17.8
667
139
1.4
03
100
191
64.4
141
1.8
05
100
193
64.0
14.6
1.8
0.2
100
11.9
64.7
19.9
27
08
100
14.0
673
169
15
0.3
100
19.7
60.2
16.8
2.7
0.5
100
20.1
62.4
15.1
1.8
0.5
100
Degree
No Degree
High School/GED
Certificate
Associate's
Bachelor's
Master's
Doctorate
Total
19.1
67.2
7.5
4.6
1.4
0.2
0.0
100
26.8
62.1
5.0
4.3
1.7
0.1
0.0
100
185
69.0
7.7
35
1.3
0.1
0.0
100
12.8
68.5
8.6
6.8
2.7
0.6
0.0
100
13.0
69.7
9.9
5.4
1.7
0.2
0.1
100
21.0
61.1
7.8
6.4
3.4
0.3
0.1
100
19.8
67.8
6.1
4.1
20
0.2
0.0
100
Less than 6
6-11
12-23
24-48
More than 48
Total
23.5
9.9
11.2
14.5
409
100
262
5.8
103
120
457
100
16.4
9.9
124
180
434
100
22.8
10.2
14.4
155
371
100
24.0
9.1
116
14.0
412
100
17.0
101
203
152
374
100
244
12.1
124
153
35.8
100
ÔTE' "Applicants" represents a cumulative total of both active and inactive candidates
SOURCE: Michigan Employment Security Commission, September and November, 1995 reports
20
Table 17
Structural Work Occupations
South
Haven
Applicants
1,507
Benton
Harbor
Holland
6,764
Kalamazoo Muskegon
Grand
Rapids
Dowagiac
3,480
3,897
2,195
21.3
19.1
16.7
23.6
21.5
21.3
35.9
32.9
35.3
19.2
26.6
26.7
100
100
100
8.9
18.7
42.6
29.8
100
10.7
24.4
40.8
24.0
100
2,393
4,536
Minimum Pay/Hourly
$5.50 or less
$5.51 -$7.01
$7.01 -$10.00
More than $10.00
Total
36.5
28.5
26.9
8.1
100
15.5
17.7
39.5
27.3
100
Education in Years
Less than 12
12
13-15
16
More than 16
Total
22.1
64.9
11.5
1.2
0.4
100
19.9
63.6
13.9
2.1
0.6
100
20.9
60.1
16.5
1.7
0.9
100
16.9
59.9
19.5
30
0.6
100
16.6
63.7
17.2
20
0.5
100
19.7
59.9
16.1
3.3
1.0
100
24.2
59.6
13.9
1.6
0.7
100
Degree
No Degree
High School/GED
Certificate
Associate's
Bachelor's
Master's
Doctorate
Total
23.1
64.0
6.9
4.6
1.2
0.3
0.0
100
27.5
60.6
4.6
5.1
1.9
0.3
0.0
100
20.2
64.6
7.6
5.7
1.5
04
0.0
100
18.4
62.5
8.9
6.8
3 1
02
0.1
100
16.3
65.5
10.0
5.8
2.1
0.2
0.0
100
22.3
60.3
5.9
6.9
3.9
0.5
0.2
100
23.9
64.2
6.6
3.7
1.5
0.2
0.0
100
Vlonths of Experience
Lessthan6
6-11
12-23
24-48
More than 48
Total
21.1
9.4
14.0
18.3
37.2
100
23.4
6.4
10.0
128
47.3
100
17.0
10.9
9.7
168
456
100
19.5
13.8
15.1
158
358
100
25.2
9.5
10.9
14.0
404
100
14.5
8.6
21.3
14.2
413
100
19.6
12.5
11.5
16.5
39.9
100
4OTE: "Applicants" represents a cumulative total of both active and inactive candidates.
SOURCE: Michigan Employment Security Commission, September and November. 1995 reports
21
Table 18
Professional, Technical and Managerial Occupations
Benton
South
Harbor Kalamazoo Muskegon
Holland
Haven
Applicants
1,325
6,983
Grand
Rapids
Dowagiac
4,380
7,544
169,200
152
16.6
15.8
16.4
15.4
16.3
32.7
32.8
34.1
35.7
35.1
33.8
100
100
100
16.3
12.2
32.0
39.5
100
11.6
18.6
30.5
39.3
100
3,182
5,975
Minimum Pay/Hourly
$5.50 or less
$5.51 -$7.01
$7.01 -$10.00
More than $10.00
Total
29.1
25.6
31.0
14.4
100
14.2
14.1
32.2
39.6
100
Education in Years
Less than 12
12
13-15
16
More than 16
Total
2.7
40.0
31.0
19.4
6.9
100
2.8
40.3
23.3
21.7
11.9
100
2.4
29.6
29.5
25.3
13.2
100
1.7
24.5
27.8
310
15.1
100
1.9
30.2
31.6
239
12.4
100
2.0
28.0
26.2
29.8
14.0
100
3.1
37.9
30.4
19.1
9.4
100
Degree
No Degree
High School/GED
Certificate
Associate's
Bachelor's
Master's
Doctorate
Total
3.9
42.3
11.7
15.6
20.2
5.4
0.8
100
10.3
42.0
5.2
11.0
23.4
6.8
1.2
100
6.1
37.4
7.7
14.3
25.8
7.8
0.9
100
2.9
29.8
7.0
13.0
35.2
9.8
2.1
100
2.4
35.9
9.1
16.2
27.6
7.6
1.2
100
2.7
30.3
6.6
14.2
34.3
10.0
1.8
100
4.0
45.9
8.3
13.9
22.9
4.3
0.6
100
Less than 6
6-11
12-23
24-48
More than 48
Total
25.5
6.7
10.9
16.8
40 1
100
25.9
4.6
9.5
12.4
47.5
100
18.4
7.6
10.5
16.9
46.7
100
17.7
9.8
13.5
18.0
410
100
19.2
6.3
9.3
133
519
100
11.8
7.2
18.4
16.3
463
100
16.1
8.7
9.6
14.9
50.6
100
MOTE: "Applicants" represents a cumulative total of both active and inactive candidates
SOURCE. Michigan Employment Secuntv Commission, September and November, 1995 reports
22
professional services (Table 19). Contrary to common belief, South Haven problems are not due
to low-wage tourism jobs (primarily in retail trade and business services) replacing higher paying
factory jobs. Indeed, professional services, including health and education, recorded the greatest
employment growth during the decade, 40.8 percent, while employment at area retailers grew at a
rate, well below the county's rate.
The above data suggest that a major problem facing the Greater South Haven Area may be a
growing mismatch between area job openings and the skills of the unemployed. Former factory
workers with no more than a high school diploma are ill-suited to fill many of the positions
available in the area's professional services sector. Such a mismatch of jobs and skills of the
unemployed would also explain the relatively low wage expectations of area production workers,
shown in Tables 14 through 18 above, as too many displaced factory workers compete for too
few openings. Unfortunately, it is possible that even with an increase in manufacturing job
openings, the skills of the more long-term unemployed may be out-of-date or insufficient in the
modern workplace.
Table 19
Employment Levels and Change
1990-1980
(by Place of Residence)
Greater South
Haven Area
Percent Change
Van Buren
Percent
Change
Michigan
Percent
Change
Industry
Greater South
Haven Area
1990 workers
TOTAL
7,195
7.9%
18.7%
11.1%
Agricultural
460
27.4%
-4 3 %
14.2%
Construction
411
18.1%
26.6%
32.3%
Manufacturing
1,767
-24.2%
-3.7%
-9.7 %
Retail
1,087
16.1%
48.0%
21 0%
Prof. Services
1,651
40.8%
37.3%
20.4%
Source: 1990 U.S. Census
Some area leaders question whether welfare dependency may be a cause of the area's relatively
low labor force participation rate and high unemployment rate. The significance of the
possible disincentives to work caused by public assistance has received much attention at the
state and national levels. In Michigan several recent changes in how earned income is
deducted from benefits allow clients to keep a larger share of their earnings, thus reducing the
system's disincentives to work.
Currently, individuals receiving Aid to Dependent Children (ADC) under the three-yearold experimental policy can earn up to $200 a month without a reduction in their monthly
benefit support and have another 20 percent of their total earnings beyond the $200 deducted
before their monthly benefit check is calculated. For instance, a family of four, with two
children not needing daycare and no working parents, is eligible for $575 dollar in ADC and
an additional $322 in food stamps per month (assuming $400 in housing costs). Monthly
23
benefits, ADC and food stamps, total $897. If one of the parents works and makes $600 a
month, the family would receive $258 in ADC and an additional $274 in food stamps. With a
working parent, the family would earn $1,132 (before taxes if any), an increase of 26 percent. 3
In addition, under the State's Work First program, most ADC clients are now required to
participate in job search activities with the principal goal of being placed in permanent,
unsubsidized employment at a minimum of 20 hours per week at an hourly wage rate no lower
than the minimum wage. Non-compliance can result in adjustments in the client's public
assistance grant.
Housing Characteristics
In our discussion with area residential developers, real estate professionals, and
manufacturers, there was overwhelming agreement that the area suffered from a shortage of
houses valued between $75,000 to $125,000. Moreover, a frequent concern expressed was
that many houses in that price range were unfortunately located in marginal or transitional
neighborhoods.
The reasons for this perceived shortage of medium-value homes rested on two general
factors. First, several of the developers and realtors we spoke to argued that the area was too
small and isolated for residential builders to consider. Due to scale economies in the construction
field, it is more cost efficient for a builder to construct an entire subdivision at one time, than to
construct houses individually. In this argument, the Greater South Haven Area is simply too
small.
The second argument made to explain the current perceived housing shortage could be called
the "lake effect" in residential development. Builders earn a greater profit margin in building
expensive, top-of-the-line housing near the lakeshore. These houses are sold not to current
residents but often as second homes to individuals living outside the region. Because many of the
new more-expensive houses are purchased by outsiders, there is not the traditional "filtering
down" process witnessed in other communities where families with growing incomes move to
better, more expensive housing, leaving their former dwelling to be taken over by lower-income
family. The lack of this filtering down of the housing stock contributes to the shortage of
medium-valued homes.
In the focus group sessions, minor problems regarding burdensome governmental regulations
and lack of planning were also mentioned. However, these complaints are registered in almost
every community statewide.
3Dave Watkins of the Department of Social Services Office in Kalamazoo provided this example.
According to Mr. Watkins, all of Van Buren is under the experimental policy. This simple example excludes
day care and Medicaid benefits.
24
Surprisingly, area housing statistics suggest a dramatically different story. In short, the
Greater South Haven Area housing problem does not center on price, but on income. In Table
20, we rank the 42 local governmental units on the Lake Michigan shoreline from the Indiana
border to the northern boundary of Muskegon County according to their median value of owneroccupied homes. All five of the local governmental units in the Greater South Haven Area ranked
in the bottom third. Clearly, relative to other shoreline communities, housing in the South Haven
area appears to be a bargain. Of course, the data are 5 years old and relative housing prices
among the 42 communities may have changed. However, it is not unreasonable to assume that, in
general, the relative rankings among the governmental units have not changed that drastically
during the past five years.
To test this assumption, we surveyed by telephone 12 Realtors in South Haven, Holland and
St. Joseph/Stevensville. Each Realtor was asked to estimate the selling price in their area of a
home with the following features: 3 bedrooms, 2 full baths, an attached 2 car garage, 2,000
square feet located in a nice neighborhood but not lake- or riverfront. As shown in Table 21,
the area averages of the four estimates indicate that current prices in the Greater South Haven
Area are comparable to those in Holland and St. Joseph/Stevensville. While the area's housing
stock may be no more expensive than other Lakeshore communities, its availability is far more
limited. Potential home buyers do not find the selection of housing options in the Greater South
Haven Area as in other communities. The large uniform subdivisions found in Holland,
Kalamazoo, and in the St. Joseph/Stevensville areas are not available in the Greater South Haven
Area. Second, the mixed or uneven neighborhoods found in the Greater South Haven area may
raise concerns among new home buyers regarding housing values.
A possible housing affordability problem is indicated by the data, however. On average,
median housing values are nearly two times the median household income of area residents in the
Greater South Haven Area (Table 20). Covert and Casco Townships, in particular, may be facing
affordability problems, as they rank 7th and 12th, respectively, among the 42 governmental units
in terms of ratio of median housing values to median household income.
The story is repeated in terms of rental property as shown in Table 22. As can be seen, the
five governmental units are again ranked in the bottom third in terms of median contract rent,
however, in terms of lack of affordability, as measured by median rent, as a percent of medium
household income, all five governmental units are ranked near the top third.
In summary, two separate problems plague the area's housing market. First, for individuals
who are earning below average incomes, housing affordability is a severe problem. At the same
time, individuals who are earning better-than-average income may find the selection of available
housing inadequate.
25
Table 20
Housing Values for Year-Round Owner-Occupied Homes, 1 990
Comparative
in Michigan
RANKING
Median
Median
Value House House/Income
Lower
Quartile $
Median
Value $
South Haven
Casco Twp
South Haven Twp
Geneva Twp
Covert Twp
35,700
34,000
35,500
29,000
23,300
50,100
50,100
49,600
43,700
34,200
72,600
74,900
72,200
66,300
53,400
192.9
230.4
209.9
192.1
239.7
30
32
33
36
39
27
12
21
28
7
Michiana
Grand Beach
Shoreham
PortSheldon
Park Twp
Laketown Twp
Saugatuck
Lincoln Twp
Ferrysburg
Grand Haven Twp
Spring Lake Twp
New Buffalo Twp
Saugatuck Twp
St. Joseph Twp
North Muskegon
Douglas
Lake Charter Twp
Chikaming Twp
St. Joseph
Holland
Laketon Twp
White River Twp
Grand Haven
Spring Lake
Stevensville
Fruitland Twp
New Buffalo
Ganges Twp
Whitehall
HagarTwp
Norton Shores
Montague
Muskegon Twp
Bridgman
Benton Charter Twp
Muskegon
Benton Harbor
84,400
79,200
70,100
67,100
69,800
67,300
63,400
63,400
54,900
60,600
55,500
52,100
54,500
53,800
54,500
54,300
5 1 ,200
46,700
50,200
51,300
47,800
48,800
49,500
48,100
47,900
43,000
43,600
38,400
39,200
33,600
35,800
36,900
31,800
27,700
20,000
22,500
15,000
134,100
115,600
91,000
90,700
90,600
85,600
84,500
83,200
82,000
77,600
77,400
75,500
73,000
72,400
72,000
72,000
70,500
67,700
66,200
65,900
64,700
63,300
63,100
62,600
62,200
59,700
59,300
54,500
50,300
50,100
48,600
46,900
43,300
37,300
33,300
32,400
19,300
195,000
200,000
118,900
129,700
127,700
112,700
117,800
108,700
119,600
108,400
115,900
126,600
108,800
95,600
109,300
105,400
96,000
96,600
93,500
86,100
85,900
86,100
81,600
80,800
80,700
88,900
78,000
79,700
67,000
69,900
64,700
60,700
57,400
49,000
49,400
45,000
28,900
401.0
231.2
245.4
200.2
191.9
214.5
355.2
220.3
230.1
188.6
213.7
249.6
243.1
175.3
193.1
299.7
199.7
231.7
231.7
216.3
174.6
166.8
217.7
210.0
237.3
170.3
195.3
193.6
1535
160.5
144.4
153.0
172.8
127.3
182.6
1728
2177
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
31
34
35
37
38
40
41
42
1
11
5
22
29
18
2
14
13
30
19
4
6
32
26
3
23
10
9
17
33
37
16
20
8
36
24
25
39
38
41
40
35
42
31
34
15
Source. 1990U.S Census
Upper Median Housing/
Qilartile $ Median Income %
Table 21
Relative Cost of Housing
South Haven
Realtor
1
2
3
4
$139,000
130,000
100,000
151,000
Average
$130,000
Realtor
Holland
1
2
3
4
$135,000
140,000
132,500
145,000
$138,125
St. Joseph
Realtor
1
2
3
4
$145,000
140,000
110,000
147,500
$135,625
Estimates of a 3-bedroom, 2 complete baths, attached two-car garage, 2,000 square foot house which if 15 years old and
not on a lakefront or riverfront property.
South Haven Realtors: Jean Conlisk, Vacation Places Ltd; Jay DeBruyn, Shores of South Haven Inc.; Ben Stegmen, Re/Max;
and Ted Weber, Coldwell Banker.
Holland Realtors: Warren Rasmussen, Re/Max; Doug Van Oss, Vogue; Darlene Boersen, Carini; and Kevin Alderink, Piers
St. Joseph/Stevensville Realtors: Fred Jung, Jung& Associates; John Ackerman, Jorgensen Real Estate; Dave Fister,
Fister/Better Homes and Gardens; and Doug Johan, Re/Max.
Table 22
Average Rents for Year-Round Housing in Lakeshore Communities, 1 990
Lower
Quartile
$
Median
Contract
Rent $
Upper
Quartile
$
Annual
Median Rent/
Median
Income %
South Haven
South Haven Twp
CascoTwp
Geneva Twp
Covert Twp
206
221
204
215
172
288
277
261
254
230
350
326
332
313
277
13.3
14.1
14.4
13.4
19.3
32
33
38
40
41
15
13
12
14
2
Laketown Twp
Park Twp
Michiana
Grand Haven Twp
North Muskegon
Holland
Spring Lake Twp
Lincoln Twp
Ferrysburg
FruitlandTwp
Port Sheldon
Grand Haven
Norton Shores
Laketon Twp
St. Joseph
White River Twp
Stevensville
Grand Beach
New Buffalo
Saugatuck
Lake Charter Twp
Saugatuck Twp
St. Joseph Twp
Spring Lake
Chikarning Twp
HagarTwp
Douglas
Montague
New Buffalo Twp
Benton Charter Twp
Muskegon
Whitehall
Ganges Twp
Bridgman
Benton Harbor
vluskegon Twp
Shorehain
406
364
369
343
338
325
316
316
298
291
302
297
278
270
285
258
310
200
275
249
239
235
23 1
239
257
246
224
262
228
227
228
161
220
218
1 89
1 69
1 29
432
429
425
408
405
403
390
380
379
374
369
369
365
360
351
350
350
350
329
327
327
326
322
318
316
313
308
294
291
290
289
276
275
262
262
260
200
471
538
506
464
448
458
444
436
448
426
459
434
455
443
432
397
413
475
387
391
402
399
439
411
391
363
381
358
395
345
343
360
357
294
319
335
393
13.0
10.9
15.3
11.9
13.0
15.9
12.9
12.1
128
128
9.8
15.3
13.0
11.7
14.7
11.1
16.0
8.4
13.0
16.5
11.1
13.0
9.4
12.8
13.0
12.0
154
115
11.5
19.1
185
10.1
11.7
10.7
355
125
65
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
34
35
36
37
39
42
20
36
10
29
16
7
22
27
25
24
39
9
18
31
11
35
6
41
19
5
34
17
40
23
21
28
8
33
32
3
4
38
30
37
1
26
42
Comparative
in Michigan
Source 1990 US Census
Rankings
Median
Rent
Rent/Income
Business Environment
The Greater South Haven Area economy rests on three interrelated base industries:
agriculture, manufacturing and tourism. Tourism and agriculture are strongly related as many
farmers supplement their incomes by selling produce on the roadside. The area also has very large
"U-Pick" farms which draw hundreds of individuals into the area. Once in the area these visitors
can take advantage of other tourist-related activities in the area.
The success of the area's tourism and manufacturing are also tied together. An area's quality
of life is crucial for both. Company owners can locate in many different areas and can be
attracted to an area due to its recreational and cultural activities. The tired statement "if you lived
here you would be home already" still rings true. In addition, it can be easier to attract
professional and technical workers to an area that is known for its cultural and recreational
opportunities. On the other hand, tourism in West Michigan remains seasonal in that many
tourism-related businesses, such as restaurants and retail stores, depend upon the income and
business of area residents in the off-months. Manufacturing provides the year-round income
needed to keep the area's retailers and eateries in business during the winter months.
Agriculture
Nearly 50 percent of the farms in Van Buren County are operated by individuals whose
primary occupation is not farming (Table 23). Total sales of over 50 percent of the county farms
did not reach $10,000 in 1992.
During the five years ending in 1992, the number of farms in Van Buren County fell by nearly
9 percent to 1,164. The average farm in the county covers 178 acres compared to 217 acres
statewide and has an estimated market value (land and buildings) of $1,277 per acre compared to
$1,131 statewide. Many of the farmers in Van Buren County grow fruit which requires smaller
acreage than grains or raising livestock.
Average total sales per farm reached $72,965 in the county, 12 percent greater than the average
total sales statewide.
29
Table 23
Agricultural Activity
Number of Farms
Average Size
Average Market Value per Acre
(land and bldgs)
Total Sales: Average per Farm
Van Buren
County
Michigan
1 , 1 64
46, 562
178 acres
217 acres
-18.0%
$ 1 ,277
$1,131
13.0%
$72,965
$65,043
12.2%
$ 9,257
12.3%
Percent
Difference
Farms by Value of Sales
Less than $10,000
606 (52%)
$10,000-24,999
191(16%)
$25,000-49,999
127(11%)
$50,000-99,999
97 ( 8%)
$100,000 and greater
143 (12%)
Net Cash Returns from Farm Sales
(average per farm)*
$10,399
Principal Occupation of Farm Operator
Farming
594 (51%)
Other
570 (49%)
Age of Farm Operator (%)
Under 34 years
11.3%
35 to 44 years
20.0%
45 to 54 years
25.4%
55 to 64 years
21.7%
65 and older
21.5%
Average Age
52.3 years
Average Years on Present Farm
22.3 years
Net cash return is denved by subtracting total operating expenditures from gross market value of agricultural products sales
SOURCE' J 992 Census ofAgriculture U.S Department of Agriculture
30
Manufacturing
South Haven has a rich manufacturing heritage. More importantly, the area is located in
one of the most robust manufacturing regions in the nation. Overall, manufacturers in West
Michigan have continuously outperformed their counterparts in the state, as well as in the
Great Lakes region.
As previously discussed, during the 1980s the number of residents in the Greater South
Haven Area working in manufacturing dropped by nearly 25 percent. Fortunately, according
to both the annual Harris Michigan Manufacturing Directory and the City of South Haven,
manufacturing employment by place of work grew from 1,515 in 1989 to 1,894 in 1995, an
increase of 25 percent (Table 24). Double J Molding, Wyckoff Chemical, and Pullman
Industries have all reported substantial employment gains in the past several years.
In order to assess the local business climate, we examined the area's production costs,
labor factors, and consulted area manufacturers regarding their views of the strengths and
weaknesses of the local economy. Labor costs and utility rates are two of the most important
business costs that vary across cities. Regarding labor, evidence suggests that area
manufacturers have an advantage with regard to wage rates but are at a disadvantage in regards
to the availability of quality labor.
As previously shown in Tables 14 through 18, workers in the Greater South Haven Area
labor market express a willingness to accept lower wage offers than in Holland or Kalamazoo.
Moreover, in a survey of area manufacturers, 16 out of the 18 firms that responded reported
that wage expectations of skilled and unskilled job applicants were "fair". One firm revealed
that they found the wage expectations to be "low". As shown on Table 25, the average hourly
wage for unskilled positions is $9.39 per hour with the average starting wage at $6.86 per
hour. For skilled positions the average hourly rate is $11.48 per hour with the average
starting wage being $9.56.
The area's utility electrical rates are also very competitive. According to a draft report by
city staff, which compares South Haven's electrical rates to those of 39 other municipalities in
the state in 1993, the City of South Haven is ranked sixth in terms of overall lowest average
rate. For the 31 municipalities that reported industrial rates, South Haven ranked tenth.
Area manufacturers, who participated in this study's focus groups sessions, identified the
following strengths of the area:
Availability of Labor - More than half of the firms that participated in the study's focus
group sessions reported that they have little difficulty in attracting a large number ofjob
seekers for available job openings.
Helpfulness of City Government. Several of the manufacturers that participated gave
positive marks to the City of South Haven's current economic development effort. One
participant mentioned that the City of South Haven had "gone the extra mile" in helping
31
Table 24
Manufacturing Employment in the South Haven Area
SOUTH HAVEN FIRMS
AGRO-UTIL Div Kalamazoo Intl Inc
ADKIN'S BLUE RIBBON PACKING
AMERICAN TWISTING CORP
BEIINC
B & K MACHINE PRODUCTS
BAARS PRINTING CO
CONSUMERS CONCRETE CORP
CONSUMERS CONCRETE PRODUCTS
CONTROLLED RUBBER/PLASTICS
DE GRANDCHAMFS BLUEBERRIES
DIAMOND TOOL CO INC
DO-IT CORP
DOUBLE J MOLDING INC
E-JAY THERMO PRODUCTS
E & J CUTTER GRINDING CO
ENGEL LEASING & STORAGE
EPWORTHMFGCO
GRAND RAPIDS TOTE BOX CORP
HADWIN SUPPLY
HARRISON ENGRG PRODUCTS
HAVEN SIGNS
LAKESHORE MANUFACTURING
LOVEJOYINC
MIDWEST SIGH GROUP
MONITOR MOLD & TOOL CO
SOUTH HAVEN FINISHING
OVERTON, S E CO.
PAPS PRONTO PRINT
PRECISION MACHINE CO
PREMIER WOODCRAFT INC
PULLMAN INDUSTRIES INC
QUALITY 4 MACHINING
SCHMIDT, KARL UNISIA INC BOHN PISTON DIV
SCOTT AVIATION PLT #4 - A Figgie Intl Co.
SEILER MODELS
SHERMAN DAIRY PRODUCTS CO INC
SLIMS PLACE
SOUTH HAVEN COIL INC Div of Humphrey Products
SOUTH HAVEN DAILY TRIBUNE CO Div Ingersoll Pub.
SOUTH HAVEN PACKAGING CO.
SYSTEM COMPONENTS INC
TA YLOR CONTROLS INC
TRIANGLE TRADES INC ( 1995 - moved to Holland, MI)
TWIN J ORCHARDS
WYCKOFF CHEMICAL CO INC
YALE-SOUTH HAVEN INC
ESTAB
TOTAL
NE = NO ENTRY
SOURCE HARRIS MICHIGAN MANUFACTURING DIRECTORIES
1974
1923
1960
1951
1950
1925
1960
1964
1957
1860
1968
1969
1963
1983
1995
1919
1949
1994
1985
NE
1994
1950
1991
1956
1988
1903
1975
1965
NE
1994
1994
1920
1934
1953
1916
NE
1957
1899
1994
1967
1981
1958
1971
1978
1955
1989
7
NE
23
30
30
7
6
11
180
NE
5
50
63
13
NE
NE
20
NE
NE
28
NE
NE
46
NE
29
33
75
1
14
NE
NE
NE
470
95
1
43
NE
57
15
NE
44
14
30
NE
55
20
1,515
1990
7
NE
53
30
20
7
6
10
180
NE
5
50
63
13
NE
NE
20
NE
NE
28
NE
NE
46
NE
29
33
75
1
14
NE
NE
NE
470
95
1
1991 |
7
6
57
30
20
7
9
10
180
4
43
NE
57
15
NE
44
14
30
NE
65
20
NE
50
63
13
NE
NE
20
NE
NE
41
NE
NE
46
10
29
33
NE
1
14
NE
NE
NE
470
75
1
43
NE
57
15
NE
44
14
30
3
65
20
1,544
1,487
Employment Size
1992
1993
1994 |
7
NE
NE
6
6
6
55
56
55
30
30
30
20
28
20
7
7
3
9
7
9
10
10
15
100
100
100
8
4
8
NE
NE
NE
47
50
54
80
80
100
13
13
13
2
2
2
NE
NE
NE
20
20
20
4
4
NE
NE
6
NE
41
41
41
2
2
NE
NE
10
NE
43
45
43
15
10
18
20
20
29
15
30
15
NE
NE
NE
1
4
1
14
14
14
6
NE
NE
NE
NE
30
NE
6
NE
470
450
450
75
75
75
1
1
1
43
43
45
1
1
NE
57
15
57
13
NE
35
14
20
NE
19
14
20
3
88
60
3
100
60
57
13
11
35
25
NE
NE
111
67
1 ,432
1,443
1,559
1995
NE
6
56
35
28
3
7
15
100
8
NE
54
125
13
2
2
22
NE
6
41
2
25
48
18
20
38
NE
4
18
NE
220
10
450
75
1
45
1
57
13
25
50
25
20
NE
125
81
1,894
Table 25
Summary Statistics
1995 South Haven Area Manufacturing
Wage and Employment Survey
Conducted by the City of South Haven
Total Number of Employees
Total Number of Production Workers
1,476
1,025
Unskilled Employees
Number
Percent of Total Employees
Average starting wage
Average hourly wage
Percent of Job Applicants without Skills
817
55.4%
$6.86
$9.39
44.2%
Skilled Employees
Number
Percent of Total Employees
Average starting wage
Average hourly wage
Percent of Job Applicants without Skills
245
16 6%
$9.56
$ 11.48
53.8%
Employee Residence
Percent of Employees Living in:
City of South Haven
South Haven Charter Township
Covert Township
Geneva Township
Casco Township
Remainder of Van Buren County
Remainder of Allegan County
Berrien County
Elsewhere
Total
24.5
21.6
5.5
6.4
6.0
19.8
4.9
7.0
4.3
100
33
his/her firm. In addition the City offers the maximum industrial facilities tax abatements
allowed by Michigan Public Act 198: 12 years for up to 50 percent of all real and personal
property. The City has a well-regarded economic development office and the services of a
full-time economic development director, a service few cities of similar size can offer. The
City operates three Local Development Finance Authorities (LDFAs) which can finance
specific public improvements for businesses that locate inside its three industrial districts
through the capture of new property tax revenue.
•
Room to Grow. The City of South Haven currently offers 414 acres for industrial
development in parcels ranging in size from 155 acres (South Haven 1-196 Industrial Park)
to small parcel lots.
•
Location. Being located on 1-196, the Greater South Haven Area offers easy access to
major markets. National surveys of manufacturers continue to indicate that interstate access
ranks among the top locational factors. The area offers an excellent location for firms
seeking to serve the state's automotive industry. In addition, being located on Lake
Michigan, the area offers superior recreational facilities.
The Greater South Haven Area is not without its problems, however. Many of the area's job
applicants lack basic workplace know-how skills. In the focus groups, manufacturers cited
instances where too many job candidates could not pass a basic math test, came to job
interviews in inappropriate attire, and/or had poor job histories. In the survey, on average 44.2
percent of the job applicants for unskilled positions and 53.8 percent of the job applicants for
skilled positions did not have the appropriate skills for the position.
In summary, the Greater South Haven Area is poised for increased manufacturing growth, if
it can develop a better trained, more job-ready workforce. The area offers a low-cost, highly
accessible location for manufacturing. Moreover, due its active economic development
program, the City is ready to provide tax incentives, land, and assistance in manufacturers'
expansions.
Tourism
Tourism is the third major component of the Greater South Haven Area's economic base.
The Lakeshore Convention and Visitors Bureau reports that according to West Michigan
Tourist Association estimates, tourism brought in nearly $20 million dollars of sales into the
Greater South Haven Area in 1993 and employed nearly 700 workers.
The magnitude of the economic impact of tourists is highly dependent upon the type of
tourists that are attracted into the area. Day trippers, who come to enjoy the beaches, walk in
the downtown, or pick berries at a "U-pick" farm, have far less impact on the area's economy
than those who stay the night or for the weekend at one of the area's lodging places. Likewise,
cottagers tend to have a small impact on the area's economy because they have kitchen facilities.
34
In Table 26, we estimate the employment impact of 10,000 additional tourist/days to the
Greater South Haven Area for each of these three different types of tourists. If these additional
visitors/days were evenly distributed throughout the year, then the resulting expenditures would
supportcthe number of year-round jobs reported in the table. Because the Greater South Haven
Area's tourist season is limited mostly to the summer months, we multiplied the year-round
number by four to generate an estimate of the number of additional summer jobs that would be
created.
These estimates, which are generate by the Institute's regional model, are very similar to
those that can be calculated using West Michigan Tourism Association figures. For example,
Lakeshore Convention and Visitors Bureau estimates that day trippers spend, on average,
approximately $18 to $21 dollars per visit. If 10,000 additional day trippers spend, on average
$20 per visit, they would generate $200,000 in new sales. Using data from the Michigan
Employment Security Commission and the 1992 U.S. Census of Retail Trade and Services, the
average sales per annual employee for those sectors containing a large tourism component, such
as food stores, eating and drinking places, apparel, and hotel/motel employee is $53,431. Using
West Michigan Tourism Association estimates yields slightly higher revenue per worker
estimates. Hence, a $200,000 increase in visitor spending will generate approximately 3 to 4
year-round equivalent positions.
Tourism provides much more than employment opportunities and income for area residents,
however. Tourism, or more precisely, the recreational and cultural activities that draw tourists
into the area, positively impacts the quality of life for the area's year-round residents. Residents
have more restaurants to enjoy, a more diversified shopping mix, and can enjoy the other
activities, such as the Maritime museum and arts and craft festivals, that tourism supports. In
short, tourism enhances the area's quality of life which is becoming increasingly important, given
the growing "footloose" nature of many industries. Local tourism promotional efforts may have
a larger impact than simply bring more visitors into the area to enjoy the beaches. They may
also attract individuals into the area that may be in the position to start or relocate a business.
Table 26
Employment Impact of 10,000 Additional Visitors
Type of Visitor
Year-Round
Employment
OR
Estimate Number of
Summer Jobs
16
Day Tripper
Cottage Stayer
5
20
Hotel/motel
24
96
Source: W E Upjohn Institute
35
Unfortunately, incomplete data suggest that compared to other shoreline communities in
Michigan, tourism-related activities have been losing ground in the Greater South Haven Area.
As shown in Table 27, from 1987 to 1992, area growth in revenues for eating and drinking
establishments and amusement and recreation services was below those of 10 other comparable
shoreline communities. During the five-year period, sales per eating and drinking establishment
rose 21.8 percent in the Greater South Haven Area, compared to 36.4 percent in the 10 other
communities.
Receipts among South Haven amusement and recreational providers rose 13.1 percent
compared to 60.1 percent among four other communities, where data are available. Finally,
revenues per establishment in the Greater South Haven Area in these three board sectors are
equal to or below that of the comparison communities. However, this last statistic does not
take into account the different mix of lodging services in each of the communities. South Haven
has a large presence of Bed and Breakfast facilities which means that its lodging places are, on
average, smaller than in other areas that have a greater number of motels.
In our conversations with representatives of the area's tourist sector, all spoke highly of the
area's physical amenities and market location. In addition, several representatives praised the
City of South Haven police force in their ability to "be present but not visible" and other city
employees as well.
On the other hand, representatives spoke about a poor community attitude toward tourism.
Most shared the opinion that the community did not appreciate or understand the economic
importance of tourism. Second, as in manufacturing, many of the individuals we spoke to
complained about their inability to attract good workers. Part of the problem stems from firms
being able to pay, on average, no more than $6.00 per hour and that the work is highly
seasonal. Still, it is a key concern to an industry where the inappropriate actions of one worker,
such as a waiter, can leave a lasting impression about the area. Several representatives
expressed concern about the current retail mix found in downtown, which they argue compares
unfavorably with the mix and quality of stores found in Sangatuck, Holland or St. Joseph.
Others spoke of the need to broaden the area's tourism year-round. Finally, several
representatives spoke strongly about their frustrations with local governmental regulations.
While these conflicts are of concern, they are not unusual and occur in most communities.
Table 27
Eating and Drinking Establishments
1987
Sales
South Haven
27
$8,893,000
Sales per
Store
$329,370
Alpena
Charlevoix
Cheyboygan
Grand Haven
Holland
Ludington
Manistee
Petoskey
SL [grace
St Joseph
42
20
59
51
77
30
29
30
12
37
$12,602,000
$5,531,000
$10,958,000
$15,981,000
$31,166,000
$6,284,000
$5.120,000
$11,817,000
$3,780,000
$13,088,000
$300,048
$276.550
$185,729
$313,353
$404,753
$209,467
$176,552
$393,900
$315,000
$353,730
Sales per
Store
$292,908
Cities
No. of Stores
10 City Average
1992
Sales
Percent Change from 1987 to 1992
No. of Stores
Sales
Sales per
Store
11.1%
35.4%
21.8%
No. of Stores
30
$12,040,000
Sales per
Store
$401 ,333
50
29
55
52
85
27
34
39
17
42
$17,852,000
$9,858,000
$12,252,000
$22,233,000
$46,264,000
$11,093,000
$9,561,000
$21,290.000
$7,601.000
$17,522,000
$357,040
$339,931
$222,764
$427,558
$544,282
$410,852
$281,206
$545,897
$447,118
$417,190
19.0%
45.0%
-6.8%
2.0%
10.4%
-10.0%
17.2%
30.0%
41.7%
13.5%
41.7%
78.2%
11.8%
39.1%
48.4%
76.5%
86.7%
80.2%
101.1%
33.9%
19.0%
22.9%
19.9%
36.4%
34.5%
96.1%
59.3%
38.6%
41.9%
17.9%
Sales per
Store
$399,384
Percent
Change:
36.4%
Lodging Places
Cities
Number
1987
Receipts
South Haven
3
Alpena
Charlevoix
Cheyboygan
Grand Haven
Holland
aldington
Manistee
'etoskey
St Ignace
St Joseph
10 City Average
Number
1992
Receipts
-
Receipts per
Firm
-
6
$1,675,000
Receipts per
Firm
$279,167
5
-
$4,472,000
-
$894,400
-
$5,134,000
-
$1,026,800
~
0.0%
-
14.8%
~
14.8%
-
28
7
9
17
9
9
20
2
$3,870,000
$2,374,000
-
$138,214
$339,143
-
49.7%
-
$697,333
$189,650
-
-42.9%
42.9%
11.1%
-17.6%
11.1%
11.1%
35.0%
150.0%
23.3%
-
$6,276,000
$3,793,000
-
$165,188
$296,400
$932,300
$304,071
$197,400
$502,500
$197,778
-
19.5%
-12.6%
-
$203,059
-
$2,643,000
$2,964,000
$9,323,000
$4,257,000
$1,974,000
$5,025,000
$5,340,000
-
-31.7%
24.9%
-
$3,452,000
-
5
3
16
10
10
14
10
10
27
5
-19.9%
40.8%
-
-27.9%
4.3%
-
Receipts per Firm
$246,180
Receipts per Firm
$362,244
Percent
Receipts per
Receipts
Number
Firm
100.0%
47.1%
Change:
Amusement and Recreation Services (Including Motion Pictures and Museums)
Number
1987
Receipts
South Haven
4
$585,000
Alpena
Charlevoix
Cheyboygan
Grand Haven
iolland
Aldington
Manistee
'etoskey
St Ignace
St. Joseph
8
6
3
10
20
9
5
4
4
9
Cities
0 City Average
Receipts per
Firm
$146,250
Number
1992
Receipts
9
$1,489,000
$215,500
11
1
8
8
24
9
1
7
4
8
$1,724,000
-
$1,836,000
$5,433,000
$183,600
$271,650
-
$201,000
$843,000
-
Receipts per Firm
$1,948,000
$40,200
$210,750
$216,444
$113,814
$1,250,000
$1,638,000
$10.594,000
$1,657,000
-
Receipts per Firm
37
$2,152,000
$497,000
$3,235,000
Receipts per
Firm
$165,444
$156,250
$204,750
$441,417
$184,111
$307,429
$124,250
$404,375
$182,258
Receipts per
Number
Receipts
Firm
13.1%
125,0%
154.5%
37.5%
-83.3%
166.7%
-20.0%
20.0%
0.0%
-80 0%
75.0%
0.0%
-11 1%
Percent Change
-
-
11.5%
62.5%
-10.8%
95.0%
-
-
45 9%
155.3%
-
66 1%
86 8%
60 1%
Fiscal Environment
The ability of local government to serve its residents is highly dependent upon the growth and
size of its property tax base. In this instance, data suggest that the Greater South Haven Area is
in a better position than the other lakeshore communities. Residential property accounts for 50
percent of the area's State Equalized Valuation (SEV) which is 50 percent of the estimated market
value of the area's real and personal (non-household) property (Table 28). Industrial and
residential SEV has experienced the strongest growth; however, for industrial sector, the growth
has been centered in Covert Township and is based almost solely on Consumer Power's Palisades
Plant. As shown on Table 29, the area's 1995 SEV per person, a commonly use indicator of local
governmental fiscal health or potential, is not only greater than the average for the comparison
communities, but in addition, grew faster than average between 1985 and 1995.
Table 28
Agricultural
Real Property
South Haven Area
South Haven
South Haven Twp
Covert Twp
Geneva Twp
CascoTwp
4.9
0.1
6.6
1.6
21.1
14.8
Agricultural
Real Property
South Haven Area
South Haven
South Haven Twp
Covert Twp
Geneva Twp
CascoTwp
488
0.0
1654
358
459
27.9
Composition of SEV: 1995
Industrial
Commercial
Residential
Real Property
Real Property
Real Property
Personal
Property
Total Real &
Personal
Property
50.0
67.2
75.4
19.4
61.9
77.1
9.9
11.7
4.2
12.1
10.9
4.4
100.0
100.0
100.0
100.0
100.0
100.0
Growth in SEV, 1985-1995
Residential
Industrial
Commercial
Real Property
Real Property
Real Property
Personal
Property
Total Real &
Personal
Property
15.8
138.7
44.4
-15.8
5.6
47.1
109.9
117.9
108.3
1143
66.2
112.9
27.5
3.5
1.2
65.6
0.7
1.0
7.7
17.5
12.5
1.4
5.4
2.7
82.6
90.7
45.0
186.2
70.5
97.3
166.1
13.1
-56.6
192.1
-395
93.8
Source: Michigan Department of Treasury State Tax Commission, 1985-1990-1995.
38
135.3
134.2
142.3
135.3
98.9
152.5
Table 29
SE V Per Capita
1990
1995
Percent
Change
South Haven Area
South Haven
South Haven Twp
Covert Twp
Geneva Twp
CascoTwp
1985
12,873
11,186
7,226
33,755
7,257
10,239
18,174
17,042
11,631
46,889
7,830
12,714
25,871
24,616
14,155
63,685
10,953
22,364
101.0
120.1
95.9
88.7
50.9
118.4
13,016
18,007
23,845
83.2
Allegan County
Ganges Twp
Laketown Twp
Saugatuck
Saugatuck Twp
11,156
14,131
10,089
26,938
14,241
14,327
17,635
19,392
41,559
25,930
19,979
29,239
32,787
55,406
59,360
79.1
106.9
225.0
105.7
316.8
12,374
8,195
3,424
12,173
16,402
8,713
227,223
9,573
10,733
23,525
14,102
11,007
16,640
11,715
4,300
17,392
33,758
12,185
243,008
14,629
24,309
47,432
20,402
17,742
22,187
16,453
1,962
26,743
60,65 1
18,189
223,143
23,050
39,483
101,149
27,934
24,422
79.3
100.8
-42.7
119.7
269.8
108.7
-1.8
140.8
267.9
330.0
98.1
121.9
Vluskegon County
Fruitland Twp
Laketon Twp
Montague
Vluskegon
Vluskegon Twp
Morth Muskegon
Sforton Shores
White River Twp
Whitehall
8,322
11,300
8,356
8,252
8,428
6,897
14,068
9,889
18,940
13,444
10,735
15,105
11,248
10,738
10,641
8,882
17,810
13,651
23,094
18,858
13,954
23,930
15,895
15,607
11,787
12,048
22,003
18,167
36,879
21,927
67.7
111.8
90.2
89.1
39.9
74.7
56.4
83.7
94.7
63.1
Ottawa County
7errysburg
Grand Haven
Grand Haven Twp
Holland
3arkTwp
3ort Sheldon Twp
Spnng Lake Twp
12,393
12,777
11,748
11,277
9,178
13,876
124,480
13,073
16,828
19,642
17,865
16,408
13,622
19,742
119,201
22,057
22,295
26,723
23,767
23,473
17,093
27,098
124,639
34,157
799
109.1
102.3
1082
862
95.3
0.1
161 3
Comparative Lakeshore
Townships in Michigan
Berrien County
Benton Charter Twp
Benton Harbor
Bridgman
Chikaming Twp
Hagar Twp
Lake Charter Twp
Lincoln Twp
New Buffalo
New Buffalo Twp
St. Joseph
St. Joseph Twp
Source' Michigan Department of Treasury State Tax Commission 1985-1990-1995.
Section III
Strengths and Weakness Analysis
In preparing this report, the W.E. Upjohn Institute facilitated six focus groups and
interviewed over twenty individuals to obtain their views of the strengths and weaknesses of
the Greater South Haven Area (Appendix A). The focus groups were organized by major
stakeholder groups and included representatives from the tourism/retail, manufacturing , area
schools, residential developers and local government.
Strengths
Land Availability for Development - Last year's water and sewer agreement between the city
and surrounding townships has opened land for commercial, industrial, and residential
development. The City of South Haven currently offers over 400 acres of industry land in
parcels as large as 155 acres. Given the recent cooperative agreement between the city and
surrounding townships, the area offers an excellent selection of available properties for new or
expanding businesses.
Land and River Front - Lake Michigan and developments on the Black River enhance the
area's quality of life and make the area more attractive to businesses, tourists, and new
residents.
Utility System - The city's water, sewer and electrical distribution systems has more than
enough capacity to service future economic growth. The city's water and sewer systems are
operating well below their capacity levels.
Market Location - Located on 1-196, the Greater South Haven Area offers a solid market
location for manufacturing firms. In particular, the area provides a competitive location for
serving major industrial markets in the Great Lake States. In addition, firms in the Greater
South Haven Area are within the overnight or same day delivery area of many specialized
manufacturing services located in the surrounding manufacturing centers of Grand Rapids,
Holland, Kalamazoo, and South Bend.
Tourist Location - South Haven is a superb location for tourists traveling from Chicago,
Detroit, Indianapolis and the other major cities in the Great Lakes region and wanting to get
away for a weekend or longer. With the marinas along the Black River, sandy beaches and a
pleasant small town atmosphere, the area has much to offer.
A Supportive Business Environment - Focus group participants highlighted the City of South
Haven's economic development department for helping area businesses to expand and/or
40
atmosphere among existing businesses. Several manufacturers spoke of a "farm community
attitude" among manufacturers. Finally, compared to large metropolitan areas like Detroit or
Chicago or even Grand Rapids, the Greater South Haven Area offers a low-cost business
location due to low wage expectations of job seekers, low land costs, and the absence of
congestion and crime.
Availability of Labor. Participants reported little difficulty in attracting a large number of job
seekers for available openings at "fair" wages. Job applicants for low or unskilled positions
are more plentiful than those more highly skilled positions.
Lifestyle - South Haven, being situated on Lake Michigan and the Black River, offers an
excellent physical environment for work and leisure. In addition, participants welcomed its
small town atmosphere compared to the congestion and other difficulties found in larger
communities such as Holland, Kalamazoo or Grand Rapids.
Weaknesses, Challenges and Problems
High Number of Poorly Trained Workers Without Workplace Knowhow Skills -Participants
have found that too many of the area job seekers lack basic workplace skills. Complaints
regarding job seekers ranged from being unable to pass a basic math test to showing up at a
job interview wearing old blue jeans. In short, many job seekers are unprepared to join the
workforce. Moreover, several participants commented that area workers can be resistant to
change. Manufacturers are also finding it difficult to fill skilled manufacturing positions, such
as engineers and tool and die makers. The problem is only enhanced when a sought after job
candidate cannot find a place to live in the Greater South Haven Area. Finally, several
participants complained that many families and individuals seriously undervalued the
importance of education and job readiness skills, e.g., being at work on time. Partially as a
result, several manufacturing representatives believed that the work ethic of the area's
unskilled and semi-skilled workers is lacking when compared to the Holland/Zealand area or to
other rural areas of Michigan.
Affordable Housing - All participants agreed that there is a serious housing shortage in the
South Haven area. One participant cited an instance where one professional job candidate
declined a job offer due to the lack of suitable housing. The prime housing deficiency of the
area cited by the group is single family housing in the $75,000 to $125,000 price range located
in a stable suburban tract environment. Unfortunately, much of the housing stock in the
Greater South Haven Area is located in mixed areas, e.g. old farm houses next to new ranch
homes. Concerns were also expressed about the available housing options for low-to-moderate
income families.
Quality of Area Schools - According to several of the manufacturing representatives we
interviewed, area schools are not responsive to the needs of business nor have they developed a
working relationship with area businesses. One participant cited an instance in which the
41
schools did not respond to his request to post job opportunities for students. In summary,
participants felt that the schools do a fair job in preparing students who are college-bound, but
are not successful in teaching workplace knowhow skills to non-college bound students. On
the other hand, school officials have reported that their efforts to gain input from area
employers were largely ignored. Recently, the South Haven Public Schools contacted 22 area
employers and only seven responded to the school's invitation to meet and discuss education
and training issues.
Inconsistent Power Supply - Municipal Power users complained about inconsistent electrical
service.
Opportunities
Focus group participants were quick to offer constructive suggestions on what could be done to
improve the competitive of the area including:
Development of a Stronger Working Relationship Between Area's Schools and Employers Business and education representatives suggested that area companies could offer
apprenticeships and internships to high school students. These opportunities would not only
offer students an insight into the attributes and skills necessary to hold a job, but also provide
companies with a well-trained labor force. The programs would also address the problem of
schools not having the financial resources to provide students with the exposure to current
machinery and technology.
Construction of an Area Training Center - South Haven lacks a training center where
specialized skills training can be offered. Currently, area firms are forced to send their
workers to training centers outside the community or to contract with out-of-the-area
educational institutions, such as Lake Michigan College or Southwest Community College.
Information Sharing - In order to enhance the education of students, business representatives
could teach courses in their respective fields of expertise. Moreover, if members of the
business community were allowed this opportunity, they would also gain a better
understanding of the obstacles that teachers confront in educating students. Another possibility
would be to allow teachers sabbaticals so that they could return to the business world and gain
a better understanding of the workplace skills necessary for success.
Closing Comments and Observations:
Nearly everyone we interviewed agreed that the community should seek a "balanced
approach" to economic development that addresses the concerns and opportunities of the area's
agricultural, manufacturing, and tourism industries. These activities need not conflict with,
but complement each other. In addition, there was general agreement amongst those
42
interviewed that the area is in a better position now to implement a balanced approach given
recent governmental agreements and improved cooperative environment.
Second, although many employers are facing too many job seekers that do not have the
necessary workplace know-how skills required for the most basic unskilled positions, several
participants commented that the area's supply of unskilled workers "willing to learn" is good
relative to other locations nationwide.
43
Section IV
Economic and Demographic Forecasts
The Greater South Haven Area will continue to experience employment and population
growth during the next ten years despite the curtailment of production activities at both the Karl
Schmidt Unisia, Incorporated Bohn Piston facility and Consumers Power's Palisades Nuclear
Power Plant. The question facing area leaders is not whether the area will grow but whether its
rate of growth will provide adequate employment and income-generating opportunities for its
residents.
In this section, we provide several alternative growth scenarios for the area. The first
forecast, the baseline forecast, offers a growth scenario based on the assumption that
no changes will be made in the area's current economic/community development efforts. This
forecast assumes that the City of South Haven will continue to operate its economic development
program but will not enact any new major initiatives.
The baseline forecast is used as a yardstick to measure the net impact of alternative growth
scenarios. Put simply, the difference between the alternative growth scenarios and the baseline
forecast measures the net impact of the alternatives. We examine the impact of the following
three growth scenarios:
1) The creation of 500 new manufacturing jobs.
2) A robust increase in population resulting from the availability of water and sewer
lines in Casco and South Haven Townships.
3) The construction and operation of a hotel/motel convention center in South
Haven.
Before turning our discussion to the net economic impact of these scenarios, we first review
the national and local assumptions incorporated in our baseline forecast. The future performance
of the national economy will highly influence the economic growth projectory of the Greater
South Haven Area during the next ten years. Although few economists foresee a recession in the
coming years, even fewer are calling for robust growth. Short-term and long-term forecasters are
in general agreement that the national economy:
•
Will continue to grow at an annual rate of between 2 and 2.5 percent during the
next 10 years. While positive, such slow growth suggests that job growth will remain
moderate in the coming years. Indeed, if this forecast is correct, it is likely that
productivity growth, not employment growth, will account for much of the future growth
in the national economy.
44
•
Will enjoy a very low and stable inflationary climate during next ten years. Recent
surveys of business leaders and consumers alike reveal that inflation expectations remain
modest. While this is good news, it means that profits will depend upon implementing
successful quality control and cost-containment measures. It will be impossible to derive
higher profits by simply raising prices. If these low inflationary expectations hold true,
employers will demand greater responsibilities from their shrinking workforce and, at the
same time, resist demands for higher wages.
•
Will continue to face strong competition from foreign companies. International
competition will demand national firms to keep costs down and quality up.
In this highly competitive national environment, only those communities that provide firms
with a highly productive and low-cost environment will continue to grow. Fortunately, data
suggest that the Greater South Haven Area offers this environment. Based on local labor market
statistics and interviews with area manufacturers, we adjusted labor costs, relative to the nation,
to be 5 percent lower than those that currently exist in Allegan and Van Buren Counties.
Second, given last year's water and sewer agreement and the residential growth expectations of
area Realtors and business leaders, we assumed that the area's population will expand by
approximately 2.0 percent annually through 2006 (Table 30).
Table 30
Population Forecast Assumptions
Without the Curtailment of Production Activities at Bohn Piston or
Expected Employment Reductions at the Palisades Nuclear Power Plant
1994
1995
1996
1997
1998
2000
2006
19,457
19,858
20,264
20,671
21,058
21,909
24,735
South Haven
5,697
6,097
6,130
6,169
6,210
6,255
6,343
4,444
4,230
4,318
4,437
4,528
4,848
5,743
CascoTwp.
2,775
2,847
2,950
3,010
3,087
3,242
3,880
Covert Twp.
3,158
3,227
3,330
3,421
3,517
3,677
4,257
Geneva Twp.
3,383
3,457
3,536
3,634
3,715
3,887
4,512
Governmental Units
Total Area
Source: W.E. Upjohn Institute
The population forecast shown in Table 30 was generated before Karl Schmidt Unisia
announced that it was ending production activities at its Bohn Piston facility, eliminating
approximately 370 employees. The economic impact of the 1996 layoffs at the Bohn Piston
facility on the local economy can be seen in Table 33. Given the magnitude of the Bohn Piston
announcement, we believe it is unreasonable to assume that a 2 percent average annual growth
rate in population can still be achieved. In addition, there exists a strong possibility that
45
employment levels at the Palisades Nuclear Power Plant in Covert Township could be reduced
dramatically by 2007 when the plant's operation certification expires. Due to uncertainty
regarding the possible closure of the existing plant and possible conversion options, it is
impossible to accurately predict future employment levels at the power plant. In the baseline
forecast, we assume that 400 jobs will be eliminated in 2002, with an additional 100 layoffs
occurring in 2003 at the power station.
As shown in Table 31, in our baseline forecast generated before the Bohn Piston
announcement, we had expected employment in the Greater South Haven Area to grow by 19.4
percent from 1995 to 2006, an increase of 1.6 percent annually. The area's low labor costs were
expected to attract manufacturing employment which, in turn, would have provided additional
local income to support further retail and service activities. As mentioned above, area population
was forecasted to grow approximately 2.0 percent per year during the forecast period except after
2002 when population growth slows due to employment reductions at Palisades.
Table 31
Greater South Haven Area Baseline Forecast
Before the Curtailment of Production Activities at Bohn Piston
But Including Assumed Downsizing at Palisades
2006
1994
1995
1996
1998
2000
6,083
6,691
6,804
7,022
7,242
6,869
7,990
19,457
19,858
20,264
21,058
21,909
22,509
23,560
Manufacturing
1,579
1,894
1,913
1,932
1,946
1,957
1,963
Retail
1,008
1,101
1,123
1,158
1,193
1,158
1,365
707
774
798
852
908
906
1,243
1,058
1,104
1,133
1,080
1,271
1,329
1,573
Total Employment
Population
2002
Industry Employment
Services
Government
Not surprisingly, the announced elimination of production activities at Bohn Piston lowered
the area's baseline growth projectory. As shown on Table 32, total employment is now forecasted
to reach only 7,289 in 2006, 700 jobs lower that in the previous forecast. Total employment is
projected to grow at only a 0.8 percent annual rate from 1995 to 2006. Population is forecasted
to expand at a 0.9 percent average annual pace.
The net job loss of the employment reductions at Bohn Piston is presented in Table 33 which
shows the estimated difference between employment levels in the area for each year. For
46
example, on Table 33 it is shown that area's total employment in 2002 will be reduced by 653, due
solely to the curtailment of production activities at Bohn Piston.
Table 32
Baseline Forecast With the Curtailment of Production Activities at Bohn Piston
1994
1995
1996
1998
2000
2002
2006
6,083
6,691
6,196
6,395
6,606
6,216
7,289
19,457
19,858
19,968
20,251
20,811
21,179
21,893
Manufacturing
1,579
1,894
1,523
1,551
1,572
1,585
1,588
Retail
1,008
1,101
1,052
1,085
1,117
1,078
1,275
Services
707
774
739
791
844
839
1,165
Government
1,058
1,104
1,119
1,159
1,214
1,259
1,485
Total Employment
Population
Industry Employment
Table 33
The Employment Impact of the Curtailment of
Production Activities at Bohn Piston on the Greater South Haven Area
1994
1995
1996
1998
2000
2002
2006
0
0
-608
-627
-636
-653
-701
0
0
-296
-807
-1,098
-1,330
-1,667
Manufacturing
0
0
-390
-381
-374
-372
-375
Retail
0
0
-71
-73
-76
-80
-90
Services
0
0
-59
-61
-64
-67
-78
Government
0
0
-14
-42
-57
-70
-90
Total Employment
Population
Industry Employment
In Table 34, the revised population growth projections for the individual governmental
units are shown. The dynamics of the area's population growth given the elimination of the
370 jobs at Bohn Piston are important to understand. Given the attractive location of the
Greater South Haven Area and the new availability of water and sewer in the area's townships,
47
new housing construction will probably not be affected by the closure of production operations
at Bohn Piston. Many of these new residents will work outside the area. However, the lack
of area employment opportunities for former Bohn Piston employees and other workers,
indirectly impacted, will cause some existing families to move out of the area for economic
reasons. Research suggests that the decision to move is a hard one, and households typically
take several years before they do so. It is because of this, that the population impact of the
partial closure of Bohn Piston is not seen in Table 33 until the later years.
Table 34
Population Forecast
With the Curtailment of Production Activities at Bohn Piston
Governmental Units
1994
1995
1996
1997
1998
2000
2006
Total Area
19,457
19,858
19,968
20,031
20,251
20,811
21,893
South Haven
5,697
6,097
6,071
5,988
5,984
5,956
6,249
4,444
4,230
4,230
4,290
4,343
4,590
4,845
CascoTwp.
2,775
2,847
2,897
2,917
2,969
3,080
3,240
Covert Twp.
3,158
3,227
3,291
3,314
3,382
3,493
3,675
Geneva Twp.
3,383
3,457
3,479
3,522
3,573
3,692
3,884
Scenario One - The Creation of 500 New Manufacturing Jobs
As discussed in the previous sections, the Greater South Haven Area offers a good location
for manufacturers to grow. Due to the excellent foresight of the City of South Haven, the area
offers ample industrial space. Area labor costs are low relative to surrounding areas. In
addition, its location on 1-196 provides superb transportation access to markets. With a good
economic development strategy, it is feasible that the area could see the creation of an
additional 500 new manufacturing jobs in 1996. For this scenario, we assume that 300 jobs
would be created by one or more plastics producers, and another 200 jobs would be created by
one or more fabricated metals firms in 1996.
In Table 35, we present the forecasted impact of the creation of 500 manufacturing jobs in
plastics and fabricated metals in 1996, counteracting the lost of 370 jobs at Bohn Piston.
Given the success in creating the 500 new manufacturing jobs, the area would resume a similar
growth projectory that it had before the announced downsizing at Bohn Piston. In the year
2000, manufacturing employment in the area would reach 2,051, which is very close to the
1,946 employment level shown in Table 31. Total employment is projected to reach 7,246 in
the year 2000 in this strong manufacturing growth scenario compared to 7,242 in Table 31.
48
In other words, the area will have to attract a greater number of manufacturing jobs
than it lost with the closure of production activities at Bohn Piston to cancel out its
negative impact. This is due to the relatively high wages paid at Bohn Piston which will
unlikely be matched by future manufacturers.
Table 35
Scenario One: Strong Manufacturing Growth
500 New Manufacturing Jobs
2002
1994
1995
1996
1998
2000
6,083
6,691
6,833
7,036
7,246
6,862
7,813
19,457
19,858
20,169
20,863
21,695
22,271
22,571
Manufacturing
1,579
1,894
2,022
2,039
2,051
2,060
2,062
Retail
1,008
1,101
1,096
1,128
1,159
1,121
1,321
707
774
774
825
878
873
1,203
1,058
1,104
1,129
1,191
1,260
1,317
1,559
Total Employment
Population
2006
Industry Employment
Services
Government
Source. W E. Upjolin Institute
Scenario Two - Strong Population Growth
Given the amenities in the area, it is very possible the population assumptions used in the
forecasts above are too low. According to many area leaders, the availability of water and
sewer in the area's townships will unleash a robust period of residential growth. Moreover,
this population growth could still occur in spite of the layoffs at Bohn Piston because many of
the new residents will be in professional occupations and working outside the area.
In this scenario, we estimate the economic impact on the area of a robust 3.0 percent
average annual growth in population. Based solely upon this new population growth rate, our
economic model generates a surprisingly robust economic outlook for the area, as shown in
Table 36. Total employment would reach just over 10,000 in the year 2006, which is 25
percent greater than the level predicted before the announced closure of production activities at
Bohn Piston. Not surprising, most of the growth occurs in area's retail and service sectors.
Indeed, retail employment would nearly double between 1994 and 2006, and service
employment would expand by over 1,000 workers. Government employment would also
49
expand to meet the needs of the new residents, especially for new schools. Finally, the
presence of a larger labor pool would attract new manufacturing activities into the area, as
well.
Table 36
Scenario Two: Strong Population Growth
(3.0 percent annual increase in population)
1994
1995
1996
1998
2000
2002
2006
6,083
6,785
6,402
6,936
7,572
7,692
10,033
19,457
20,083
20,702
22,053
23,487
24,982
28,271
Manufacturing
1,579
1,901
1,544
1,628
1,737
1,864
2,138
Retail
1,008
1,130
1,115
1,239
1,381
1,471
1,991
Services
707
797
790
926
1,087
1,214
1,879
Government
1,058
1,114
1,140
1,209
1,293
1,368
1,663
Total Employment
Population
Industry Employment
Scenario Three - Construction of Hotel/Motel Convention Facility
The area's tourism industry is somewhat limited due to the lack of a hotel/motel convention
facility. Currently, the area must turn away convention business. In this final scenario, we
estimate the impact on the area of the construction of a $5.0 million hotel/motel convention center
in 1996 that would employ 60 workers and attract 10,000 overnight visitors during its first year of
operation in 1997. Moreover, we added a 10 percent annual growth rate in the number of visitors
attracted into the area due to the facility.
By comparing Table 37 below with Table 32, the baseline forecast which includes the impact
of the closure of production activities at Bohn Piston, it ca'n be seen that the area would have
more than 100 jobs, all in retail and services in 2006 with the convention facility than otherwise.
The economic impact of this scenario can be better seen in Table 38 where the impacts of all three
scenarios are compared.
50
Table37
Scenario Three: The Construction and Operation
of a Hotel/Motel Convention Center
Construction
Phase
1994
1995
1996
Operations Phase
1998
2000
2002
2006
6,083
6,691
6,259
6,484
6,699
6,315
7,403
19,457
19,858
19,986
20,298
20,912
21,324
22,107
Manufacturing
1,579
1,894
1,523
1,550
1,569
1,581
1,583
Retail
1,008
1,101
1,059
1,121
1,153
1,115
1,314
707
774
741
839
895
894
1,229
1,058
1,104
1,119
1,162
1,219
1,267
1,497
Total Employment
Population
Industry
Employment
Services
Government
Summary
In this section we provide a baseline forecast for the Greater South Haven Area given the
elimination of production activities at Bohn Piston and the expected downsizing at the Palisades
Nuclear Power Plant. It may be comforting to some that the area will continue to grow despite
these major negative occurrences. As stated above, area employment is still expected to grow at
a 0.8 percent average annual rate and population at a 0.9 percent average annual rate, from 1995
to 2006, even with loss of 370 production jobs at Bohn Piston and an expected elimination of 500
jobs at Palisades.
Nevertheless, this projection should not induce inaction. The area has the potential to achieve
a much faster rate of growth given an effective economic development strategy. We have offered
three growth scenarios that forecast the impact of three separate strategies:
The expansion and attraction of new manufacturing facilities
The encouragement of further population growth
The construction of a hotel/motel convention facility
The impact of each scenario is compared with the baseline forecast in Table 38. When
examining this table, it becomes clear that a successful strategy that enhances population growth
51
would generate the greatest impact while the development of a hotel/motel convention center
would generate the least. This is a highly unfair comparison, however. First, it could be much
more difficult and costly to conduct an effective marketing campaign to persuade families to move
into the area than it would be to attract a hotel/motel convention center. Second, it is very
feasible and preferred to carry out all three efforts at the same time.
Finally, it is important to note that each of the three alternative scenarios affect different
segments of the area workforce. Population and tourism growth impacts primarily the area's
retailers and service industries. Unfortunately, occupations in these industries may be ill-suited to
meet the needs of the area's displaced and experienced production workers.
Table 38
Employment Impact of Alternative Growth Scenarios
Difference from the Baseline Forecast
2006
2002
2000
1999
19S 8
1997
1996
-
Manufacturing Growth - 500 new jobs
Total Employment
637
642
641
641
640
646
667
Manufacturing
500
494
488
484
479
475
474
Nonmanufacturing
1 28
125
121
118
115
113
119
10
23
32
39
46
58
74
201
451
612
758
884
1,092
1,369
206
348
542
726
967
1,476
2,744
21
44
77
117
165
279
550
164
270
415
547
723
1,088
2,017
21
34
50
62
79
109
177
734
1,309
1,803
2,206
2,675
3,800
6,377
89
91
93
100
114
0000
0
95
104
3345
10
145
214
Government
Population
Population Growth - 3.0 % per year
Total Employment
Manufacturing
Nonmanufacturing
Government
Population
Construction of a Hotel/Motel Convention Facility
63
89
0
0
63
87
Government
0
2
Population
18
25
Total Employment
Manufacturing
Nonmanufacturing
86
47
52
88
76
89
100
Section V
Recommendations and Conclusions
The purpose of this study is to assist area leaders in the formation of an areawide approach to
economic development. This study provides an assessment of the area's economy, identifies its
strengths and weaknesses, and offers alternative economic forecasts of the area's economy.
However, this study purposefully falls short of providing a strategic plan. Instead, it offers
an invitation for area stakeholders to work together to develop such a plan. An effective
strategic plan cannot be prepared by any organization outside the community; it must be "owned"
by the area's stakeholders, and ownership can be earned only by the area's stakeholders working
together.
In addition, we strongly believe that the current study should not stand alone, but be taken as
another step in the area's move to improve the economic well-being of its residents. It is an effort
that includes the completion of the 2002 Partnership in Progress report which outlines the area's
economic goals and objectives. It is important for area leaders to revisit these economic goals
and objectives as they look to the future.
How Do Local Economies Grow?
In planning for the future, it may prove beneficial to stop and consider how local economies
grow. Local economies that are able to attract new income into their area and/or retain income
inside the area longer will grow faster than other similar communities. All economic development
activities can be classified as being either attraction efforts (income-attracting) or retention efforts
(income-keeping). The task facing area leaders is to choose among the various strategies that can
generate more income into the area. Attraction strategies include:
assisting new or existing firms to increase the sales of their goods or services to customers
located outside the local area;
attracting more visitors into the area who buy goods and services from area businesses
including lodging;
attracting more retirees who bring more disposable income into the area;
encouraging entrepreneurship.
Traditional economic development efforts to enhance local income include offering tax
incentives, establishing industrial development districts, promoting tourism, facilitating the
application of new technology and management innovation, offering export and government
procurement assistance, marketing the area for target activities, marketing the area as a good
residential location, and assisting small business development assistance programs This list is
clearly not exhaustive, but all these programs share the common purpose of attracting new income
into the area
53
Communities can also expand if they are successful in stopping or reducing its economic
leakages. Retention efforts can include:
attracting new suppliers for the area's existing businesses;
persuading local residents to purchase their consumer items and services from local merchants
instead of elsewhere;
attracting new stores or shopping areas that provide goods or services that were previously
unavailable locally;
persuading residents to vacation at home and not in other communities;
encouraging entrepreneurship.
Economic development efforts designed to stop existing leakages include downtown
promotional activities, retail promotional studies, and efforts to search for needed suppliers for
existing firms. Of course, many of the tactics used in income attraction and income retention
efforts are the same. Small business development is an attraction activity if the firm's
products/services are directed to a non-local market. On the other hand, if the potential customer
base for the new firm are area residents, it could be classified as an income retention effort.
Small communities, such as the Greater South Haven Area, can expect to witness substantial
economic leakages to occur because:
their industrial base is too small and diversified to support but the smallest of suppliers, i.e.
print shops or office supply stores;
local buying power is not sufficient to support major cluster retail activities.
What Do Businesses Look for in Siting a New Facility?
The Greater South Haven Area is fortunate in having many of the assets chief executive
officers (CEOs) of national firms want to see in a new site location. In fact, according to the
recent surveys conducted by Area Development, CEOs are most interested in communities that
have highway access, low labor costs and a good supply of low-cost energy . Table 39 provides
a list of the 25 most important assets a community CEOs examine in determining a site location.
The list is ranked in order of importance of these factors, averaged over the past six years. It can
be argued that the Greater South Haven Area falls short only in the areas of housing cost, housing
availability, not being in a right-to-work state and, perhaps, raw material availability. Moreover,
the area offers the three top factors cited.
54
Table 39
Key Site-Selection Factors
National Survey of CEOs
1990-1995
Percent of CEOs identifying these factors as "very important" or " important"
Average
1990 1991 1992 1993 1994 1995
Highway accessibility
Labor costs
Energy availability and costs
Availability of skilled labor
Occupancy or construction costs
92 .3
92 .1
88 .1
87 .1
88 .5
95.5
95.3
89.4
80.9
87.5
94.1
90.3
83.7
88.6
83.6
87.1
90.3
83.2
88.8
85.5
96.8
93.5
93.4
91.9
87.3
93 6
94 2
89.6
87 .9
90 .2
93 .2
92 .6
87 .9
87 .5
87 1
6
7
8
9
10
State and local incentives
Low crime rate
Tax exemptions
Environmental regulations
Avail of telecommunications
services
88.7
83.3
85.8
82.9
76.7
81.4
84.7
78.8
78.6
78.4
86.8
88.4
88.4
77.9
81.5
83.0
86.6
83.0
77.4
80.7
89.3
87.2
87.9
88.2
87.0
87 .8
86 6
86 4
86 5
80.2
86 .2
86 1
85.1
81.9
80.8
11
12
13
14
15
Availability of land
Health facilities
Ratings of public schools
Cost of land
Low union profile
82.3
78.6
79.6
84
78.7
80
78.4
75
76.5
74.3
81.9
84.1
84.2
79.7
80.9
72.5
81.1
80.5
70.2
75.9
829
81 4
768
807
80.1
83.7
79.0
81.5
83 2
82.8
80 5
80 4
79 6
79 1
78 8
16
17
18
19
20
Housing costs
Availability of long-term financing
Nearness to major markets
Housing availability
Right-to-work state
76.5
75.4
74.9
76. 9
71 3
74.1
74.6
68.6
70.6
66.7
81.7
84.0
79.0
78.5
72.7
81.0
88.9
76.9
76.8
70.6
76.3
71.6
795
75.0
72.3
77.5
65 5
74.5
74 5
77.8
77 9
76 7
75 6
75 4
71.9
21
22
23
24
25
Nearness to suppliers
Raw materials availability
Availability of unskilled labor
Recreational opportunities
Accessibility to major airport
65. 1
64. 1
73. 6
66. 6
55. 5
63
59.2
61.2
60.5
57.2
66.3
59.9
55.8
58.3
65.5
58.8
60.1
54.2
60.0
57.4
68.9
66.3
62.0
60.4
71.7
66 5
64 9
64 9
62.0
59. 5
64.8
62 4
62.0
61 3
61 1
1
2
3
4
5
Source: Area Development
55
Necessary Pre-Conditions for Multi-Community Cooperation.
Data gathered during the preparation of this report suggest that the area could strongly benefit
from a regional approach to economic development. The economics of the area's local
governmental units are highly interrelated. A focused effort that builds upon the area's strengths
and is supported by all of its governmental units has a stronger chance of yielding measurable
results than if the separate governmental units create their own economic development programs
or if they simply ignore the issue.
Indeed, the South Haven Industrial Fund requested this study to take advantage of what it
believes is a window of opportunity for the formation of an areawide economic development
effort. However, for such efforts to be successful, researchers have found that several key "pre
conditions" should be in place. These include:
the threat or occurrence of an economic disaster;
perceived or real community fiscal stress;
the perception or actual existence of a strong political constituency for cooperation;
the existence of assistance programs available through external agents such as state
government, municipal associations, and/or university programs;
early and continuous support by elected officials;
clear documentation that the joint activity has a strong probability of success and is of mutual
benefit;
the presence of a policy leader willing to promote the joint activity;
an early focus on a visible and effective strategies;
an emphasis on collaborative skills-building by and for those involved in the effort. 4
Karl Schmidt Unisia's announcement of its closing of production activities at its South Haven
operation satisfies the first and probably most important condition listed above. Since over 50
percent of the affected workers reside in the Greater South Haven Area (Table 25), all of the
area's local governments will be impacted. In addition, approximately 260 additional area
workers will lose their jobs due to future layoffs at Bohn-Piston.
4Beverly A. Kegler, Anicca C. Jansen, Vernon D. Ryan, and Jack C. Strabler. Toward an
Understanding ofMulti community Collaboration, U.S. Department of Agricultural,
Washington D.C., February 1994.
56
Recommendations for Achieving Growth Scenarios
In the previous section the following three alternative growth scenarios were discussed:
A high growth manufacturing scenario in which firms in plastics and fabricated metals
industries create 500 jobs.
A high population growth scenario where the area's population expands by 3.0 percent per
year through 2006.
The construction of a hotel/motel convention center.
The net impacts of these three growth scenarios are presented in Table 38.
High Growth Manufacturing
Of the three options, the creation of new manufacturing jobs, through the attraction of new
firms or the expansion of existing manufacturing operations, holds the greatest potential for
improving the economic conditions for area residents. Given the relatively low education
achievement level of the area's workforce, manufacturing activities probably provide the greatest
income potential for many area residents. In addition, the area boasts of a strong manufacturing
tradition and a high number of available workers who are experienced production workers.
As previously discussed, the area commands a competitive advantage for manufacturing. It is
located in a very strong manufacturing region, provides excellent transportation access and offers
a wide selection of fully-serviced industrial sites. Moreover, the area's workforce is highly
competitive. Finally, the City of South Haven, unlike most cities of its size, supports a
professionally staffed economic development department.
In its ongoing economic development, we encourage the City of South Haven's continuous
efforts to
Work with the Michigan Job Commission in attracting new companies into the area. The
City's economic development effort is much too small to try to market the area directly to outof-state firms alone. Studies indicate that advertising in trade journals, booths at trade shows
and/or cold calls to major manufacturers are rarely cost effective, especially if the expenditure
levels are low. One of the major goals of the Michigan Job Commission is to attract new
business into the state by offering attractive financial incentives. However, the success of the
Job Commission depends upon it building strong local partnerships with area economic
developers. We encourage the City of South Haven to maintain its solid relationship with the
Job Commission.
Continue to maintain and offer quality data packages for prospective businesses. The City's
57
current economic development brochure is excellent. In addition, through its economic
development office, the city can respond quickly to data requests.
Broker better relationships between regional colleges/training institutes and businesses that
can result in the creation of needed training programs for area workers. This is a task that the
City of South Haven should not bear alone; area schools and the county's intermediate school
system also have roles to play. Finally continued effort should be made in the schools to
improve existing technical training programs and to instill workplace know-how skills to all
students.
Maintain its use of property tax abatements and incremental tax financing.
In short, we strongly encourage the City of South Haven to continue its excellent economic
development program.
High Population Growth
To reach and maintain an average 3.0 percent annual growth rate as presented in the previous
section (see Table 36), the area must attract approximately 250 households per year.
The ability of the area to attract strong population growth depends upon its physical capacity
and its attractiveness. With the water and sewer agreement in place, the area has the capacity to
grow, although increased traffic volumes could strain several area roadways.
The area's ability to pull new residents into the area is made easier by its location on the lake
and its small town atmosphere. However, it is handicapped by its struggling economy and its
distance from urbanized areas. Most of the new residents would be required to find work outside
the area. While more and more individuals are willing to commute greater and greater distances,
it is still a burden most individuals try to minimize. For individuals working in Holland or the St.
Joseph/Stevensville area, a South Haven address offers little compared to similar locations closer
to work. Second, the area lacks the retail and service centers available in surrounding
neighborhoods.
Area landowners, Realtors and retailers would be the primary benefactors of a 3.0 percent
annual population growth rate. Renters, especially low-to-moderate renters, could be hurt as
rents are bid up. Nevertheless, the benefits of the area's increased growth would spill over to all
aspects of the local economy. As shown in Table 36, the strong population growth could
stimulate further manufacturing growth due to the increased pool of qualified workers. In
addition, retail and services positions would become available.
Without a strong local economy that can offer employment opportunities as well as retailers
and services, the area may find it difficult to attract new residents. Moreover, even if the area
achieves a greater population of commuters, a large segment of its population may fall further and
58
further behind economically. If the area's incomes become more unevenly distributed, it can result
in greater demands being placed on areas in public services including its schools and law
enforcement activities. In short, a strong economic development effort may be the best strategy
to create stronger employment and population growth.
The Construction of a Hotel/Motel Convention Center
Of the three scenarios, this one is probably the most feasible. The area offers an ideal setting
for a hotel/mote 1 convention center that could offer a year-round flow of new dollars into the
area. As previously discussed, motel stayers spend more than cottage dwellers. While the
employment and income impact of this scenario is small compared with the other scenarios, its
potential impact could be large. The facility could introduce the area to new business leaders that
were unaware of its attractive features. The key for the City of South Haven is to encourage a
quality constructed facility that complements the area architecturally and is not obtrusive or
cheaply designed.
General Conclusions
If there is one key finding of this report, it would be that the area's future depends on
the health of its three base industries: agriculture, manufacturing and tourism. All three
bring millions of dollars of new revenues into the area. Moreover, these activities are mutually
supportive and economically dependent upon each other.
In addition to bringing income into the area through the sales of its products, agriculture
draws hundreds of individuals into the area to pick berries and/or to buy produce at area roadside
vendors. However, the area's agricultural community needs a strong non-farm economy for its
survival. Nearly 50 percent of the area farm operators could not survive without the availability
of non-farm employment opportunities in the area.
Manufacturing can offer these employment opportunities to area farm operators. In fact,
because manufacturing is a year-round activity, unlike farming and tourism, it provides the area
with a much needed stable source of income. A stronger manufacturing sector would allow more
restaurants and services to remain open year round.
Companies looking to expand or relocate their facilities, often examine locations that are not
only competitive, but are also a good places to live. Tourism provides an exciting environment
where people want to live. It heightens the seasons, turning South Haven from a sleepy village in
the winter months to an active city during the summer months. Tourism plays a greater role than
just bringing in new revenues through visitors' expenditures; it also provides recreational and
cultural activities that can be shared by residents and, thus, improve the area's quality of life.
However, tourism is a seasonal industry and cannot provide year-round employment opportunities
for area residents.
59
Second, the area should build upon the City of South Haven's economic development
program. It is highly unusual for a community of South Haven's size to support a full-time
economic developer. In addition, the city offers a wide selection of industrial and tax
incentive programs that rival the offerings of larger communities. Residents of the
surrounding townships have benefited from the city's economic development efforts without
contributing to its support. A regional economic development could help coordinate the area's
economic effort and provide financial support to the city's economic development program
which is already assisting areawide growth.
Finally, area leaders should focus upon providing the opportunities for area residents,
young and old, to improve their workplace know-how skills. Recently, the South Haven
Public Schools initiated a visitation program with area employers and arrived at the same
conclusions that were reached by major research efforts, nationwide. 5 Employers are looking for
individuals that are trainable (possess basic skills - reading , writing and math) and are dependable
(will show up to work and not steal). It is a local problem shared by all localities, nationwide. It
is a very difficult problem. Many of the individuals lacking basic skills are well beyond school
age. For those still in school, troubled family situations make it difficult for educators to instill the
importance of learning and retaining basic skills. Nevertheless it is a challenge that if overcome
would bring economic prosperity to the area.
5See Kevin Hollenbeck, The Workplace Know-How Skills Needed to be Productive, W.E.
Upjohn Institute for Employment Research, May 1994.
60
Appendix A.
Individuals Interviewed in the South Haven Study
Name
Charles Beatty
Patrick Bird
Larry Blackmer
Arthur Bolt
Jeannie Byford
Jennie Christian
Stan Compton
Jean Conlisk
Jacqui Cowles
Jay DeBruyn
Karl Dehn
Dennis DeVinney
Karna Globensky
Dawn Grove
Tom Hanson
Ron Hartgerink
Al Hawkins
Larry King
Robert Kripaitis
Bob Leksich
Larry Lewis
Donald Lykms
Jennifer Lyons
John Malbone
Kevin Marken
Dennis McKee
Sally Mounger
Robert Nichols
Don Olendorf
Janet Olson
David Paull
Amie Redsicker
Al Ruppert
Ed Ryzenga
Ben Stegman
Ross Stem
Elaine Suppes
Allan Ulen
Alan Vanderbert
Ty Wallace
Ted Weber
Title
Company
Principal
Superintendent
South Haven High School
South Haven Pubhch Schools
Board of Public Utilities
St. Basil's School
Pullman Industries, Inc.
Compton, Inc.
Vacation Places
Friendship Inn
Shores of South Haven, Inc.
City of South Haven
Housing Commission
City of South Haven
Personnel Administrator
Owner
Realtor
Owner
Realtor
Econ Development Director
Director
Harbor Master
Financial Director
President
Director
Owner
Owner
Humor Resources Director
Personnel Manager
Vice President
Senior Public Infor Specialist
Owner
Former Mayor
Plant Manager
Owner
Vice President
Realtor
South Haven Townhip Supv.
Director
City Manager
Vice President
Realtor
South Haven Public Schools
Wyckoff Chemical Co.
Covert Public Schools
South Haven Area Chamber
Yelton Manor Bed and Breakfast
Victoria Resort
Yale-south Haven
South Haven School Board
Karl Schmidt-Bohn Piston
Maritime Museum
Consumer Power Company
Davenport College
Nichols Charters
Van Buren Int. School District
South Haven School Board
City of South Haven
Lovejoy, Inc
Clementine's
Double "J" Molding, Inc.
Re/Max
South Haven Township
Lakeshore Conv. & Vist. Bureau
Am-Sign (Midwest Sign Grp)
City of South Haven
Do-It/PIC
Coldwell Banker
Assessment of the Importance of Small Business
to Kalamazoo County's Economy
and the
Adequacy of Services
to Nurture Small Business Formation
October 1996
Table of Contents
I.
Executive Summary ..........................................
Role of Small Business ........................................
Small Business in Kalamazoo County ...............................
Current Small Business Assistance Efforts ............................
Recommendations ............................................
II.
Introduction ............................................... 6
III.
Small Business and Local Economic Development:
National and Local Findings ..................................... 7
Importance to Economic Development .............................. 7
National Findings ....................................... 7
Local Findings ........................................ 10
Characteristics of Self-employed Individuals .......................... 20
National Findings ...................................... 20
Local Findings ........................................ 21
Local Area Small Business Survey ................................ 25
IV. Current Services Offered by Area Small Business Assistance Providers ..........
Financial Assistance .........................................
Information, Counseling and Training ..............................
Who Uses What Services ......................................
Coordination of Services ......................................
1
1
2
3
4
30
30
31
37
38
V. Barriers and Opportunities ....................................... 40
Previous Studies ............................................ 40
Locally Identified Barriers ..................................... 41
What Could be Done? ........................................ 46
Identified Barriers .......................................... 48
VI. Conclusions and Recommendations ................................. 50
Recommendations ........................................... 50
APPENDIX A ................................................. 55
APPENDIX B .................................................. 56
Notes ....................................................... 57
Table Listing
Table 1
Business Establishments, Percent of Total Establishments Employing Less
Than 20 Workers ...................................... 11
Table 2
Employment Share of Establishments Employing Fewer than 20 Workers hi
Kalamazoo County ..................................... 12
Table 3
Net Employment Change by Establishment Size As a Share of Total Employ
ment Change, 1989-1992 ................................. 14
Table 4
Net Employment Growth of Establishments Employing Fewer Than 20
Workers by Industry .................................... 15
Table 5
Components of Employment change in Small Establishments Employing
Fewer Than 20 Workers, 1989-1992 .......................... 16
Table 6
Components of the Change of the Number of Small Establishments,
Employing Fewer Than 20 Workers .......................... 17
Table 7
Comparative Analysis of Wages Per Worker and Income Per Proprietor
1969, 1979, 1989, 1994 .................................. 19
Table 8
Demographic Characteristics of the Self-employed and Wage & Salary
Workers in Kalamazoo County, 1990 ......................... 22
Table 9
Education Achievement of Self-employed and Wage & Salary Workers
hi Kalamazoo County ................................... 23
Table 10
Personal Income of Self-employed and Wage & Salary Workers
in Kalamazoo County ................................... 23
Table 11
Employment by Industry and Occupation in Kalamazoo County, 1990 .... 24
Table 12
General Characteristics of Survey Respondents ................... 25
Table 13
Economic Characteristics of Individuals Who Opened a Business
in the Last Three Years .................................. 26
Table 14
Number of Surveyed Owners Who Were Unsuccessful Before ......... 27
Table 15
Education Levels of Small Business Owners ..................... 27
Table 16
Total Household Income in the Year that the Business Was Started ...... 28
Table 17
Employment Growth by Firm Size ........................... 28
Table 18
Employment Growth by Age of Firm ......................... 29
Table 19
Employment Growth by Performance of Firms ................... 29
Table 20
Private Loan Activity in Kalamazoo County, Capital Access Program
and the U.S. Small Business Administration ..................... 30
Table 21
Available Services for Individuals Interested in Exploring
Self-Employment Opportunities ............................. 32
Table 22
Services for Individuals who already own an existing business ......... 34
Table 23
Kalamazoo County Non-Profit Small Business Assistance Providers ...... 36
Table 24
Number and Percent of Businesses that Have Used the
Area's Service Providers ................................. 37
Table 25
Major Obstacles and Minor Obstacles to Starting a Business ........... 43
Table 26
Major Obstacles Cited by Business in Operation < 3 years, > 3 years
Table 27
Financing ........................................... 45
Table 28
Type of Financing by Income Level .......................... 46
Table 29
Ranking of Small Business Assistance Program ................... 47
Table 30
How Can Small Business Assistance Organizations be of
Greater Assistance? ..................................... 48
Table 31
Three General Types of Microenterprise Loan Funds ............... 54
Chart 1
Kalamazoo County Small Business Delivery System ................ 39
111
44
Assessment of the
Importance of Small Business to Kalamazoo County's Economy
and the
Adequacy of Services to Nurture Small Business Formation
October, 1996
I.
Executive Summary
Role of Small Business
Small businesses are a dynamic part of a community's economy. By most accounts,
small establishments create a large share of a community's new jobs through startups and to a
lesser extent through expansions. However, a large percentage of these businesses fail; half of
the new startups are unlikely to survive past five years. Moreover, only a small percentage of
establishments account for most of the employment growth.
Small businesses succeed and fail across a wide range of industries, and there is
virtually no way to predict the winners. What is predictable is that new small businesses will
most surely fail if their owners do not do their homework beforehand. Regardless of the
industry or potential markets, most successful entrepreneurs complete a business/marketing
plan, secure adequate funding, and are willing to give their full commitment to the business.
A community which offers a support structure that provides the basics building tools for new
small businesses will, most likely, gain higher returns from its investment, than one which
attempts the impossible task of picking winners or even identifying "growth" sectors.
Small businesses play a positive role in economic development; however, recent
research suggests that its job creation abilities may be overemphasized.
The customer base for most small businesses is restricted to its local area, limiting their
economic impact on the area's economy. The gains of one small business often come
at the expense of existing area firms. Area customers may be better served and,
equally important, the neighborhood of the new business may be enhanced, but the
impact on the overall economy, on net, may be minimal.
Most small businesses start small and stay small. Employment growth is not uniform
across all establishments, but instead is concentrated among a small percentage of
highly successful establishments.
Small businesses, while offering a counter cyclical stabilizing force to local economies,
are not the job generators that researchers had earlier reported. Recent research using
better data and correcting for past mistakes suggests that in the long-run small
1
business's share of net new jobs is approximately in proportion to the total number of
workers they employ. In addition, jobs at small businesses tend to have shorter
durations and pay less than jobs at larger firms.
At the same time, small business assistance can be an effective community
development tool. A successful small business sector can virtually change the face of a
neighborhood, turning abandoned, unsafe buildings into neighborhood meeting places. Small
business development can bring economic hope, community leadership, and employment
opportunities to individuals living in neighborhoods suffering from high unemployment.
While it is unrealistic to believe small business development, by itself, can bring new life into
a neighborhood, it is certainly a necessary element.
Small Business in Kalamazoo County
A comparison analysis of the performance of the county's small business sector,
relative to similar metropolitan areas nationwide, suggests that the county's economic
environment is slightly better than average in terms of small business growth. Small
establishments employing fewer than twenty workers grew faster in the Kalamazoo-Battle
Creek MS A than in a similar set of metropolitan areas, from 1989 to 1992. Employment gams
due to births of small establishments in the Kalamazoo-Battle Creek MSA lagged behind that
of the comparison group. On the other hand, employment growth due to expansion of existing
establishments in the area was greater than the average for the comparison group.
Small business owners in Kalamazoo County have the following characteristics:
Self-employed workers are more likely to be white, male, married and a householder
than are wage and salary workers. African-Americans make up 8.0 percent of the
county's self-employed. Males account for 60.7 percent of the county's self-employed
compared to 48.6 percent of wage and salary workers.
76.2 percent of the surveyed business owners reported previous experience in their
business f s industry.
45.2 percent had previous experience as an owner or manager of another firm.
32.7 percent were laid off at least once by previous employers.
5.4 percent of the survey respondents revealed that they had been unsuccessful in
starting a small business prior to their current operation.
Surveyed small business owners achieved higher education levels than the wage and
salary workers.
Employment grew by 7.7 percent in the small businesses surveyed, compared to total
employment increase of 4.2 percent in the Kalamazoo-Battle Creek MS A from 1993
to 1996.
The top 5 percent of the surveyed firms ranked by employment growth
accounted for over 100 percent of the surveyed firms' total employment growth.
Current Small Business Assistance Efforts
Kalamazoo County houses a wide selection of small business assistance providers,
offering strong expertise in a variety of general and specialized fields. In addition, its
banking community has shown a strong interest in facilitating the growth of business.
Two potential limitations of the current system may exist, however:
Since each of the service providers generates its own marketing/information brochures,
there may exist a duplication hi mailings.
It is not unusual for individuals to make three or four phone calls or visits before they
reach the service provider that is right for their needs.
The major obstacles facing small businesses in Kalamazoo County are identifying a
customer base, finding acceptable financing, and dealing with personal stress.
Identifying a customer base. Entrepreneurs tend to focus too much of their attention
on their product or service and ;not enough on building their customer base. However,
this barrier may run deeper than entrepreneurs simply disliking selling and drumming
up business. It may also reflect the lack of proper homework in the preparation of a
business plan.
•
Small business financing. Financing of small businesses is a problem for several
reasons. First, it may stem again from a poorly prepared business plan that does not
provide an adequate justification for why the business will succeed. Second, for many
small businesses, the financing needs are so small that it is simply not economically
feasible for a commercial bank to finance it because the returns will not even cover the
fixed paper work costs. Finally, some entrepreneurs are unwilling to offer what banks
believe is sufficient collateral for the loan. The biggest concern, in our view, is that
low-income entrepreneurs who have done their homework and present a good
argument for the success of their business may be denied financing due to the size
of the request.
•
Personal Stress. Starting a small business is extremely stressful and lonely. The
marketplace can be harsh and demands a tough skin. A day of "no thank you" can
shake the confidence of the most self-assertive individual.
Recommendations
Based upon our research we offer the following recommendations to improve the
current delivery of area small business assistance programs and to enhance the ability of
entrepreneurs to succeed.
•
Strengthen marketing efforts of existing programs. Our research suggests
that the county's existing small business assistance programs could do a better
job in advertising/marketing their services. We suggest that the following
activities be considered:
•
A monthly or quarterly bulletin that would announce all of the scheduled
seminars and services offered by the individual organizations.
•
Develop a centralized business service information networkthat allows
multiple entry points by electronically linking the area's service providers. The
center would not necessarily be an independent office or have a staff. Instead,
it could be a dedicated phone line with a recorded message briefly describing
available services and transferring area service organizations.
Promote the area's small business assistance services and small business
opportunities, in general, through a publicity program.
Establish a microenterprise loan program. Research suggests that
microenterprise loan programs promote entrepreneurship, self-employment, and
small-scale business creation among individuals who lack access to credit via
the formal banking system. In addition, by facilitating entrepreneurship they
can help create needed role models in distressed neighborhoods.
We do not recommend, however, that the program be solely restricted to minority
groups or entrepreneurs in distressed neighborhoods because we fear it would be
stigmatizing. Instead, we suggest that small business assistance providers be given the
financial support to conduct a special outreach effort to minorities and individuals
living in distressed neighborhoods.
It is important that any microenterprise loan fund program contain a strong education
and training component.
Finally, the cost structure of microenterprise funds suggests that financial selfsufficiency cannot be attained without either a sizeable capital endowment or operating
subsidies that could be tied to operating performance. We suggest that public subsidies
for a microenterprise loan program are warranted because of the potential community
development benefits that would result.
When we started this research effort, we set out to determine if market failures and
organizational deficiencies of the small business assistance organizations exist. We found that
Kalamazoo County offers a good environment for individuals looking to start their own
business. Starting a new business will never be an easy task and the burden of its success rests
firmly on the shoulders of the entrepreneur. Nevertheless, Kalamazoo County offers a wide
selection of small business assistance services, and their impact is partially reflected by the
county's better-than-average performance relative to similar metropolitan areas.
We do not have a small business problem in Kalamazoo County. Instead, small
business development offers an opportunity. By encouraging and assisting entrepreneurs and
small businesses in distressed neighborhoods, we could make a positive impact on the county's
economy as a whole, and even more so on the neighborhoods that need it the most.
II.
Introduction
"Those economies that provide the proper environment for [entrepreneurial
firms] to appear and grow flourish; those that fail to provide such an
environment languish." David Birch1
"But, development planners and policy makers who are betting mainly on
achieving local or regional economic growth and development by targeting
incentives, subsidies, variances, and other policies to the small firms are going
to lose their bets." Bennett Harrison2
The health and performance of Kalamazoo County's small business sector are
important to the well-being of its economy and to the vitality of its neighborhoods. Our
nation's history abounds with instances where the ingenuity of entrepreneurs launched entire
industries, creating thousands of jobs and transforming their communities from sleepy villages
to robust urban centers. Detroit was the center of an entrepreneur-driven auto industry during
the first thirty years of the century, while the San Francisco-San Jose and the Boston areas are
the centers of an entrepreneur-propelled computer industry.
Community leaders in Kalamazoo County have long recognized the importance of small
business in contributing to the growth of the region and enhancing the economic opportunities
of local residents. The county houses several organizations that offer small business assistance
and its banking community has been active in small business financing.
The Kalamazoo Foundation has played a supporting role in improving the county's
environment for small businesses by offering to assist the funding of several development
efforts. However, for various reasons, these projects were never carried through. Recently,
the Foundation hosted several meetings with representatives from area governments, financial
institutions, and economic development organizations. As a result of these meetings, it was
decided that a study of the needs of small businesses, an inventory of the various services
available, and a perspective on the importance of small business in Kalamazoo County would
be beneficial in guiding the future course of the community's efforts.
The purpose of this report is to offer a better understanding of 1) the importance of
small business to the Kalamazoo County economy, 2) the process of small business formation,
and 3) the current system of services available to entrepreneurs. Finally, this report attempts
to identify gaps in the current efforts in providing a nurturing climate for small business. In
the following section, we review national research on the role of small business in economic
development. We also offer a comparative analysis of Kalamazoo County with 23 other
metropolitan areas of similar size and industrial composition. Finally, we offer a profile of
the area's self-employed. In Section IV, we present an inventory of current services offered
by the area small business assistance organizations. In Section V, we identify the strengths
and weaknesses of Kalamazoo County regarding small businesses and entrepreneurs. Finally,
in Section VI, we submit our conclusions and recommendations.
in.
Small Business and Local Economic Development:
National and Local Findings
Importance to Economic Development
National Findings
During the past two decades, analysts have credited small businesses with creating most
of the nation's new jobs. David Birch, in a much circulated working paper during the late
1970s and in his book, Job Creation in America, estimated that small firms employing fewer
than twenty workers created 88 percent of all net new jobs from 1981 to 1985.3 This finding
portrayed small businesses as super job-creating machines, capable of generating several times
as many jobs as its share of total employment. Birch's conclusions prompted many economic
developers to re-examine the role of small business in the economic vitality of local
economies.
Since Birch first reported his findings, researchers have closely scrutinized the role of
small business in creating jobs. Recent studies have questioned the magnitude of the original
estimates. For example, researchers at the Brookings Institution, after refining Birch's
database, found that the contribution of small business to total job creation was only in
proportion to the total number of workers they employ around 28 percent of firms with less
than 100 employees.4 Current research, based on a Census database of manufacturing
establishments, finds that large plants account for a proportionately larger share of new
manufacturing jobs than what Birch found. Establishments employing 100 or more workers
accounted for two-thirds of the jobs created. However, when all industries are considered,
Census-based estimates are more in line with Birch's original estimates. As argued in a recent
study of small business growth, interpretation of the findings can be misleading because firms
move between size classifications as their business responds to temporary economic
phenomenon. 5 Over the long-run, the contribution of small business to net job growth most
likely is not much more than its employment share.
While the extent to which small business contributes to overall employment remains
controversial, researchers generally agree on several characteristics of the job creation process
with respect to small businesses. First, there is considerable churning within the small
business sector. A proportionately large number of jobs are created from the opening of small
businesses. At the same time, a proportionately large number of jobs are lost as many of these
businesses go out of business.
The large volume of activity among small businesses can be seen by looking at the
gross flows of jobs. Gross flows refer to the four components of net employment change: the
creation of jobs from the opening of new establishments and the expansion of existing
establishments, and the destruction of jobs from the closing of businesses and the contraction
of existing establishments. Adding together these four components yields the net number of
jobs created, and dividing by the employment level in the base year expresses the change in
percentage terms.
By looking at the gross flows at the national level, it is apparent that establishments of
firms with twenty employees or less create significantly more jobs than their share of total
employment, both from openings and expansions. Between 1989 and 1991, establishments
affiliated with firms of twenty employees or less accounted for 34 percent of the total jobs
created from births and 56 percent of the new jobs generated from expansions. At the same
time, establishments in this size category also account for proportionately more job losses, 34
percent of total jobs from deaths and 23 percent of total jobs lost from contractions.
Therefore, the small business sector, while creating a considerable number of new jobs, is
quite volatile, with a high degree of job turnover. Research indicates that only 50 percent of
all new firms survive their fifth birthday.6
Second, research suggests that births and expansions of businesses, hi all size
classifications, are key to regional employment growth. This statement may seem self-evident,
but the issue here is whether the difference between a fast-growing region and a slow-growing
region is due to higher job creation or lower job destruction. Analysts, starting with Birch,
have found that the rate of job destruction is fairly uniform across regions, whereas the rate of
job creation varies proportionately with net employment change. That is, what makes one
region grow faster than another is its high rate of job creation, not its inordinately low rate of
job destruction. Birch concluded that "virtually all of the variations in the growth from one
place to another derive from differences in the rate at which lost jobs are replaced, and that
replacements originate in the formation of new firms and the growth of existing firms. "7
These findings were supported by a study that examined the metal working, machinery,
electronic component, and motor vehicle industries from 1971 to 1979. 8 Moreover, a study of
metropolitan employment growth comes to a similar conclusion:
The largest, most immediate component of change in local labor demand has
been variation in the openings of new firms, rather than in the closings,
expansions, or contractions. This stands in sharp contrast to the popular
impression that regions decline primarily as a result of closings hi declining
industries, and stands as a warning to policy makers who focus primarily on the
special requests of declining industries at the expense of appropriate general
economic policies. 9
While contributing significantly to job growth, small businesses do not contribute as
much as large firms to regional economic development. The distinction made here is the
ability of small business to stimulate additional growth in a region, in addition to generating
jobs internal to their business. Export base industries stimulate local economic growth by
selling products to markets outside their immediate area, thus bringing additional dollars into
the community which are then circulated through local businesses. The primary export-base
industry is manufacturing, although some services, such as health and business services, are
selling increasingly to outside markets. Creation of an additional job in export-base businesses
8
can do much more to stimulate an economy than an additional job in nonexport-base
industries. Industries not included in the export-base sector, such as services and retail stores,
also contribute to a community's economic base by providing the businesses within which the
outside dollars are circulated. Without a strong retail and service-sector base, these dollars
would flow outside the region. Furthermore, these nonexport-base industries enhance a
region's amenities, which in turn makes it easier to attract and retain businesses, particularly
those hiring professionals.
Small businesses are not as prevalent in the export-base sector as they are hi the nonexport base sector. Small businesses with fewer than twenty employees, while comprising 63
percent of all manufacturing firms, account for only 7 percent of that industry's employment.
Small businesses' share of manufacturing workers is well below the 20 percent share for all
industries nationwide. In contrast, establishments affiliated with firms of 500 or more
employees account for 62 percent of manufacturing employment. On the other hand, small
businesses with fewer than twenty workers account for 24 percent of employment hi the retail
sector, which does not typically export goods or services outside the local community.
Third, researchers have found that small businesses, in general, have a counter cyclical
stabilizing influence on their local economies. Researchers, using a longitudinal business
database of the Cleveland area which allowed the tracking of employment change among
individual firms, found that employment in small firms grew faster than larger firms during
recessions and had a smaller share of the loss in employment during the recession. 10 These
findings were replicated by other researchers in their examination of the Milwaukee
metropolitan area. During the 1979-83 recessionary period, researchers found that only
establishments with fewer than 20 employees created a net addition to employment in the area.
In contrast, during the economic expansion between 1983 to 1987, establishments of all sizes
including those with over 500 workers experienced a net gain in employment, and the largest
absolute number of jobs was added by establishments with between 100 and 249 employees. 11
The fourth, generally accepted characteristic of job creation is that employment growth
among small firms is limited to a small percentage of firms. A researcher at the Dunn &
Bradstreet Corporation found that among the 245,000 U.S. businesses that started up in 1985,
the 735 fastest growing firms, or just 0.3 percent of all firms, accounted for 75 percent of the
employment gains made by 1988. 12 Moreover, a study, which pooled data from two major
surveys of firms between the ages of one to six years in Minnesota and Pennsylvania, found
that in both states a small proportion of new firms were responsible for the major proportion
of increases in jobs, sales and out-of-state exports. In both the Minnesota and Pennsylvania
surveys, about 25 percent of new firms provided 75 percent of the jobs, 80 percent of sales,
and 90 percent of the out-of-state exports. 13 In addition, high-growth new firms were found in
all industries, except consumer services.
Fifth, most new businesses are started by established residents of the community. In
the Minnesota and Pennsylvania surveys, not one of the surveys' combined 2,653 respondents
revealed that he or she had moved to start a new firm. It was also found in the same study that
the major factors associated with higher regional birth rates were the presence of existing
businesses, adults 25 to 45 years old, and adults with education attainment appropriate for the
industry.
Sixth, self-employment provides only a modest opportunity for the unemployed. Less
than one in ten of the respondents to the two surveys mentioned above said they had been
unemployed before starting a business. On the other hand, in an evaluation of a discontinued
pilot small business initiative program in Ohio directed toward displaced workers, researchers
found evidence to the contrary. The program was successful in creating and maintaining a
significant number of businesses, suggesting that it offered a viable employment generation
option for some unemployed individuals. 14 Of the displaced workers who participated hi the
program, 44 percent had started a business when surveyed two and a half years later. Of
these businesses, 77 percent were still operating. However, of the operating businesses, 41
percent employed no one beyond the original program's participant and 29 percent had only
one employee in addition to the program's participants. Only two of the businesses employed
more than ten individuals.
Seventh, Small businesses offer lower compensation than larger firms. One researcher
found that after controlling for industry, age and other factors, small businesses pay lower
wages, offer fewer benefits, and are less stable than larger firms. However, at the same time,
small business employees feel that their jobs are more creative and interesting than in medium
and large establishments and report significantly higher levels of job satisfaction. 15
In 1990, the Industrial Technology Institute (ITI) in Ann Arbor Michigan released a
major study that suggested that small manufacturers, in part, pay lower compensation to their
workers because many are pursuing a dangerous low-cost strategy. Growth through
underselling the competition is an excellent short-term strategy; nevertheless, it allows little
resources for these companies to use to remain innovative or to keep current with new trends.
ITI researchers worried that too many small- and medium-sized firms were trying to keep their
costs low by cutting back on worker training and were not exploring new technologies. 16
To conclude, the small business sector is highly active and volatile, creating a
substantial number of new jobs but also destroying large number of jobs. Only a small
percentage of the many startups account for most of the jobs created by the small-business
sector. Jobs in small establishments pay less, offer fewer benefits, and are less stable, but
appear to offer a high degree of job satisfaction. Also, small business owners are established
residents of their community, and their business commitment enhances their community
involvement and commitment.
Local Findings
Available statistics in the West Michigan area mirror national findings. In Kalamazoo
County, 83.7 percent of all business establishments employed fewer than twenty workers in
1993. As shown in Table 1, the concentration of small business establishments varies among
10
industries and at different times during the business cycle. Small establishments, employing
fewer than twenty workers, account for 96.7 percent of the county's agricultural services,
construction and for all of its non-classifiable establishments. In addition, employment change
Table 1
Business Establishments
Percent of Total Establishments
Employing Less Than 20 Workers
1979
1983
1989
1991
1993
97.1%
95.6%
97.2%
95.9%
96.7%
100.0%
100.0%
100.0%
80.0%
87.5%
Construction
92.0%
93.0%
90.0%
92.8%
93.1%
Manufacturing
57.6%
63.0%
59.8%
60.5%
58.5%
Trans. & Public Utilities
74.3%
79.7%
80.1%
79.4%
75.5%
Wholesale
79.9%
84.3%
81.2%
81.5%
81.5%
Retail
82.4%
83.7%
81.3%
81.4%
80.5%
Finance
92.2%
91.4%
87.3%
87.6%
88.9%
Services
89.8%
89.4%
86.8%
86.2%
86.3%
Non-classifiable
99.4%
100.0%
96.8%
97.0%
100.0%
Total
84.8%
86.3%
83.7%
83.9%
83.7%
Agriculture
Mining
WE Upiohn Institute
for Employment Research
Source: U.S. Dept. of Commerce County Business Patterns. Excludes railroad workers and self-employed.
11
in the county's small establishments is counter cyclical. In 1979, small establishments
accounted for 84.8 percent of all establishments. At the end of the 1982-83 recession, they
represented 86.3 percent of the county's total establishments. In 1989, their share of the
county's total number of establishments fell to 83.7 percent, rose slightly to 83.9 percent in
1991, and shrank back down to 83.7 in 1993. In addition, the small business's share of the
county's total employment has remained fairly constant while still showing counter cyclical
tendencies. As show in Table 2, in 1979 at a business cycle peak, small establishments
employ ing fewer than twenty workers accounted for 23.5 percent of the county's total private
employment. In 1983, just after the 1981-82 recession, small establishments' share of total
private employment rose to 27.4 percent. Their share dropped slightly by 1989, the next
business cycle peak, and stood at 27.1 percent in 1993.
Table 2
Employment Share of Establishments
Employing Fewer than 20 Workers
in Kalamazoo County
Year
Number
Percent of Total
Private
Employment*
1979
1983
1989
1993
19,520
21,466
25,516
27,415
23.5
27.4
26.1
27.1
*Excludes railroad workers and self-employed.
Source: U.S. Dept. of Commerce County Business Patterns
WE Upiohn Institute
While small establishments' share of all establishments in Kalamazoo County has
changed little over the past 15 years, this ratio begs more questions than it answers. Does the
percentage stay fairly constant because small business startups and expansions match small
business deaths and contractions? Is there movement between employment-size categories so
that small establishments are growing out of the small-establishment grouping at the same pace
as larger establishments are shrinking, thus keeping the percentage the same? Finally, this
12
statistic does not indicate anything about Kalamazoo County's performance compared to
similar areas.
To explore these issues we used a recently released data series tabulated by the U.S.
Census Bureau that allows the tracking of employment growth by business establishments of
different firm size groups from 1989 to 1992 in all of the nation's metropolitan areas. Since
an area's growth rate depends, in large part, on its industrial structure, population size, and
proximity to larger MS As, we selected metropolitan areas having the following criteria to be
included in a comparison group. To be included, the metropolitan area:
Had to have a similar-sized manufacturing base. In the Kalamazoo-Battle Creek
MSA, manufacturing employment represented 28.1 percent of the area's total private
employment in 1992. To be included in the comparison group, the area's
manufacturers had to account for at least 18.0 percent, but no more than 38.1 percent
of the area's total employment.
Had to be of similar employment size. In 1992, private industry employed 165,690
individuals in the Kalamazoo-Battle Creek MSA. To be included in the sample, private
industries in the comparison metropolitan areas had to employ no more 205,690 and no
fewer than 115,690 workers.
Could not be included in a larger metropolitan area. Metropolitan areas that are
located next to a major city can benefit from positive spillover effects of the core city's
business activities.
The selected metropolitan areas are listed in Appendix A.
The time period of the analysis is, unfortunately, restricted to 1989 to 1992 due to data
limitation. During this period, the national economy descended from a business peak to a
recessionary low. Therefore, one would expect that a larger share of the employment growth
during this period would have occurred in small establishments than would have happened
during an expansionary period. Indeed, during this time period, establishments employing
fewer than twenty workers in 1989 accounted for 278 percent of all jobs generated in the
Kalamazoo-Battle Creek MSA (Table 3). Establishments that employed a greater number of
workers, on average, lost employment during the same time period. In comparison to the
selected metropolitan areas, small establishments in the Kalamazoo-Battle Creek metropolitan
area accounted for less of the area's overall growth than average because, in part, the area's
larger establishments that employed fewer than 500 workers did not perform as poorly as in
the comparison areas.
Table 4 offers an industry comparison of the employment growth in small
establishments in the Kalamazoo-Battle Creek MSA relative to the average growth witnessed in
similar metropolitan areas. Overall, small establishments in the local area out-performed those
in similar metropolitan areas, growing by 43.5 percent compared to 39.9 percent. Small
13
establishments in the area's large services sector, which represented 38.1 percent of total
private employment in small establishments, clearly out-performed those in the 23 other
comparison metropolitan areas. Meanwhile, small establishments in the area's goodsproducing industries of construction and manufacturing did not grow as fast as their
counterparts in the other metropolitan areas,,
I
Table 3
Net Employment Change by Establishment Size
As a Share of Total Employment Change,
1989-1992
<20
20-99
100-499
500+
Kalamazoo-Battle Creek, MI
278.0
-86.7
-42.2
•49.1
Average
316.6
-131.9
-75.8
-8.9
Metropolitan Areas that experienced positive growth:
71.1
Appleton-Oshkosh-Neenah, WI
57.6
Augusta-Aiken, GA-SC
115.2
Beaumont-Port Arthur, TX
99.5
Boise City, ID
1086.3
Chattanooga, TN-GA
164.6
Davenport-Moline-Rock Island, IA-IL
142.5
El Paso, TX
222.5
Evansville-Henderson, IN-KY
120.1
Huntsville, AL
149.7
Johnson City-Kingsport-Bristol, TN-VA
120.9
Lansing-East Lansing, MI
262.5
Lexington, KY
194.2
Peoria-Pekin, IL
199.8
Rockford, IL
923.3
Saginaw Bay City-Midland, MI
-16.9
-15.1
-22.0
-10.2
-322.5
-54.9
-45.4
-74.2
-37.5
-47.8
-49.1
-91.0
-61.0
-63.9
-380.8
8.3
-14.6
-6.6
0.0
-389.5
-10.8
-24.5
-33.3
-15.4
-20.2
-19.9
-98.9
3.6
-55.4
-282.0
37.5
72.0
13.5
0.0
-274.4
1.1
27.4
-15.0
32.8
18.3
48.0
27.4
-36.8
19.5
-160.5
Source: U.S. Census - special tabulation.
WE Uoiohn Institute
14
Table 4
Net Employment Growth of Establishments
Employing Fewer Than 20 Workers
By Industry
1989 Employment
Net Growth
TOTAL
Kalamazoo-Battle Creek MSA
Metropolitan average
CONSTRUCTION
DURABLE GOODS
NON DURABLE GOODS
TRANSPORTATION
WHOLESALE
RETAIL
FIRE
SERVICES
Growth as a
Percent of
1989 Employment
30,124
28,098
13,109
11,224
43.5%
39.9%
2,868
3,514
412
659
14.4%
18.8%
1,677
1,379
632
738
37.7%
53.5%
1,006
748
456
715
45.3%
95.6%
884
922
491
531
55.5%
57.5%
1,886
2,305
550
447
29.2%
19.4%
7,847
7,201
2,235
2,490
28.5%
34.6%
1,657
1,676
587
758
35.4%
45.2%
11,474
11,098
7,763
5,270
67.7%
47.5%
Source: U.S. Census - special tabulation
WE Upjohn Institute
15
Net employment growth can be broken down into four components: births, expansions,
contractions and deaths. As shown in Table 5, a better-than-average expansion growth of
small establishments accounted for the Kalamazoo-Battle Creek MSA's better-than-average
performance during the 1989-1992 period. Employment increased 35.6 percent among small
establishments in the Kalamazoo-Battle Creek area due to expansions, compared to an average
30.1 percent in the comparison group. On the other hand, employment growth due to births
of small establishments in Kalamazoo-Battle Creek MS A was below average during the period,
37.4 percent to 41.7 percent.
Table 5
Components of Employment Change
in Small Establishments Employing Fewer Than 20 Workers, 1989-1992
(Percent of 1989 Employment)
All Industries
Births
Deaths
Expansions
Contractions
Net
Metropolitan Average
37.4
41.7
-17.0
35.6
30.1
-12.5
-13.2
43.5
39.9
-18.7
Source: U.S. Census Special Tabulation
WE Upjohn Institute
In regard to employment loss due to deaths and contractions, Kalamazoo-Battle Creek
MSA's performance was slightly better than average. Still, as found hi previous national
research, employment loss due to deaths and contractions was fairly uniform across
metropolitan areas.
Unfortunately, data limitations do not allow an industrial analysis of the employment
change in small establishments during the 1989-to-1992 period. However, we are able to
examine the change hi the number of establishments according to the movements in their
employment levels as shown in Table 6. For example, the percentage growth in the number of
establishments in the Kalamazoo-Battle Creek MSA due to births was 33.1 percent, which was
only slightly lower than the comparison group's average of 33.4 percent. In contrast, the
spread between the local area and the comparison group in terms of employment growth due to
births was larger, a difference of 4.3 percent. The same is true for the number of
establishments that expanded during the period. The percentage increase in the number of
establishments that experienced employment growth in the local area was only 0.6 percent
higher than average, while in terms of employment growth there was a 5.5 percent difference.
16
Table 6
Components of the Change of the Number of Small Establishments,
Employing Fewer than 20 Workers
(Percent of 1989 Establishments)
Births
Deaths
Expansions
Contractions
Change
hi Est.
33.1
33.4
24.6
26.3
31.0
30.4
22.7
22.2
8.5
7.1
16.8
15.3
Agricultural Services
37.5
40.5
21.7
24.8
35.8
35.9
17.5
18.9
15.8
15.7
34.1
32.7
Mining
18.2
25.5
9.1
36.7
63.6
26.6
18.2
20.0
9.1
-11.2
54.5
-4.6
Construction
37.2
33.4
22.5
29.4
30.4
29.9
25.8
24.3
14.7
4.0
19.3
9.6
Durables Manufacturing
26.4
31.2
22.8
23.2
32.3
33.1
32.3
29.3
3.5
8.1
3.6
11.8
Nondurables Manufacturing
18.7
36.0
22.7
26.2
34.7
32.8
22.0
24.3
-4.0
9.8
8.7
18.3
Transportation, Utilities
46.7
44.8
30.5
33.2
39.5
30.2
16.8
20.5
16.2
11.6
38.9
21.3
Wholesale Trade
Metropolitan Âverage
30.2
30.2
20.2
24.3
30.8
31.7
26.2
24.8
10.0
5.9
14.6
12.8
Retail Trade
31.8
33.9
27.9
30.3
30.4
29.5
24.6
23.1
3.9
3.7
9.7
10.0
Finance, Insurance, Real Estate
35.4
39.3
18.8
23.4
29.9
26.5
19.3
18.9
16.6
15.9
27.2
23.5
Services
31.5
29.2
19.2
20.8
32.6
32.2
22.5
21.6
12.2
8.3
22.4
19.0
Growing
Declining
Source: U.S. Census Special Tabulation.
WE Upjohn Institute
17
These findings support national research which suggests that employment growth
among small establishments is not uniform but instead occurs in a small subset of
establishments. If employment growth was uniform among all establishments, the percent
increase in the number of establishments would match that of employment.
The local area's change in establishments due to deaths or contractions was near the
average of the comparison group, although a lower percentage of the area's small
establishments died during the period. Overall, the percent change in the number of small
establishments in the local area, 8.5 percent, was higher than the 7.1 percent average increase
for the comparison metropolitan areas. In addition, the net growth in establishments locally
that experienced employment growth (birth and expansions minus deaths and contractions) was
16.8 percent compared to 15.3 percent in the comparison group.
The percent change in the number of establishments in Kalamazoo County by the four
components of employment growth and by major industrial groupings is shown in Table 6. In
contrast with the average of the comparison group:
In manufacturing, the birth rate of small establishments in the Kalamazoo-Battle Creek
MS A is lower than for the comparison group. However, it is impossible to determine
if this is because the area is less attractive to entrepreneurs or because the area's
industry mix of pharmaceuticals, cereal, paper and auto suppliers is not conducive to
small business startups due to high capital requirements.
The death rate among existing small establishments in the local area is lower than the
average across all industries.
The growth in the number of establishments in the local area that witnessed
employment expansions or contractions was slightly higher-than-average or nearaverage across most industries.
This data base does not allow for calculating the percentage of the area's small
establishments responsible for the employment growth. However, in an earlier study of
manufacturing establishments in the West Michigan area, Upjohn Institute researchers found
that only 2.3 percent of the region's manufacturing establishments that employed fewer than
50 workers in 1979, employed 100 or more workers in 1989. In comparison, 67.6 percent of
the region's 1979 small establishments continued to employ fewer than 50 workers in 1989,
and 24.3 percent either closed or moved by 1989. 17
We also examined trends in the number and income of proprietorships in Kalamazoo
County relative to the comparison areas, as well as for all the metropolitan areas in the state
outside of Detroit. As shown in Table 7, during the 20-year period, 1969 to 1989, proprietor
income grew at a slower pace than wage income in Kalamazoo County, in the comparison
metropolitan areas, and in the state's metropolitan areas outside of Detroit. In Kalamazoo
18
TABLE 7
Comparative Analysis of Wages Per Worker and Income Per Proprietor
1969, 1979, 1989, 1994
1969
1979
1989
1994
$7,516
$10,975
$14,499
$18,061
9.6%
4.0%
69-79
3.9%
9.8%
4.7%
79-89
2.8%
12.7%
6.7%
89-94
4.5%
13.5%
7.5%
Proprietor income per proprietor/Comparison Group
Proprietor income per proprietor/Michigan
111.5%
99.2%
91.1%
98.1%
87.8%
110.1%
91.8%
109.7%
Wage earnings per worker
$7,081
$13,856
$23,014
$26,357
69-79
6.9%
79-89
5.2%
89-94
2.8%
$6,739
$12,053
$16,515
$19,676
Avg. annual growth in Proprietor income
Proprietors/Wage & Salary workers
Proprietors/Population
10.5%
4.1%
69-79
6.0%
11.3%
5.3%
79-89
3.2%
13.8%
6.7%
89-94
3.6%
15.1%
7.4%
$6,425
$12,795
$20,607
$24,479
69-79
7.1%
79-89
4.9%
89-94
3.5%
$7,577
$11,190
$13,166
$16,459
9.5%
3.8%
69-79
4.0%
9.3%
4.3%
79-89
1.6%
12.4%
6.1%
89-94
4.6%
13.5%
6.9%
$7,418
$14,854
$23,220
$27,597
69-79
7.2%
79-89
4.6%
89-94
3.5%
Kalamazoo County
Proprietor income per proprietor
Avg. annual growth in wage earnings
Comparison Group
Michigan Cities
Source: Bureau of Economic Analysis, REIS.
WE Uoiohn Institute
County, proprietor income grew at an annual rate of only 3.9 percent compared to 6.9 percent
for wage earners during the 1970s and at a lesser 2.8 percent pace compared to a 5.2 percent
rate for wage earners in the 1980s. During the most recent 1989-to-1994 period, on the other
hand, proprietor income grew at a faster pace than wage and salary earners in Kalamazoo
19
County and the two comparison groups. In fact, proprietor income grew at a higher pace in
Kalamazoo County during the latest five-year period than in the two comparison groups, on
average. Finally, the ratio of the number of proprietors per wage and salary worker has been
growing in the county, as well as in the comparison groups.
In summary, our comparison analysis of the Kalamazoo County area indicates that the
health and performance of its small business sector are at least no worse than the average for
similar metropolitan areas. This is not the same as concluding that its performance could not
be improved. Still, past trends suggest that the county's small business sector has performed
as well as can be expected given its size, industrial composition, and location relative to larger
metropolitan areas.
Characteristics of Self-employed Individuals
National Findings
Several researchers have developed profiles of individuals who start new firms. One
found that members of new firm startup teams are between 25 to 40 years old, have substantial
industry experience, but are starting a business for the first time. 18 In a 1989 study,
researchers reported additional key characteristics of entrepreneurs: 19
The likelihood of becoming an entrepreneur is seemingly independent of age and work
experience. The traditional job-shopping model where younger workers are more
likely to take employment risks than older workers does not apply.
The probability of an entrepreneur returning to wage or salary employment decreases
with duration. Approximately 10 percent leave self-employment during the first year
and 50 percent during the first seven years.
The percentage of the workforce that is self-employed increases until around 40 years
of age and then remains steady.
All things equal, men with greater assets are more likely to become self-employed than
men with fewer financial resources, suggesting the existence of a possible financial
constraint.
At the same time, low-wage workers, unemployed workers, and workers who have
changed jobs frequently, are more likely to be self-employed.
Men, who believe that their future depends largely on their own actions, have a greater
probability of becoming self-employed.
Unfortunately, comparable data are not available for women or minorities.
More recent research published in January of this year, suggests that some trends have
changed since the 1989 study. 20 First, the ratio of self-employed individuals to total
20
employment was found to increase with age. The study found that only 3.1 percent of all
workers between the ages of 20 and 24 were self-employed, compared to 14.2 percent of all
workers between the ages 55 and 64 and to 26.0 percent of all workers 65 years and older. In
total, 10.2 percent of all male workers and 6.9 percent of all female workers were self-employed
in 1994. The study attributes this trend to two factors: the development of a "second career"
after retirement and that in the 1950s when today's older workers entered the labor market,
self-employment opportunities were more plentiful. In 1950, self-employed workers
represented 12.0 percent of all nonagricultural workers, compared to 7.5 percent hi 1994.
Finally, the report found that relative to wage and salary workers the self-employed are more
likely to work part-time, suggesting that self-employment may be a "moonlighting activity" to
some and supplemental household income to others.
Local Findings
We uncovered similar trends in our examination of 1990 U.S. Census Public Use
Microdata Sample (PUMS) data for Kalamazoo County. The PUMS database allows the
opportunity of examining the individual census records of 5 percent of the county's population
including records on 150 self-employed workers. Although the sample is small, it still shows
that the county's self-employed individuals are typically better educated, earn more, and are
older than wage and salary workers.
First, as shown hi Table 8, a much higher percentage of self-employed workers are
older than 65 years of age than are wage and salary workers, 9.3 percent compared to 4.7
percent. The same is true for workers between the ages of 45 and 64 and, to a lesser extent,
between 30 and 44 years of age. Workers, who are less than 30 years of age account for only
16.7 percent of the self-employed group but 46.2 percent of wage and salary workers.
According to the 1990 PUMS data, self-employed workers are more likely to be a
white, male, and married householders than are wage and salary workers. Eight percent of the
county's self-employed are black compared to 10.9 percent of the county's wage and salary
workers. Finally, 60.7 percent of the county's self-employed are males compared to 48.6
percent of wage and salary workers.
As shown on Table 9, self-employed workers are more likely to be better educated than
wage and salary workers. In fact, 25.2 percent of the county's self-employed have graduate
degrees compared to only 9.7 percent of the county's wage and salary workers. On the other
hand, the percentage of the county's self-employed who did not complete high school is
identical to the percentage of wage and salary workers who did not finish.
Not surprisingly, given that self-employed workers are better educated than wage and
salary workers, mean income for self-employed individuals, $17,096, is 3.2 percent greater
than the mean for wage and salary workers, $16,568. These income measures, shown in
Table 10, exclude all non-work related income.
21
Table 8
Demographic Characteristics of
the Self-employed and Wage & Salary Workers in Kalamazoo County
1990
Self-employed
Wage & Salary
Workers
Age:
Average Age:
<30:
30-44
45-64
>64
43.8
16.7%
38.7%
35.3%
9.3%
34.7
46.2%
30.0%
19.3%
4.7%
Family:
Householder
Spouse
Son/Daughter
Other
57.3%
23.3%
3.3%
16.0%
47.3%
18.6%
8.6%
25.6%
Marital Status:
Married
Divorce/separated
Never married
51.3%
14.7%
16.0%
40.6%
12.2%
44.8%
White
Black
Other
91.3%
8.0%
0.7%
85.8%
10.9%
3.2%
Gender:
Male
Women
60.7%
39.3%
48.6%
51.4%
Race:
Source: U.S. Census PUMS Files
WE Upjohn Institute
22
Table 9
Education Achievement of
Self-employed and Wage & Salary Workers in Kalamazoo County
1990
No High School
High School Only
Some College
Associate Degree
Bachelors
Graduate Degree
Self-employed
Wage & Salary
Workers
13.3%
16.0%
18.0%
4.0%
23.3%
25.3%
13.7%
22.1%
33.4%
7.3%
13.9%
9.7%
Source: U.S. Census PUMS Files.
WE Upjohn Institute
Table 10
Personal Income of
Self-employed and Wage & Salary Workers in Kalamazoo County
1989
Earnings
Less than $15,000
$15,001 - 35,000
$35,001 - 50,000
$50,001 - 75,000
$75,001 -150,000
More than $150,000
Mean Income
Self-employed
wage & Salary
Workers
56.8%
21.6%
2.3%
3.4%
6.8%
0.0%
59.0%
29.7%
7.6%
2.4%
0.9%
0.3%
$17,096
$16,568
Source: U.S Census PUMS.
WE Upjohn Institute
_____———.—————————————————
23
Finally, as expected, a higher percentage of the self-employed are in professional
services and medical occupations than wage and salary workers in general (Table 11). At the
same time, self-employed workers are under-represented in manufacturing.
Table 11
Employment by Industry and Occupation in Kalamazoo County
1990
Occupation
Industry
Selfemployed
16.0%
Wage&
Salary
10.2%
26.7%
7.0%
0.7%
3.6%
14.7%
15.0%
3.3%
13.6%
Service
17.3%
20.9%
Farming
2.7%
2.1%
5.6%
Mechanics and Repair
1 .3%
2.6%
6.7%
4.6%
Construction Trades
9.3%
2.4%
Personal Services
5.3%
3.2%
Precision Production
2.0%
3.8%
Entertainment
0.7%
2.1%
Machine Operators, Assemblers
1 .3%
9.7%
Medical
12.7%
9.0%
Transp. and Material Moving
4.7%
9.0%
Other Professional
Services
16.0%
6.3%
Family Child Care
12.7%
0.4%
Selfemployed
4.7%
Wage&
Salary
2.1%
0.0%
0.0%
Professional Specialty
10.7%
3.9%
Technician
Manufacturing
4.7%
24.2%
Transportation
2.0%
3.9%
Administrative Support
Wholesale
4.0%
3.7%
14.7%
30.8%
Finance, Insurance, Real
Estate
5.3%
Bus. & Repair:
Agriculture
Mining
Construction
Retail
Exec., Admin., & Mgt.
Sales
Source- US Census PUMS Files
WE Upjohn Institute
24
Local Area Small Business Survey
In order to obtain a more complete picture of the current condition of the small
business sector in Kalamazoo County, we mailed surveys to 1,756 small businesses in the
county. The mailing list was developed using the following sources:
•
•
•
7996 Kalamazoo County Business Directory21
County D.B.A. filing for the past two years
New business listings reported in various local business publications.
After a second mailing, we received 763 usable returns for a very strong response rate
of 43 percent. The survey instrument used is in Appendix B. As shown hi Table 12, the
general
Table 12
General Characteristics of
Survey Respondents
(percent) ___
Age
20 years or less
21-30
31-40
41-50
51-64
65 or more
Respondents
0.4
7.5
21.1
36.2
27.4
7.5
Gender
Male
Female
70.3
29.7
Race
White
Black
Asian
Hispanic
92.7
5.2
1.0
0.6
Resident of County
0-10 years
11-25
26-50
51-64
65 or more
15.1
31.2
43.8
7.3
2.6
Source: Small Business Owner/Manager Survey, 1996
WE Upiohn Institute
25
characteristics of the survey respondents are similar to those listed in Table 8. Only 5.2
percent of the survey respondents were black, and 29.7 percent were women. The survey's
respondents had similar characteristics as those found in 1990 (Table 8) using the PUMS
Census data. Finally, only 15.1 percent of the survey respondents lived in the county for
fewer than 11 years, supporting the finding of national studies that entrepreneurs do not move
to a new location to start a business.
Not surprisingly, most small business owners have had prior experience in the field of
their business, according to the survey results. Of the surveyed business owners, 76.2 percent
reported obtaining previous experience in their business's industry; 45.2 percent had previous
experience as an owner or manager of another firm (Table 13). Somewhat counter to other
studies, a large minority of the owners/managers surveyed, 32.7 percent, was laid off at least
once by previous employers. Unfortunately, it is unknown if being laid-off was the catalyst
for becoming a small business owner. Finally, 13.1 percent of the surveyed business owners
had accepted early retirement, suggesting that for them they are pursuing a second career.
Forty-one survey respondents revealed that they had been unsuccessful in starting a
small business before their current operation (Table 14). Twenty-seven survey respondents
had one false start, while nine had two. Somewhat surprising, given that a business failure
can be looked at unfavorably in a later loan application, only 26.8 percent of the surveyed
business owners who revealed a previously failed attempt found financing a major obstacle.
As was true in the PUMS sample of self-employed individuals, a large share of the
surveyed small business owners, approximately 52.0 percent, earned a bachelor degree or
higher (Table 15).
Finally, during the year that an individual started a business (Table 16), only 22.6
percent had a household income of less than $20,000, while 12.5 percent had a household
income of more than $80,000.
Table 13
Economic Characteristics of Individuals
Who Opened a Business in the Last Three Years:
number
128
76
55
22
Previous experience in industry
Owned or managed another business
Laid-off
Accepted early retirement
76.2%
45.2%
32.7%
13.1%
WE Upiohn Institute
26
Table 14
Number of Surveyed Owners Who Were Unsuccessful Before:
Yes
41
27
9
2
2
1
Unsuccessful before in starting a business?
Number of times attempted: One
Two
Three
Four
Five
-29.3% surveyed businesses that were started in the past three years were
unsuccessful in starting a business previously.
-26.8% found financing a major obstacle after failing in a previous business start-up.
WE Upjohn Institute
Table 15
Education Levels of Small Business Owners
Firms less than 3 years Firms 3 or more years
Percent of
Percent of
Number
Respondents
Number
Respondents
5
1.5%
8
2.0%
31
13
9.2%
3.9%
24
85
107
72
7.1%
25.2%
31.8%
21.4%
38
22
29
103
112
94
9.4%
5.4%
7.1%
25.4%
27.6%
23.2%
Less than High School
High School Diploma
Post-High School Technical Certificate
Two-year Associate Degree
Some College
Bachelors Degree
Graduate Degree
WE Upjohn Institute
27
Table 16
Total Household Income in the Year that the Business Was Started.
Income
Number
Percent of
Respondents
Financing an
Obstacle
38
40
35
17
13
8
22.6%
23.8%
20.8%
10.1%
7.7%
4.8%
31.6%
25.0%
11.4%
41.2%
7.7%
12.5%
Less than $20,000
$20,000 - 39,000
$40,000- 59,000
$60,000- 79,000
$80,000 -100,000
$100,000 Plus
WE Upiohn Institute
From 1993 to 1996, employment in the 763 businesses surveyed increased 7.7 percent.
During the same time period, total employment grew by 4.2 percent in the Kalamazoo-Battle
Creek MS A as shown in Table 17. Firms that employed fewer than 10 workers in 1993
experienced the greatest growth, 12.0 percent, while firms that employed between 10 to 20
workers in 1993 lost 2.0 percent of their 1993 workforce.
Table 17
Employment Growth by Firm Size
Firm employment size
in 1993
1993
<10
10-20
21- 100
TOTAL
1,681
558
609
2,848
1996
Absolute
Change
Percent
Change
1,883
547
637
3,067
202
-11
28
219
12.0%
-2.0%
4.6%
7.7%
WE Upiohn Institute
28
Younger firms grew faster that older firms, as shown in Table 18. However, as has
been found in other studies, employment growth occurred in only a very few firms. The top
five percent of the surveyed firms, ranked by employment growth, accounted for over 100
percent of the surveyed firms' total employment growth (Table 19). The bottom 40 percent of
the surveyed firms lost 310 workers from 1993 to 1996.
Table 18
Employment Growth by Age of Firm
Firms by Age
7993
7996
Less 5 years
5 to 9 yrs
10 to 20 yrs
20 yrs or more
80
473
917
1,378
98
616
912
1,441
Absolute
Change
18
143
-5
63
Percent
Change
22.5%
30.2%
-0.5%
4.6%
WE Upjohn Institute
Table 19
Employment Growth by Performance of Firms
Firm ranked by
employment growth
7993
7996
Absolute
Change
Percent
Change
top 5%
top 10%
342
539
591
877
249
338
113.7%
154.3%
Istquartile20%
2nd quartile 20%
3rdquartile20%
4th quartile 20%
5th quartile 20%
788
374
161
626
899
1,238
453
161
623
592
450
79
0
-3
-307
205.5%
36.1%
0.0%
-1.4%
-140.2%
WE Upjohn Institute
29
IV. Current Services Offered by Area Small Business Assistance Providers
Kalamazoo County houses a wide selection of small business assistance providers,
offering strong expertise in a variety of general and specialized fields. In addition, its banking
community has shown a strong interest in facilitating the growth of business. Tables 21 and
22 provide a partial list of the county's small business assistance providers and their products
and services. The list is only a partial tabulation because it is based on a mail survey. We are
not certain that all of the county's small business assistance organizations received^ survey or
responded. In addition, the activities offered by each provider can change without notice.
Financial Assistance
Available services to small businesses include financial assistance, as well as,
counseling and training. The county's financial institutions not only offer loan products of all
types, but several are active in the lenders' assistance program and most alLmake regular
referrals to the area's service providers. In addition, the county's commercial banks are
active in two of the more widely used government assistance loan programs, SB A and the
Capital Access Program, as shown in Table 20. The Michigan Strategic Fund's Capital
Access Program is a shared-risk program where the Fund, bank, and borrower contribute to a
loan loss reserve that the bank can
Table 20
Private Loan Activity in Kalamazoo County
Capital Access Program and the U.S. Small Business Administration
(thousands of dollars)
Percent
Share
Capital
Access
Loans in the
County
Capital
Access
Loans in the
State
Percent
Share
N.A.
N.A.
$1,017.2
$15,872.0
6.4%
N.A.
N.A.
N. A.
$1,537.2
$27,056.7
5.7%
1993
$2,700
$125 600
2.1%
$2,016.9
$32,600.7
6.2%
1994
$2,900
$161,500
1.8%
$1,789.0
$41,511.1
4.3%
1995
$4,900
$206,000
2.4%
$1,856.0
$48,570.0
3.8%
1996
$3,700
$134,300
2.8%
N.A.
N.A.
N.A.
Year
FY -SBA
CY-CAL
SBA Loans
in County
SBA Loans
in the State
1991
N.A.
1992
Source: SBA Loans Volumes - Michigan District Office of the U S Small Business Administration; Capital Access Programs Loans - Michigan
Strategic Fund under the Michigan Jobs Commission .
WE Upiohn Institute
30
use if necessary. The existence of a subsidized loan loss reserve allows the bank to be more
aggressive in making loans; however, if the bank makes too many bad loans, the reserve could
be exhausted and the bank would be at risk for the excess loss.
The City of Kalamazoo also offers three separate loan programs. Its Small Business
Revolving Loan Fund has a current balance of $426,000 and offers below-market interest rate
loans for the purchase of fixed asset improvements to property. The loan program is restricted
to businesses located in the city and targeted to business startups and expansions which create
new job opportunities or retain existing jobs with a majority of the jobs targeted toward lowand moderate-income individuals. Its Economic Initiative Fund, which currently has over
$400,000, is available for businesses based on job creation or retention, tax base created or
retained. Finally its Economic Opportunity Funds can be used for grants or low interest loans
to create or retain jobs in the city and enhance the tax base.
Information, Counseling and Training
The major non-profit or governmental small business providers in the area are the
county's two major libraries, Kalamazoo College SBDC/Stryker Center, S.C.O.R.E., and
W.E.S.T.O.P.S. As shown in the Tables 21 and 22, the services offered by the four include:
•
Business information, e.g., the Kalamazoo County Business Directory prepared by the
Kalamazoo Public Library.
One-on-one counseling and assistance in preparing a business plan which are
available at the Kalamazoo College SBDC/Stryker Center, S.C.O.R.E., and
W.E.S.T.O.P.S. The staff at Kalamazoo College SBDC/Stryker Center spends
approximately 80 percent of its time on one-on-one counseling with individuals who
wish to start a business or who are already in business.
Educational opportunities are also offered by the above three providers, as well as,
by Kalamazoo Valley Community College and Davenport College.
Mentoring opportunities are also available. The Northside Economic Potential Group
in association with the Deacon's Conference offers mentoring opportunities where an
established entrepreneur is paired with an individual interested in starting a new business. The
Group has facilitated a support group of small business owners and would-be entrepreneurs
and is now organizing a microenterprise loan program.
31
Table 21
Available Services for Individuals Interested in Exploring Self-Employment Opportunities
Organization
Activities
Financial Services
First of America Bank
Loan products of all types.
Cash mgmt. products, investment products and trust services.
Michigan National Bank
Small Business Banking Group
Automated bank services
"Getting the Credit you deserve"
Lender assistance program
NBD Bank
Step to small business financing-Handout
Referrals to SCORE, Stryker, etc.
Business counseling.
Standard Federal
Business loans conventional, SBA loans.
Stryker Center
Referral sources
Review of business plans
Lenders Assistance Program - Center
City of Kalamazoo
Small Business Revolving Loan Fund
Economic Initiative Fund
Economic opportunities
Counseling and Education Services
Small Business classes
Davenport College
Kalamazoo College/SBDC/Stryker Center
Consulting/counseling
Training/workshops
Data research
Advocacy
Kalamazoo County Chamber of Commerce
Referrals
Kalamazoo County Services Dept.
Small Business counseling for Head Start families
Kalamazoo Public Library
Business literature publications
Community Information
Kalamazoo County Business Directory
Directory of Human Services in the Kalamazoo area
Help File
Information and referrals
Kalamazoo Valley Community College
Small Business Mgmt Certificate
Research and references
Workshops and seminars
Individual consulting
MSU Extension-Kalamazoo
Bulletins and publications on home-based businesses
Held seminars on how to set up a home-based business
32
Table 21
Available Services for Individuals Interested in Exploring Self-Employment Opportunities
Northside Economic Potential Group
Mentoring
Help to obtain capital
Assist in developing a business plan
Assist in implementing marketing plans
Facilitate support groups
Portage Public Library
Reference and circulating
Pathfinders/bibliographies
S.C.O.R.E.
Counseling
Workshops/Seminars
W.E.S.T.O.P.S.
Small Business Workshop
One-on-one Counseling
Reference library
Online database searching
Business Development Plan
WE Upjohn Institute
33
Table 22
Services for Individuals who already own an existing business (Partial List)
Organization
Activities
Financial Services
First of America Bank
Loan products of all types.
Cash mgmt. products, investment products and trust services.
Michigan National Bank
Small Business Banking Group
- Automated bank services
Preferred Lender status
"Getting the Credit you deserve"
- Brochure to assist entrepreneur with necessary
elements that go into a business plan
Lender assistance program
Monthly Newsletter
Seminars
General mailings
Portage Commerce Bank
Michigan Strategic Fund Capital
Access Program
SBA Loan Guaranty program
"Low Documentation" program
NBD Bank
Commercial credit-loans, lines of credit, leases,
credit cards, etc.
Checking and savings accounts
Seminars for businesses
Standard Federal
Business loans conventional, SBA loans.
Stryker Center
Referral sources
Review of business plans
Lenders Assistance Program - Center
City of Kalamazoo
Small Business Revolving Loan Fund
Economic Initiative Fund
Economic opportunities
Counseling and Education Services
Davenport College
Small Business classes
Kalamazoo College/SBDC/Stryker Center
Consulting/counseling
Training/workshops
Data research
Advocacy
Kalamazoo County Chamber of Commerce
Entrepreneur Network
- Annual Trade Expo
Small Business Interchange
Kalamazoo County Services Dept.
Small Business counseling for Head Start families
34
Table 22
Services for Individuals who already own an existing business (Partial List)
Business literature publications
Community Information
Kalamazoo County Business Directory
Directory of Human Services in the Kalamazoo area
Help File
Information and referrals
Kalamazoo Valley Community College
Selected Courses
Business Service Center
Northside Economic Potential
Mentoring
Assist in obtaining capital
Assist in developing business plans
Facilitate support groups
MSU Extension-Kalamazoo
Conference on home-based business development
Reference and circulating
Pathfinders/bibliographies
Small business workshops and showcase
S.C.O.R.E.
Counseling
Workshops/Seminars
Southwest Michigan Technical Assistance Center
Assistance with Federal and state contracting
Export development
W.E.S.T.O.P.S.
One-on-one Counseling
Reference library
Online database searching
Business Development Plan
WE Upiohn Institute
35
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A
PROVIDERS
Agri-Businesses
Business Literature / Publications
Business Videos
Computer Learning
Economic / Labor Data
Employee Recruitment
Employee Training
Environmental Information
Exporting Assistance
Financial Planning /Analysis
Food Products Businesses
Government Contracts Assistance
Grant Information
Home Based Businesses
International Information
Inventory Control / Management
Manufacturing Businesses
Marketing Assistance
Minority Assistance
Networking
Preparing Business Plans
Production Planning
Retail Businesses
Seminars / Workshops
Service Businesses
Site Procurement
Start-up Assistance
Wholesale Businesses
ill
v^./.:*:?^&:rH'.v.~
Who Uses What Services
In our survey of small business owners, we asked area small business owners if they
had used any of the listed services shown in Table 24. The Kalamazoo Public Library was
used by 30.4 percent of the small businesses responding to the survey. Kalamazoo College's
SBDC/Stryker Center was used by 26.2 percent of the respondents. More importantly,
however, 43.5 percent of the business owners surveyed used more than one of the listed
services which suggests that cooperation exists among the service providers. Still, it also
shows that 56.5 percent of the firms surveyed did not use any of the services listed.
Table 24
Number and Percent of Businesses that Have Used
the Area's Service Providers
CEO Council
City of Kalamazoo
City of Portage
Davenport
D.K.I.
Chamber of Commerce
Kalamazoo Library
K.V.C.C.
MSU -Extension Ser.
S.C.O.R.E.
K-College SBDC/Stryker Ctr.
W.E.S.T.O.P.S.
Multi - users
Yes
10
15
13
11
2
33
51
28
13
34
44
20
Percent
6.0%
8.9%
7.7%
6.5%
1.2%
19.6%
30.4%
16.7%
7.7%
20.2%
26.2%
11.9%
73
43.5%
WE Upjohn Institute
Interested individuals can choose from various non-profit service providers for similar
programs. For example, at least five offer workshops or seminars on how to write a business
plan. Still, many of the providers are busy. The number of active clients being served at the
Kalamazoo College SBDC/Stryker Center reached 328 in May of this year, according to its
37
records. Nearly 75 percent of the Center's clients are seeking assistance in starting up their
own business. Others are looking for advice on a wide range of issues from accounting to
international trade. Over 50 percent of the Center's clients are in the service industry; nearly
12 percent are retailers while 8.5 percent are manufacturers. Most of the clients are white,
85.7 percent; however, 13.1 percent are African Americans, which is higher than the percent
of the county's self-employed workers in 1990 who were black, 8.0 percent. On average, the
Center's staff spends nearly 2 hours per client, including preparation time.
During the twelve-month period ending in April of this year, 245 individuals sought
business assistance at W.E.S.T.O.P.S. Unlike the Stryker Center, only 28.3 percent of
W.E.S.T.O.P.S. clients were seeking assistance in starting a business, according to its files.
Over 57 percent of the organization's clients came from established business operations. On
average, W.E.S.T.O.P.S. personnel spends 1.2 hours per client.
Coordination of Services
The Kalamazoo County Chamber of Commerce convenes a monthly meeting of the
various small business service providers. Due to this effort the area's small business resource
organizations, the service providers are in regular communication with each other. For several
years the Chamber of Commerce has prepared, updated, and distributed a chart illustrating the
type of services offered by area service providers. The Chart is duplicated in Table 24.
Referrals are made regularly between the area providers in order to meet the needs of
individuals seeking assistance.
In Chart 1, we offer a flow chart showing the different ways individuals can enter the
system. The Kalamazoo College SBDC/Stryker Center, S.C.O.R.E., W.E.S.T.O.P.S.,
Kalamazoo Public Library and the Portage Library are typically the first points of contact by
an interested individual. From any of these entry points, individuals are able to review
literature and brochures of most of the area's service providers. In addition, target
populations have their own programs available, and they are often passed on to other
organizations in the area when needed.
Two potential limitations of the current system may exist. First, since each of the
service providers generates its own marketing/information materials, there may exist a
duplication in mailings. Second, it is not unusual for an individual to have to make three or
four phone calls or visits before reaching the right service provider for assistance. These
limitations are addressed in the report's conclusions and recommendations section.
38
Chart I
Kalamazoo County Small Business Delivery System
Education/Seminars
Small
General Small Business
Counseling
Business
Kalamazoo College-SBDC/
Stryker Center
Community
S.C.O.R.E.
KVCC
Davenport
Stryker Center
W.E.S.T.O.RS.
S.C.O.R.E.
W.E.S.T.O.RS.
and
Financial Assistance
Individuals
Financial Institutions
Interested
Stryker Center
in
Opening
City of Kalamazoo
General Business
Information
Their Own
Business
Special Assistance
Exporting
Business & Development Bureau
Government Procurement
Sites
W.E.S.T.O.P.S.
Market Inquiries
WMU Services
WE. Upjohn Institute
Kalamazoo College
Business Studies
MSU Extension
Home Based Businesses
Kalamazoo Area Chamber
Networking
Special Populations
Kalamazoo City Businesses
City of Kalamazoo
Office of Economic Development and Planning
Downtown Kalamazoo Businesses
Downtown Kalamazoo Incorporated
Portage Businesses
City of Portage
Department of Community Development
Head Start Families
Kalamazoo County
Human Services Development
Minority Businesses
S.W. Michigan Minority Business Association
Inner-City Businesses
Deacons Conference
V. Barriers and Opportunities
Previous Studies
In 1991, the Public Policy Associates (PPA) released its Michigan Small Business
Needs Assessment which was based on 1,721 telephone interviews to firms employing 500 or
fewer workers.22 The following five problems were identified by more than 30 percent of the
surveyed small businesses in the state: finding finance capital (37.4 percent), costly
government regulations (36.8 percent), workforce development (35.2 percent), finding
assistance on technology applications (35.0 percent) and assistance in marketing (33.8
percent). Of those citing financing as a problem, 64 percent listed the unavailability of loans
at below-market rates, while developing financial strategies and assessing financial needs were
also cited as major difficulties.
Other studies reveal the various ways entrepreneurs finance their business ventures.
Researchers who surveyed manufacturing firms in Arkansas found that small manufacturers
make greater use of equity capital when starting up, while using debt capital for expansion
purposes. Over 90 percent of the startups that used equity capital tapped into personal
savings, and for those firms that used personal savings it provided 78.5 percent of the total
capital required. The researchers stressed that one barrier facing manufacturing startups is the
lack of a successful bank relationship since banks are the primary source of expansion
capital. 23
Yet, in a survey of 235 businesses operating in an established neighborhood in
Chicago, researchers found that formal loans are seldom used in financing business startups.
Only 11.5 percent of the surveyed businesses said that they used such loans in their startups. 24
More than 42 percent of the surveyed businesses reported being rejected for a bank loan;
however, in most cases individuals appeared to have succeeded in raising similar amounts of
capital elsewhere. In fact, 41.6 percent of the businesses surveyed did not use any kind of loan
to finance start-up costs. Indeed, 49.5 percent of respondents used only personal resources,
principally personal savings. Of those that did not ask for financial assistance for business
startups, 63.2 percent reported lack of need. Only 8.8 percent revealed their belief that the
bank would reject their application anyway.
Certain populations experience difficulties in obtaining financing. Data pulled from the
1987 U.S. Census Bureau's Characteristics of Business Ownership database indicated that
young black business owners were able to leverage only 89 cents of debt for every dollar of
owner equity, while young white business owners were successful in obtaining $1.79 of debt
per dollar of equity, even after controlling for age and management experience. 25
40
Researchers, who surveyed women-owned firms in Wisconsin, found in their study that
when starting and expanding a business, 68 percent of the women surveyed used personal
savings; 46 percent commercial banks; 41 percent family, friends and relatives. 26
Turning away from financial issues, research suggests that small manufacturers' may
be slow adoption of new technologies. One researcher found that small manufacturers lag in
the use of manufacturing practices such as use of production teams, just-in-time
manufacturing and statistical process control. Moreover, they under invest in worker training,
and are not likely to take a long-term approach to strategic planning.27 ITI extensive research
on small manufacturers in Michigan cited earlier found that many small manufacturers lacked
experience with advanced technologies and new manufacturing methods. In addition, the ITI
report indicated that many firms had insufficient in-house engineering expertise, poorly skilled
production workers, inadequate workers training programs, and lack of knowledge about how
to select equipment vendors and consultants. Furthermore, researchers worry that if these
trends continue small manufacturers will simply slip further behind.
PPA also found that one barrier facing many small businesses is the owner's
unwillingness to seek outside assistance. "While perceiving threats to the continuing viability
of the firm, the business owner or manager believes that she or he is able to handle almost all
of these threats without outside help, and in fact may take pride in doing so. "28 One reason
business owners do not seek assistance is that they know that showing signs of weakness can
be disastrous.29 A troubled business will lose supplier discounts and customers.
Locally Identified Barriers
We attempted to assess the type and extent of the barriers facing Kalamazoo County's
small business owners by soliciting their perceptions through one-on-one interviews, a focus
group of service providers and our survey of local small business owners. By and large, the
three activities yielded a similar list of perceived barriers. However, it was interesting to see
the differences in the priorities given to the barriers, particularly the contrast between
providers and owners.
Fifteen one-on-one interviews were conducted with individuals who were either
successful in then- efforts to start a small business or are still trying. Most of the interviews
were arranged through the Kalamazoo Deacon's Conference. Twelve of the interviewees
were African American, and seven were women. While each person's experience was unique,
several common threads were shared.
Nearly all had prior experience in the business. Most had worked for larger
companies and left to start their own business because they believed that they could
provide a better product or service. However, there were exceptions. Four individuals
have or are trying to start a business in a field that was totally different from their past
41
experience. In these instances, all of the individuals have or are conducting a market
analysis.
On average, individuals rated the area's current small business service providers
as just fair. Several found the information they received confusing and not very
helpful. Two entrepreneurs complained that they were given forms to fill out when
they wanted to talk to someone. Several reported that the providers were unduly
discouraging, while another spoke highly of the service he received. Still, the lack of
communication between the individuals interviewed and service providers was a fairly
common theme in the interviews.
While financing was a barrier to several, the lack of both an adequate business
plan and marketing strategy were barriers to most. As one interviewee said,
"Entrepreneurs must be made aware that there is a significant difference between doing
something and running a business that does something." Second, several mentioned
that being a small business is itself a problem because one does not have access to the
trade discounts or advertising available to their larger competitors.
Personal issues were barriers for several as they found that the demands of
running a small business seriously cut into their family responsibilities. However,
at the same time, several held strong personal beliefs that operating the business
was their way of giving something back to the community or to their family.
We also conducted a focus group session with area service providers and held one-onone interviews with several others. The providers at the focus group session identified the
following issues as major obstacles facing individuals starting or operating a small business.
•
The lack of available financing. However, the barrier goes deeper than just the
inability to secure a loan. Many would-be entrepreneurs are not willing to put up their
own financial resources as collateral; instead, they want financial institutions to take
most of the risk on the loan. Moreover, many first-tune loan applicants have little
savings, a troubled credit history and major outstanding debt. The group generally
agreed that too many entrepreneurs are not financially prepared to successfully tap into
existing business loan resources.
The lack of business skills. Most entrepreneurs know how to produce their goods
and/or services, but few have acquired the business skills that are necessary to operate
a profitable business. Bookkeeping, accounting, and customer relations were cited as
skills that new business owners too often lack.
•
Lack of preparation. Frequently, individuals with a desire to start their own business
do not prepare a business plan nor adequately research current market conditions for
their business.
42
•
Unrealistic aspirations or expectations. Too many entrepreneurs expect success too
quickly and/or underestimate the amount of work that starting a new business requires.
•
Lack of knowledge on how to locate business information. Many entrepreneurs do
not know where to turn for business information on the local area and/or their industry.
Lack of business experience. Some entrepreneurs attempt to start a business in an
industry in which they have very little experience. Too often, individuals have an
ambition of starting their own businesses without a full understanding as to what it
means to run a business, e.g., long hours, that can come only through experience.
Finally, in our small business survey we asked respondents to identify from a list of
possible problems what they considered to be major and minor obstacles when they were
starting up or purchasing then* current business (Table 25). Developing a customer base, that
is finding a market for their goods or services, was by far the greatest obstacle facing starting
entrepreneurs. This problem may run deeper than not knowing how to advertise, for it may
also indicate that the entrepreneur did not fully research the market before entering the field.
The second major obstacle identified, the inability of finding regional market information, is
highly related to the first.
Table 25
Major Obstacles and Minor Obstacles to Starting a Business
Major
32.1%
13.7%
21.4%
11.3%
13.7%
9.5%
8.9%
Developing a customer base
Finding regional market information
Finding regional financing
Government regulations
Finding qualified workers
Finding technical assist for business plan
Finding national market information
Minor
30.4%
27.4%
17.9%
23.8%
19.0%
22.0%
19.6%
Combined
62.5%
41.1%
39.3%
35.1%
32.7%
31.5%
28.6%
WE Upjohn Institute
We also asked survey respondents to identify, in their own words, the major obstacles
they faced when starting their business. We separated the respondents according to the age of
the business as shown in Tables 26. Among businesses in operation for less than three years,
43
26.6 percent, again, indicated that identifying a customer base was the major problem they
faced. Less than one in five indicated that start-up financing was a barrier. Personal
problems, ranging from marital problems to a lack of self-confidence or time management
skills, plagued 14.4 percent of the respondents.
For businesses that have been in existence for three years or more, government
regulations and taxes were the major obstacles cited by 32.0 percent of the respondents.
Finding a qualified workforce was a problem for 18.4 percent of the respondents. Locating a
customer base still troubled 14.3 percent of the surveyed respondents, as well.
1
1
Table 26
Major Obstacles Cited by
Businesses in operation
< 3 Years
Total
> 3 Years
Percent
Total
Percent
100
26.6
83
14.3
Start-Up/EQ Financing
69
18.4
75
13.0
Personal Problems
54
14.4
18
3.1
Cash Flow Financing
35
9.3
35
6.0
Govt. Regulations and Taxes
34
9.0
185
32.0
Lack of Marketing Information
28
7.4
27
4.7
Finding Qualified Workers
19
5.1
104
18.0
Miscellaneous
17
4.5
19
3.3
Finding Affordable Space
12
3.2
5
0.9
8
2.1
17
2.9
Identifying Customer Base
Business Cost/Licenses
44
Regarding financing, we asked owners who were in business for less than three years,
how they arranged financing for the opening of their business. As shown on Table 27, 79.2
percent financed the opening through personal savings, and only 11.9 percent went to a
commercial bank for a loan. These findings are very similar to those reported in other studies.
In addition, only 22.6 percent of the 133 respondents who used personal savings found
financing a major obstacle. Many of the individuals who turned to friends and relatives did so
as a last resort, since 42.1 percent indicated that financing was a major obstacle.
Personal savings was the financing choice for individuals across all income groups as
shown in Table 28. Home ownership, among the upper-middle income levels, allowed the use
of second mortgages. Individuals making between $20,000 and $39,000 accounted for 42.9
percent of all credit card users for their small business startups. Finally, commercial bank
loan users were spread across a wide band of income groups.
Table 27
Financing
How did you finance the opening of your business?
133
10
35
19
20
17
Personal Savings
Second Mortgage
Credit Cards
Friends and Relatives
Commercial banks
Other
79.2%
6.0%
20.8%
11.3%
11.9%
10.1%
Was financing a
major obstacle?
30
22.6%
3
30.0%
12
34.3%
42.1%
8
4
20.0%
5
29.4%
WE Upjohn Institute
45
Table 28
Type of Financing by Income Level
Personal savings
Second Mortgage
Credit Cards
Friends and
Relatives
Commercial banks
Other
< $20,000
$20-39K
$40-59K
$60-79K
$80-99K
$100K
N.A.
24.8%
0.0%
17.1%
21.1%
22.6%
30.0%
42.9%
36.8%
21.8%
20.0%
17.1%
10.5%
12.0%
30.0%
8.6%
26.3%
9.0%
20.0%
8.6%
0.0%
3.8%
0.0%
5.7%
5.3%
6.0%
0.0%
0.0%
0.0%
10.0%
23.5%
25.0%
17.6%
20.0%
17.6%
25.0%
5.9%
15.0%
5.9%
5.0%
5.9%
0.0%
23.5%
WE Upiohn Institute
What Could be Done?
Returning to Birch, he offered several observations that run counter to standard
economic development concepts. First, he suggests that high cost areas tend to do better than
low-cost areas because innovative firms require quality not cheapness and will locate hi an
area where smart, creative individuals want to live. Indeed, Birch focuses on five location
factors: educational resources, (particularly higher education), quality of labor, quality of
government, telecommunications and quality of life. 30 According to Birch, it is quality not
cheapness that the successful entrepreneur needs. Wages and taxes are secondary. Other
researchers agree and suggest that the most important contribution that a local government can
make to new firms is to provide quality educational programs at all levels, reliable
infrastructure (roads, utilities, transportation), and an efficient and responsive government.
In the survey, we asked business owners to rank, in order of helpfulness from 5 to 1, a
list of nine traditional small business services that are offered in other communities around the
country. As shown on Table 29, the availability of small business, market-rate loans with
minimum collateral requirements ranked highest, followed by business planning assistance and
the availability of seminars on key issues. It is important to note that low-interest rate
business loans with standard collateral requirements are not as attractive to the business
community. Finally, small business owners do not consider the availability of a business
incubator as an important issue.
46
Table 29
Ranking of Small Business Assistance Program
(5= Most Helpful; 1= Least Helpful)
Summary Statistics
Seminars on Key Issues
Business Plan Assistance
Market information
[ncubator & support
services
Incubator & low rent
Loan with min collateral
req.
Loan at below mkt. rates
Tech & quality assistance
Buyer-Seller linkages
Total Sample
Established
less than 3
years
Established
3-10 years
Established
more than 10
years
AfricanAmericans
number
score
number
score
number
score
number
score
number
score
608
605
594
565
3.36
3.38
3.08
1.96
114
113
111
106
3.26
3.16
3.04
1.94
189
188
189
183
3.37
3.40
3.15
2.08
304
303
293
275
3.40
3.45
3.04
1.88
29
26
27
25
4.28
4.08
3.59
2.60
558
595
2.11
3.51
104
109
1.97
3.47
176
186
2.20
3.54
277
299
2.10
3.52
25
28
2.64
4.36
578
563
579
2.95
2.23
3.00
107
110
110
2.78
2.05
3.14
183
170
187
2.90
2.29
3.13
287
282
286
3.06
2.28
2.83
26
26
27
3.54
3.23
3.63
Source: Small Business Owner/Manager Survey, 1 996
WE Upjohn Institute
In addition, we asked surveyed firms about what programs or activities of the area's
small business providers would be the most helpful. As shown in Table 30, 24.2 percent
indicated that the current providers could do a better job in promoting their activities. Several
of the surveyed businesses expressed surprise about the number of service providers in the
county. In addition, 13.9 percent pressed for service providers to reduce government
regulations and taxes. However, many of the regulations and taxes identified were state and
federal, making it difficult for local efforts to make a significant impact. Still, zoning,
building code enforcement and other local issues were identified, as well. Financial
assistance, general small business training assistance, and marketing networking opportunities
were also cited by 11.8 percent of the surveyed businesses.
47
Table 30
How can Small Business Assistance Organizations
be of Greater Assistance?
Better Marketing of Current Programs
Work to Reduce Govt Regs & Taxes
Offer Financing Assistance
Offer Basic Small Business Education
Offer Networking Opportunities
Consulting
Advanced Business Training
Workforce Training
Miscellaneous
Public Relations/Group Advertising
Offer Mentoring Options
Total
Percent
80
46
44
40
39
21
16
16
13
9
7
24.2%
13.9%
13.3%
12.1%
11.8%
6.3%
4.8%
4.8%
3.9%
2.7%
2.1%
WE Uoiohn Institute
Identified Barriers
In conclusion, the barriers facing individuals wanting to start their own business may
come down to three basic problems that should be addressed by the area's small business
assistance delivery system.
•
Identifying a customer base. Entrepreneurs tend to focus on their products or
services and not necessarily on their market or customers. They need to focus on both.
In our discussions with entrepreneurs we heard over and over again that they loved the
work of making the good or service, but they hated the marketing.
However, this barrier runs deeper than simply disliking selling and drumming up
business. It may also reflect the lack of proper homework in the preparation of a
business plan. A crucial part of a good business plan is an in-depth analysis of current
market conditions for the good or service that the individual wants to make. Many
48
markets are very competitive, making it difficult for new businesses to enter. Hence,
for some small businesses, the lack of a customer base is not simply a call for better
marketing, it is the result of a poorly prepared business plan.
Small business financing Financing of small business is a problem for several
reasons. First, it may stem, again, from a poorly prepared business plan which does
not provide an adequate justification for why the business will succeed. Second, for
many small businesses, the financing needs are so small that it may not be
economically feasible for a commercial bank to finance them because the returns will
not cover the fixed paper work costs. Finally, some entrepreneurs are unwilling to risk
what the banks believe is sufficient collateral for the loan. The biggest concern, in our
view, is that low-income entrepreneurs, who have done their homework and present a
good argument for the success of their business, could be denied financing due solely
to the size of the request.
Personal Stress Starting a small business is extremely stressful. The marketplace can
be harsh and demands a tough skin and perseverance. A day of "no thank you" can
shake the confidence of the most self-assertive individual.
49
VI. Conclusions and Recommendations
The primary purpose of this study is to assess the importance of small business to the
Kalamazoo County economy and attempt to identify gaps in the current efforts in providing a
nurturing climate for small business owners. The benefits of a strong small business sector are
not limited to expanded employment opportunities for entrepreneurs and the employees they
hires. Small business assistance is both an economic development tool and a community
development activity. Small business development can create jobs, but perhaps more
importantly, it can bring economic hope, community leadership, and employment
opportunities to individuals living in neighborhoods suffering high unemployment.
A successful small business development program may have little to no overall impact
on the area's economy. First, a good business development program will prevent many
individuals from starting a small business that had a slim chance of survival. Second, as
research has shown, small businesses tend to stay small. In addition, if the assisted small
businesses serve the local market and do not sell their goods or services to customers located
outside the county, their net economic impact on the county's economy will be lessened by the
amount of business they take away from existing firms. Indeed, the customer base of 73.9
percent of the small businesses surveyed in Kalamazoo County was limited to the county.
Another hair salon, restaurant, grocery store or temporary employment agency, if successful,
would strip business from existing establishments and thus contribute very little to the local
economy.
For consumers a new store can offer more variety, better prices, and better quality
service. Although the new store may negatively impact an existing operation, consumers are
better off. More importantly, the neighborhoods housing the successful businesses are better
off, if the businesses are using an abandoned storefront or brownfield. In low income areas,
new stores can also bring convenience and employment opportunities for residents who do not
have access to a dependable vehicle.
An effective system of small business assistance organizations may not significantly
impact the overall growth rate of the metropolitan area. However, small business
development may be an important part of an effective community development strategy.
Recommendations
Kalamazoo County is fortunate to house many excellent small business assistance
organizations. Unlike other communities, we are not hindered by the lack of available
resources for small business assistance and development. Based upon our research, we offer
the following recommendations for the Kalamazoo County's small business assistance
providers:
50
Strengthen marketing efforts of existing programs. In our discussions with
individuals starting their own business and through our survey of small business
owners, it became clear that existing small business assistance programs could
do a better job in advertising/marketing their services. Currently, the service
providers are doing a very good job in informing each other of the programs
being offered and have developed their own mailing lists. However, we suggest
the following activities be considered:
A monthly or quarterly bulletin that announces all of the scheduled
seminars and services being offered by the individual organizations. The
bulletin could include contact telephone number and person for each of
the area's service providers. It could be mailed to all residents in the
county on a monthly or quarterly basis. A newspaper insert or a posting
on the Internet are options, as well. The target audience of the bulletin
would also be the area's financial community.
•
Develop a centralized business service information network which
would electronically link the area's business services providers. We are
not suggesting a new office with additional personnel, but instead an
automated telephone service that would direct individuals to the right
agency for a particular service and announce all scheduled programs.
The network would enable an individual to access programs and
resources which are provided by any of the business services providers.
Promote the area's small business assistance services and small
business community. For example, in Eau Claire County, Wisconsin,
the area's
small business assistance centers conduct an annual small
<
business plan competition. Area service providers offer assistance to
interested individuals in preparing the plans which are then judged by a
panel of local experts. In their program, the winner receives $1,000 and
second place is awarded $500.31 The program not only helps the new
small business person to succeed, but also promotes small business
development, stresses the importance of developing a business plan, and
provides visibility to a new business.
Establishment of a microenterprise loan program. Microenterprise loan
programs have been established across the country. According to the 1994
Directory of U. S. Microenterprise Programs which was based on a survey sent
to over 2,000 organizations nationwide, there were 195 microenterprise
programs scattered over 44 states. In 1992, a similar effort yielded only 108
microenterprise programs. 32 According to Shorebank Advisory Service, Inc.,
there are currently three general types of microenterprise loan programs as
shown in Table 31.
51
The research completed by the Shorebank Advisory Services Inc. suggests that
microenterprise loan programs promote entrepreneurship, self-employment and
small-scale business creation among individuals who lack access to credit via
the formal banking system. 33 In addition, by facilitating entrepreneurship they
can help create needed role models hi distressed neighborhoods. Finally, their
programs could generate a positive income flow to low- and moderate income
households. In addition, microenterprise programs may allow the cultivation of
human development skills and improved dignity and self-esteem of the client.34
It is important that any microenterprise loan fund program contains a strong
education and training component. Access to capital and credit is only one of
many barriers facing would-be entrepreneurs. It is also important to note that
self-employment is appropriate for only a small percentage of the population.
The program should not be solely restricted to minority groups or entrepreneurs
in distressed neighborhoods because we fear it would be stigmatizing. Instead,
we suggest that small business assistance providers be given the financial
support to conduct a special outreach effort to minorities and individuals living
in distressed neighborhoods.
The program should be available to new firms, as well as, startups. Many
firms face a serious cash-flow crunch during their second or third year of
operation, yet they do not have a sufficient financial track record and/or
required enough collateral to acquire a commercial loan. A microenterprise
loan fund could supply this needed "gap" financing.
Finally, the cost structure of microenterprise funds suggests that financial selfsufficiency (i.e. the ability to earn sufficient revenue from internal operations to
meet operating expenses, replace capital written off to bad loans, and pay the
cost of capital) cannot be attained without either a sizeable capital endowment or
operating subsidies that could be tied to operating performance. Indeed,
microenterprise loan programs are expensive to offer for they include a quality
training component and a small loan portfolio with an expected higher- thanaverage loan-loss reserve. This is also complicated by the fact that since it is
targeted primarily to low-income individuals, it can expect little user support.
Consequently, income from interest will most likely be inadequate to cover
costs. It is possible that an effective microenterprise programs will not be
financially self-sustainable.
The idea of establishing a microenterprise loan fund is not new to Kalamazoo
County. Several of the area's service providers have been working toward
establishing such a program. The Deacon's Conference has already received
funding for a small loan fund and is currently working with neighborhood
leaders and residents to determine how the program should be structured.
Healthy Futures has also identified the establishment of a microenterprise loan
52
program as one of its anti-poverty strategies. Finally, the Kalamazoo
Foundation had set aside a substantial grant to be matched by private and public
dollars for the establishment of a microenterprise loan program.
We close with a word of caution. Given these recent activities, it is important
that efforts are made to avoid both needless duplication and the possible
establishment of competing, undercapitalized loan funds. As we have said
before, Kalamazoo County's strong resource base for small businesses could
further be enhanced through fostering additional cooperation among its area
service providers.
53
Table 31
Three General Types of Microenterprise Loan Funds
Self-Sufficiency Loan Funds
To increase the self-sufficiency
-Informal, part-time home
-Start-up Seed Capital loans
-Small, short-term Working
Capital loans:
- up to $5,000
- up to 12-month maturities
-Basic business management
skills.
-Personal Development /
Support
-Verbal "Action Plan"
-Intuitive understanding of
break-even sales volume.
-Full-time venture for
entrepreneur.
-Storefront, office, and some
home-based.
-May have part-time
employees.
-Early-stage expansion and
enterprise transformation stage.
-Pre-development stipend
-Seed capital
-Asset purchase
-Working Capital loans:
- up to $10,000
- up to 36-month maturities
-Refinement of business concept
-Financial management
-Marketing plans and market
development
-More complete Action Plan
-Enterprise expansion stage
-May have full-time employees
-Entrepreneur makes most
decisions, but beginning to
delegate
-Entrepreneur has demonstrated
product/service quality and
market and informal
organizational ability
-Permanent Working Capital
-Long-Term Seed Capital
(subordinated debt)
-Fixed Asset Financing
-Financing needs are:
- up to $25,000
- typical size $15,000
-Working capital and cash flow
management
-General management skills,
decision-making
-New market development
-Hiring and managing
employees
-Managing growth
nf
entrepreneur
the pntrpnrpnwir
of fhf»
artivitv
hae/^H
based activity.
Self-Employment Loan Funds
Tot help entrepreneurs develop
a viable source of selfemployment.
Small-Scale Enterprise Loan
Funds
To help existing
microenterprises make the
transition into small-scale
growth enterprises.
-Enterprise formation stages.
-Entrepreneur is beginning to
think of hobby or activity as a
business.
Note: A single loan fund may operate two different kinds of programs to target distinct markets of entrepreneurs.
Source: Widening the Window of Opportunity Strategies for the Evolution of Microenterprise Loan Funds. Shorebank Advisory Service, Inc., July, 1992
WE Upiohn Institute
APPENDIX A
List of Comparison Metropolitan Areas
Appleton-Oshkosh-Neenah,
Augusta-Aiken,
Beaumont-Port Arthur,
Boise City,
Canton-Massillon
Chattanooga,
Davenport-Moline-Rock Island
El Paso
Evansville-Henderson,
Fort Wayne
Huntsville
Johnson City-Kingsport-Bristol
Lancaster,
Lansing-East Lansing
Lexington,
Peoria-Pekin
Reading
Rockford
Saginaw-Bay City-Midland
Springfield
Stockton-Lodi
York
Youngstown-Warren
Wisconsin
Georgia-South Carolina
Texas
Idaho
Ohio
Tennessee-Georgia
Iowa-Illinois
Texas
Indiana-Kentucky
Indiana
Alabama
Tennessee-Virginia
Pennsylvania
Michigan
Kentucky
Illinois
Pennsylvania
Illinois
Michigan
Massachusetts
California
Pennsylvania
Ohio
55
APPENDIX B
W.E. Upjohn Institute for Employment Research's
Small Business Owner/Manager Survey
56
W.E. Upjohn Institute for Employment Research's
Small Business Owner/Manager Survey
This survey is to be answered ONLY by the business's owner/manager
Please complete and return this survey in the enclosed prepaid envelope or mail to:
W.E. Upjohn Institute. 300 S. Westnedge Ave. Room 5017, Kalamazoo, MI 49007.
Please return survey by August 7, 1996.
1. What is the name of your business?
2. Your name:
Position/title:
Business Information
3. What is your business' major product or service? ____
4. How many full- and part-time employees are you currently employing?
Full-time:_________ Part-time: _________
5. Is your business independently owned? Yes __ No __
If not, who is the owner? _____________ City: ________
6. Is your business a franchise?
Yes __ No
7. Which of the following geographical areas best describes your market area?
a.
b.
c.
d.
e.
f.
A circle with an approximate 3-mile radius
Kalamazoo County
Kalamazoo County and surrounding counties
State of Michigan
The Great Lake States
National/international
8. How many years has your business been in operation? _____
9. How did you acquire this business?
a.
b.
c.
d.
e.
Started it on your own.
Took over the business from a family member.
Purchased the business from an unrelated individual
Was assigned the position by the parent company.
Other ___________________________
I
If your business has been in operation for less than 3 years, please continue to
question 10. If not, please go to question 16.
A purchase of an existing business?___
10.
Did this business begin as: A start-up?___
11.
Before becoming the owner/operator of this business:
a.
b.
c.
d.
e.
12.
Did you have previous experience in the industry?
Had you owned or managed other small business(es)?
Were you laid off or unemployed?
Did you accept early retirement from your previous job?
Had you attempted to start another small business
but was unsuccessful?
If yes, how many attempts did you make
before this business? __ Attempts
YES
__
__
__
__
NO
__
__
__
__
___
__
How did you finance the opening of this business (Circle as many as apply)?
a.
Personal savings.
b.
Took out a second mortgage or equity loan on your house.
d.
e.
f.
g.
Borrowed money from friends and relatives.
Commercial banks.
Partnered with venture capital investor who holds an equity position in the business.
Other _____________________________________.
c.
13.
||
Credit cards.
When you were starting up or purchasing your current business, which of the
following were major obstacles, minor obstacles, or not a problem?
a. Finding acceptable financing
b. Finding regional marketing information
regarding your business
c. Finding national marketing information
regarding your business
d. Finding technical assistance to help with
the development of a business plan
e. Government regulations
f. Developing a customer base
g. Finding qualified workers
Obstacle
Minor
Major
___
___
Not
A Problem
____
___
___
____
___
___
____
___
_____
______
___
___
___
___
___
___
____
____
____
14.
In the year that you started or purchased this business, what was your household's total
income?
a.
b.
c.
15.
d.
e.
f.
Less than $20,000
$20,000 to 39,999
$40,000 to 59,999
$60,000 to 79,999
$80,000 to 99,999
$100,000 or more
In your own words, what were the major obstacles in starting or purchasing your
business? _____________________________________
Please go to question 21.
SECTION FOR BUSINESSES THAT HAVE BEEN OPERATING FOR 3 YEARS OR MORE
16.
How long have you owned/operated this business? ____ years
17.
Three years ago, how many workers did this business employ?
Full-time: ____ Part-time: ____
18.
Did you hire at least one worker in 1995?
If yes, did you find (check 1):
a.
b.
c.
Yes __ No __
Most of the job applicants to be qualified.
Some applicants to be qualified.
Very few of the applicants to be qualified.
____
____
____
19.
In 1995, did you apply for a loan or line of credit at a commercial lender? Yes __ No
If yes, was your loan approved? Yes __ No __
20.
In general, what do you believe are the greatest obstacles facing small businesses?
GENERAL INFORMATION
Gender:_____
Race:.
21.
What is your age? ____
22.
How long have you lived in Kalamazoo County? _____ years
23.
Would you consider working for someone else, and, if so, how much more would they have to
pay you per year than what you earn now? $_______
24.
What level of education have you achieved?
a.
b.
c.
d.
25.
e.
f.
g.
Did not complete high school
High School Diploma
A post-high school Technical Certificate
Two-year Associate Degree
Some college
Bachelor Degree
Graduate Degree
Have you used any of the services offered by the following agencies or organizations?
Please circle all that apply:
a.
b.
c.
d.
e.
f.
CEO Council
City of Kalamazoo
City of Portage
Davenport College
OKI
Kalamazoo Area Chbr of Commerce
g.
h.
i.
j.
h.
k.
Kalamazoo Library
KVCC
MSU-Extension Service
SCORE
Kalamazoo College-SBDC/Stryker Center
WESTOPS- WMU
If you circled any of the above, please describe the assistance you received.
26.
When you started or purchased this business, how useful would the following programs have
been? Please rank (5 = most helpful, 1= least helpful).
a.
b.
c.
d.
e.
f.
g.
h.
27.
____
Seminars on key issues/topics affecting small businesses
____
Assistance in developing a business plan
_____
Market information, i.e. demographics
A business incubator that would offer support services
___
and shared equipment but would charge market rent
A business incubator that would offer below-market rent
____
but provide little support services
businesses
small
to
A market-rate loan program targeted
___
that require minimal collateral requirements
A below-market rate loan program targeted to small businesses
____
with standard collateral requirements
A program that would offer technical and quality control
___
assistance
A buyer-seller linkage program that would identify local suppliers
_
and buyers of products and services
How can small business assistance organizations be of greater assistance to the area's small
business community?_____________________________________
Notes
1.David Birch, Job Creation in America,(Free Press, New York), 1987.
2.Bennett Harrison, "The Myth of Small Firms as the Predominant Job Generators" Economic
Development Quarterly Vol. 8 No. 1, February 1994, pp 3-18.
3. Birch, Ibid.
4.Catherine Armington and Michael Odle, "Small Business: How Many Jobs?" Brookings
Review, Vol 20, Winter.
S.Steven J. Davis, John Haltiwanger, and Scott Schuh, "Small Business and Job Creation:
Dissecting the Myth and Reassessing the Facts" in Solmon and Levenson Labor Markets,
Employment Policy and Job Creation (Westview Press: Boulder, Colo.),1994.
6.Birch, Ibid.
T.Birch, Ibid.
S.Marie Rowland, Plant Closings and Worker Displacement: The Regional Issues (W.E.
Upjohn Institute, Kalamazoo MI.) 1988.
9.Randall W. Eberts and Joe A. Stone, Wage and Employment Adjustment in Local Labor
Markets (W.E. Upjohn Institute: Kalamazoo, MI) 1992.
10.Randall W. Eberts, "Components of Employment Change in Cleveland" REI Review, Vol
2, No. 1 pp. 3-12.
ll.Sammis B. White and Jeffrey D. Osterman, "Is Employment Growth Really Coming from
Small Establishments?" Economic Development Quarterly,Vol. 5 No.3 August 1991 pp. 241257.
12.Douglas Handler, "Business Demographics," Economic Analysis Department, Dun &
Bradstreet Corp. N.Y. 1989 as reported in Harrison.
13.Paul Reynolds, "New Firms" Commentary, Summer 1989, pp 4 -11.
14.Stephen L. Mangum and Judith W. Tansky, "Displaced Workers Turned Small Business
Operators: A Viable Economic Development or Reemployment Strategy?" Economic
Development Quarterly Vol. 7 No. 3 August 1993. 243-254.
57
15. John F. Zipp, "The Quality of Jobs in Small Business" Economic Development Quarterly
Vol. 5, No. 1 February 1991 pp. 9-22.
16.Industrial Technology Institute, Executive Summary, The Michigan Foundation: A Study of
the Modernization Process in Michigan's Small- and Medium-Sized Manufacturers, (Industrial
Technology Institute: Ann Arbor, ML), 1990.
17.George Erickcek and Walter Miller, "Does Establishment Size Matter?" Business Outlook
for West Michigan Vol. 8, No. 1 pp. 1-7.
IS.Reynolds, Ibid.
19.David S. Evans and Linda S. Leighton, "Some Empirical Aspects of Entrepreneurship"
American Economic Review June, 1989, pp. 519-543.
20.John E. Bregger, "Measuring Self-employment in the United States" Monthly Labor
Review, January/February 1996 pp.3 - 9.
21.Margean Gladysz, ed. 1996 Kalamazoo County Business Directory (Kalamazoo Public
Library, Kalamazoo. MI.) 1996.
22.Jeffrey D. Padden, Michigan Small Business Needs Assessment, (Public Policy Associates:
EastLansing, MI), 1991.
23.Morris Lamberson and Clint Johnson, "Financing Experiences of Small Manufacturers in
Arkansas: Survey and Analysis, Economic Development Review, Spring 1992, pp. 62-66.
24.Phillip Bond and Robert Townsend,"Formal and Informal Financing in a Chicago Ethnic
Neighborhood" Economic Perspectives, (Federal Reserve Bank of Chicago), July/August
1996, Vol XX, Issue 4, pp.3-27.
25.Timothy Bates, Banking on Black Business.
26.Sara G. Burr and Mary Strickland, "Creating A Positive Business Climate for Women: An
Approach to Small Business Development", Economic Development Review Winter 1992, pp.
63-66.
27.Roger S. Ahlbrandt, "Helping Small Manufacturing Companies Become More Competitive:
A Model and an Evaluation", Economic Development Review Winter 1992.
28.Padden, Ibidpg. 30.
29.Michael Brockett, "Struggling Small Businesses: Can (Should) the Community/Economic
Development Professional Help?" Economic Development Review Winter 1992, pp. 46-47.
58
30.Birch, Ibid. p. 139.
31.Craig W. Carlson, "Creating Your Own Business" Economic Development Review, Fall
1990, pp. 24-25.
32.Margaret Clark, Tracy Huston, and Barbara Meister, 1994 Directory of U.S.
Microenterprise Programs, Self-Employment Learning Project: The Aspen Institute. 1994.
33.Shorebank Advisory Services Inc., Widening the Window of Opportunity: Strategies for the
Evolution ofMicroenterprise Loan Funds, (Charles Stewart Mott Foundation), July 1992.
34. Jaqueline Novogratz, Hopeful Change: The Potential ofMicro-enterprise Programs as a
Community Revitalization Intervention. June 1992.
59

Economic Analysis of the Greater South Haven

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