Does Bend’s “Adventure Label” Help Attract Lifestyle Businesses?June 12, 2017 After a devastating recession, businesses in Bend began to add back jobs in the spring of 2012. The entire metro area (Deschutes County) recovered from the recession in March 2015 and entered a period of economic expansion that continues to this day.
Job growth in Bend over the past five years is amongst the fastest in the Western United States. How did Bend transition from being one of the hardest-hit metro areas by the recession to being one of the fastest growing job markets? One theory is that Bend’s lifestyle amenities help to attract new businesses and labor, both looking to enjoy the city’s noted quality of life and access to outdoor amenities. We know that quality of life is a significant factor in drawing workers to Bend; however, do businesses also move to Bend due to its reputation as an adventure town?
New Bend Businesses
A business may open or relocate to a new community for a variety of reasons. Did a business open to capitalize on a new and expanding market? Did a business relocate to a new location to have better access to raw materials or transportation networks? Or, did a business relocate due to quality of life reasons? Although a quantitative analysis of payroll taxes cannot definitively answer this question, the industry composition of new businesses in a community may provide some hints to the major drivers behind business relocation or creation.
The following analysis uses payroll tax records from the Oregon Employment Department. Those business establishments that reported employment in 2015, but not in 2010 were classified as “new businesses.” If the establishment reported employment in both 2010 and 2015 they were classified as a “legacy business.”
In the past five years, 863 new businesses opened or relocated to Bend. These new businesses accounted for one-fourth (26%) of all 2015 private jobs. New businesses in Bend accounted for a disproportionate share of the city’s job recovery. Although these newer establishments only accounted for around 26 percent of the jobs in 2015, they accounted for more than 38 percent of the job growth since 2010. To put it another way, of the roughly 9,550 jobs Bend added over the past five years, over 3,650 of those jobs were created in businesses that opened since 2010. New businesses helped to inject new life into Bend’s economy. There seems to be a similar pattern for Oregon with a high share of the statewide job growth in the past five years coming from newer businesses that opened or relocated to the state.
The professional, scientific, and technical sector accounted for the largest share of nonfarm payroll businesses established over the past five years. These professional and technical businesses represented 16 percent of all new establishments created since 2010. Retail and construction also made up a large share of new businesses (11% each); both industries were hit hard by the recession and saw strong growth since 2010.
The story is a bit different when you look at where new business employment was concentrated. Although the professional and technical sector accounted for the largest share of new businesses, the largest share of jobs in new businesses was in retail, accommodation and food services, and health care. This discrepancy makes sense as these industries tend to be relatively large employers, such as big box retail stores, hotels, or health clinics. For instance, new accommodation and food service businesses had an average of nearly 17 jobs each compared with an average of around two jobs in new professional and technical businesses.
When drilling down at a more detailed industry level we find that around 120 of Bend’s new businesses were restaurants (6% of businesses added). That’s not a surprising finding for a city seeing rapid population growth. The more surprising finding was that nearly the same number of Bend’s new businesses (+118) were in “management, scientific, and technical consulting services.” That seems a bit specific; why so much growth in this industry? The largest share of these businesses were scientific and technical consultants (+50 businesses) followed by marketing consultant services (+35 businesses). These are small businesses and many of them work with clients outside of the Bend area. Today, many professional service businesses are not as dependent on place because of the advancement of technology. These businesses are becoming more lifestyle companies – they can live anywhere assuming they have good internet service and reliable flights to larger markets. In fact, there were a number of fast growing industry sectors that reflected similar lifestyle characteristics, including wholesale electronic markets (+90 new businesses) and computer systems design (+54 new businesses). Ultimately, growth in these lifestyle companies is likely being understated as this analysis does not count self-employed or those working remotely, likely a significant share of these industries. The chart shows a top 10 list of the most new businesses established by industry in Bend.
The Lifestyle Sector
Does Bend attract new businesses due, at least in part, to quality of life and access to outdoor recreation? Trends within the “lifestyle sector” were used to answer this question. Many of the most popular outdoor adventure towns across the United States are major tourism destinations. The industry is often criticized for a large share of part-time and seasonal workers, as well as relatively low wages. However, a common rebuttal in favor of tourism is its ability to attract new traded-sector businesses. These lifestyle businesses are not tourism related; rather they are traded-sector businesses that are flexible enough to move their operation for lifestyle reasons without relying on local demand.
A variety of qualities were used to develop an industry definition for the lifestyle sector. These are traded-sector businesses that are flexible in where they can be located and largely internet based. These lifestyle businesses are not to be confused with leisure and hospitality or tourism businesses, such as hotels, recreation, restaurants, or other tourism related businesses. Instead, these are businesses with enough flexibility to locate their business where they choose. They are not bound by access to major infrastructure networks. Finally, the primary way these businesses deliver their good or service is through the internet or telephone.
As of 2015, these lifestyle businesses accounted for roughly 17 percent of Bend’s business establishments, 6 percent of total employment, and around 11 percent of total payroll. The average annual wage of these lifestyle businesses was around $72,000, considerably higher than the average annual wage for all businesses in Bend ($41,500).
The number of lifestyle businesses is growing rapidly with nearly 275 more lifestyle establishments compared with five years ago, a growth rate of 55 percent. Between 2010 and 2015 employment in these lifestyle businesses rose by a staggering 67 percent (+1,125 jobs), considerably faster than growth in non-lifestyle businesses during the same period (+26%). The only sector to post a faster rate of job growth during that period was the construction industry as it added back jobs lost during the recession. Employment levels in construction remain well below the pre-recession peak. At the statewide level, the lifestyle sector also seemed to outpace non-lifestyle businesses; however, without controlling for economic code changes it is hard to know for certain.
The lifestyle sector is growing rapidly in Bend, but do these lifestyle businesses represent a significant share of the new businesses moving to Bend? The answer is a resounding yes. When focusing exclusively on just those new businesses that opened or relocated to Bend in the past five years, the lifestyle sector accounted for a larger share of new businesses than its share of all businesses. The lifestyle sector accounted for 21 percent of new businesses, 9 percent of employment in new businesses, and 18 percent of total payroll. The lifestyle sector was a larger component of Bend’s economy in 2015 than back in 2010.
How does Bend’s lifestyle sector compare with Oregon’s? Lifestyle businesses are a larger share of Bend’s economy than Oregon’s. Again, 17 percent of Bend’s businesses in 2015 were in these lifestyle related sectors, compared with around 15 percent of Oregon’s businesses. The share of the state’s employment in the lifestyle sector is fairly consistent with Bend primarily due to lifestyle businesses in Oregon being slightly larger (~5 employees per establishment) than Bend’s (~3.5 employees per establishment). Considering Oregon’s reputation as a quality of life state, it is not too surprising to see such a high share of jobs in the lifestyle sector.
Analyzing the growth of lifestyle businesses in Bend is an important first step in understanding the role of quality of life and outdoor recreation in business attraction. Unfortunately, this quantitative analysis of employment by industry can only take us so far. It would be complete conjecture to state that all the businesses that fall under the lifestyle sector relocated their business or opened a new business in Bend solely due to lifestyle reasons. Despite these limitations, it is clear that a large proportion of the businesses that opened in Bend during the current expansion fall under this lifestyle sector; which created high-paying jobs and diversified the local economy.