Walla Walla IPZ report: Wine industry keeps local economy afloat in sea of national hard times

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Nick Velluzzi Walla Walla Community College's director of institutional planning and assessment, discusses the impact of the wine industry on the regional economy outlined in a report in which he served as lead researcher. November 22, 2011

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WWCC President STEVE VAN AUSDLE, who heads the Walla Walla Innovation Partnership Zone. November 22, 2011

The statistics are as bleak as they are stark.

More than 46 million Americans are in living in poverty.

More than 2.5 million of them fell into that official classification over the past year.

The national jobless rate is stuck in high gear at 9 percent, and investment in new and expanding business is stagnant.

But there's a different, more promising story playing out in the Walla Walla Valley, say authors of a new report on the economic health in the Walla Walla Innovation Partnership Zone.

To lead researcher, Nick Velluzzi, Walla Walla Community College's director of institutional planning and assessment who holds a doctorate in geography specializing in regional economics and labor, the study leads him to conclude the region is an "island of success in a sea of doom and gloom."

The reason? Raise a glass to the Valley's continued strong growth in its wine industry, which the study shows is continuing to create new jobs directly related to the growing and making of wine as well as generating employment increases in spin-off support and tourism-related businesses. Combined they create what report defines as "wine cluster" businesses.

"Our study demonstrated that without the presence of local wineries and the jobs they create ... our region would be undergoing economic stagnation and potentially contraction," Velluzzi said in a prepared statement announcing the findings released in November.

The IPZ is one of 12 such state-designated zones in Washington and includes all but the western fringe of Walla Walla County, Columbia County and the greater Milton-Freewater area of Umatilla County in Oregon. It is a consortium with local government, agencies, institutions and business leaders at the helm, working to fill gaps in education and training for local employment and to further diversify the regional economy.

The numbers

The 2011 report, a follow-up to the benchmark Walla Walla IPZ study released in 2007, re-examines all employment sectors in the region, from health care to government to manufacturing to retail and their related clusters.

It found that while overall employment in the nation declined 1.5 percent since 2006 and grew in Washington only 1.1 percent, the total number of jobs in all sectors within the IPZ increased by 11.3 percent.

Among the mixed bag of economic performance in those sectors, only the wine cluster experienced what could be considered a continuing boom in new business and job growth since 2007.

Since that year, wine cluster employment has grown from 1,094 full- and part-time jobs to a current 2,061 - an 88 percent increase that is currently generating earnings of $96 million, according to the report.

Add in multiplier effects - defined as indirect jobs created by inputs and services that cluster businesses purchase and jobs generated through spending outside the cluster by people earning incomes within it - and the effect of the wine industry on the regional economy broadens.

Total wine cluster jobs, including multiplier effects, now stand at 6,003, up 84 percent from 3,263 in 2007, and generating earnings of $230 million.

Moreover, wine cluster and multiplier employment now make up 14.4 percent of all jobs regardless of sector in the region, up from 8.5 percent in 2007, according to the report.

The numbers beat "conservative" employment projections made for the future in the 2007 report, said WWCC President Steve VanAusdle, leader of the IPZ team who also is vice chairman of the Washington Economic Development commission and a member of National Council on Competitiveness.

And wine cluster growth has yet to peak, according to the 2011 report's projections through 2020. By then, wine cluster and multiplier employment is forecast to reach 8,913 jobs, for a total of 19.8 percent of all employment in the IPZ region.

Earning power lags

What's lagging in the wine cluster compared to other sectors are individual annual earnings, largely due to the seasonal nature of vineyard labor, part-time status of many working in the Valley's mostly small-production wineries and tasting rooms, and the traditionally lower wages restaurant, lodging and other workers in the cluster's tourism and specialty retail businesses.

While vineyard and winery owners and related industry professionals earn an average of $45,000 to $75,000 a year, according to Velluzzi, the average annual earnings per job in the overall cluster - the report does not distinguish between full- and part-time employment when counting jobs - stands at $17,000.

No one is popping corks over that number but, as VanAusdle said, "part-time wages in a tough economy" trumps no income at all.

That's especially true for younger people entering the workforce and for workers whose unemployment benefits have expired, according to employment experts. Further, a r?©sum?© that shows the person is employed ¬?-- even part time -- will have a leg up over one in which the job seeker is currently idle.

A ripple effect

Apart from direct hiring in an locally expanding industry that has established a national and global reputation for consistently producing high-quality wines, the 2011 IPZ report also examines another factor that it says may be contributing a "rippling" effect adding to the comparative health of the region's overall economy: "quality-of-life migrants."

"This group of people is generally made up of footloose proprietors ... or retirees, and is recognized as an increasingly important factor in western U.S. non-metropolitan growth," the report states.

"As a general rule, members of this group have made the decision to relocate in rural places such as Walla Walla based on the collection of appealing amenities they find there. Along with low crime, affordable housing, and quality schools, the 'wine country' atmosphere and the other wine cluster amenities attract these generally well-to-do migrants.

"As these individuals bring in outside income from investments, self-employment, or new entrepreneurial activity, they contribute to local economic growth that we can then attribute to the wine cluster, if it was the primary attractant in bringing them to the region."

The report, however, notes that while there is a "strong recent trend" of such people relocating here, there is "no hard data that could be used to estimate the number of in-migrants to Walla Walla who chose the area primarily for wine-related amenities... ."

But VanAusdle says that without wine industry and the growing arts, fine dining and specialty retailers, "I don't think (quality-of-life migrants) would be here. But that's just a hunch."

It's no hunch for Beth Swanson, founder of the The Mom's Network, a 250-member local organization of parents who focus on community involvement. Like Swanson a mother of four who with husband Aaron moved to Walla Walla eight years ago from Seattle, many of the network's members are recent arrivals.

"I believe the wine industry has assisted in providing the quality of life that families are seeking in a small town," she said. "When you move from a city you still want some of the big city opportunities for your family to experience. You want to be able to eat in good restaurants, attend theater events and musical events. As a family you are looking for community events that are educational and can enrich your life.

"... When businesses recruit people to work for them they have to recruit the entire family and showcase all that Walla Walla has to offer," Swanson added. "The wine industry did not create these events, but by providing a superior product that draws visitors the community has embraced its role of providing quality entertainment, food and shopping to complement the wine industry."

VanAusdle said the IPZ study can serve as a useful tool for businesses seeking to start up or relocate to Walla Walla from elsewhere. He added they are unlikely to be disappointed.

"I think this study adds to the confidence that this county is on the right path," he said.

Thomas P. Skeen edits the Walla Walla Valley Business Monthly. He can be reached at tomskeen@wwub.com or 526-8320.

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