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State's virtues come at a price
Friday, August 4, 2006
BY ARTHUR KIMBALL-STANLEY
Journal Staff Writer
John Zip and his wife, Ivana, moved to Providence from Dallas just a few weeks ago. Ivana Zip, a doctor, had been looking for a job and when she and her husband saw an opportunity for her to work for a medical practice in New Bedford, Mass., they decided they would look into it.
"We looked at it on the map and saw Cape Cod, Boston, and Providence and said 'Oh yeah, I've heard of those,' " John Zip said. "It's locked into the whole East Coast, so we decided to have a look."
The Zips said they had quite a bit of choice when it came to picking a place to live. Ivana Zip's expertise as an endocrinologist put her in high demand, able to consider offers from all over the country. They could have even decided to stay in Dallas. And there it would have been cheaper.
Instead, they moved to Providence. Although they are renting, they say they plan to buy a house on the East Side.
"The absolute cost in Providence is higher," John Zip said. "I think Dallas is a relatively affordable city. There is no income tax. You can buy a 2,000-square-foot home for $200,000. You can't do that here. But for me and my wife, what it came down to was quality of life."
What convinced the Zips that Providence was the city where they would move to raise their two young children was the compact urban environment with historic neighborhoods and blend of residential and commercial real estate.
"When I made the decision and said let's try this was when I drove downtown and all I saw was old buildings and the kind of life outside and the narrow streets and coffee shops," Ivana Zip said. "I'm from Slovakia and used to public and pedestrian sort of life. I saw Providence and I just really liked it. If you really want money, you can pick where you want to, but what we wanted was quality of life."
But not everyone has a doctor in the family.
Expensive restaurants, high taxes and astronomical real estate prices are factors that job-seekers say they have to look at when they are considering working and living in Rhode Island. On the other hand, there is the state's proximity to New York and Boston, as well as to mountains and ocean; the possibility of living in the country but working in the city; and the wide variety of cultural and social activities that adds to a quality of life that transplanted workers say they couldn't find in the states they moved from.
How does it all come out? It's hard to tell, if you listen to people who have recently moved here. But according to some experts, something must be done about the high cost of living in Rhode Island if the state wants to be successful in drawing businesses and employees from other parts of the country, as well as retaining its homegrown talent.
"The minimum bets at casinos are way more than in New Orleans," Christopher J. Fettweis, a professor at the Naval War College in Newport who moved from his home in Louisiana about a year ago, said with a chuckle. "New Orleans real estate is a lot lower, but there are other things, like restaurants, that are way more over here. In New Orleans, we never spent more than $200 on a night out and we went to some pretty nice places. . . Here you can blow out your food budget pretty quick."
Fettweis took the job at the Naval War College when his fellowship at Tulane University ran out. His wife, Celeste Lay, who was also teaching at Tulane, followed him to Rhode Island a short time later when Hurricane Katrina hit. After months of searching, Lay landed a job teaching political science at Stonehill College, in Easton, Mass.
"My salary won't be going as far," Lay said. "I make the same thing up here but taxes are higher and I'll be commuting."
The couple settled in Providence in a condominium that is smaller than their home in New Orleans, despite the pay differential Fettweis said he receives from the Navy for his housing. The housing assistance pay from the Navy for Rhode Island is one of the highest in the country because the state has become one of the most expensive places to live. In 2003, according to numbers provided by the Inter-university Consortium for Political and Social Research, Rhode Island ranked as the fifth most-expensive state, behind Massachusetts, Connecticut, New Jersey and New Hampshire.
Being such an expensive state can be problematic, according to Leonard Lardaro, an economics professor at the University of Rhode Island. Lardaro said that the cost of living in the Ocean State often keeps people from moving here to seek employment opportunities.
"What you're not going to find is lots of people from the southern United States or the Midwest coming here because it's so expensive," he said. "Wages, wherever they are received, will translate into different real income. If Missouri is a lot cheaper, then $200,000 is a higher real income than it is here."
Lardaro said that one outcome of the high cost, especially when it comes to housing, is that there is a net outflow from Rhode Island. People cash in on their high-value homes, he said, and go to parts of the country where homes are not as expensive and where, more often than not, there are more jobs as well.
"Companies are just not going to be able to pay employees in real terms what they would get in North Carolina," he said. "They are forced to pay a premium or subsidize their employee's housing for the most highly competitive jobs. . . It's tough to get the really high-skilled talent and it's tough to keep."
Steve Brock, who recently moved from South Carolina to work at Pawtucket-based Hasbro Corp., said the cost of moving and living in Rhode Island almost kept him from making what he considered a very important career move.
"It played a huge part in trying to decide whether or not to come here," he said. "When the recruiters started calling me, I was excited about the possibility of working at Hasbro and living close to the two big cities, but the cost of living was nearly a 50-percent increase and almost kept me from coming."
Brock said his friends thought he was crazy to move, partly because of the cost and partly because of the weather. But, he said, he had heard great things about working at Hasbro, and as a marketer, the toy company offered the kind of career challenge he was looking for.
"If I was offered that kind of position in the South with that kind of salary, I would have to take it because of the difference in cost of living," he said. "I know up here, if I was married I would have had a hard time trying to find I place I could afford and want to be. It would have made the decision much harder."
Figuring out how much to pay someone from a different part of the country and how to sell the expensive state of Rhode Island as a place to live is something human-resource executives do constantly.
Dolphe Johnson, senior vice president of human resources for Hasbro, said ultimately, no matter what his department does, employees choose to come to Rhode Island because they want to work at the company.
"Our industry is such that you have to get people with the skill sets," he said. "We are going to find them wherever they are in the country. If we find there is a critical business need and they are the right person, it's rare that money will prevent us from getting that person."
Johnson said Hasbro uses a number of indexes to figure out what to pay people coming from elsewhere to keep their salaries competitive with what they were making in places where the cost of living is not as high. He said Hasbro often uses signing bonuses or stock awards, as well as relocation and housing subsidies, to even out the costs.
But his department must also make sure the company does not give recruits from inexpensive parts of the country salaries that exceed what the locally recruited employees are getting.
"If someone prices themselves too high, we have to draw the line," he said. "In the end, we look at it as a cost of doing business."
That cost for some businesses might be climbing too high. Cindy Laughlin, president of Recruiting Specialists, an executive search firm in Dedham, Mass., said that there are not many executive positions to be had in Rhode Island, partly because of the cost of living.
"I don't think we have a lot of positions in this area," she said. "There just isn't a lot of opportunity. We have this problem in other parts of the country as well. It's not easy trying to recruit someone to California from remote parts of the country. . . Companies are compensating with higher salaries, but I don't think it's enough."
Laughlin said it's much easier to recruit executives for companies located in Ohio than in the Northeast. "Out there, people can get twice as much when they buy a home," she said.
The high cost of living in Rhode Island, particularly housing, is a problem for Rhode Island's workers and businesses alike, according to Ari Matusiak, director of HousingWorksRI.
"Companies are telling us that the recruiting environment in Rhode Island is a difficult one," he said. "If we continue the trend in this direction, it will threaten the long-term economic health of the state."
The Journal reported in March that William Hatfield, president of Bank of America in Rhode Island, told the Greater Providence Chamber of Commerce that the bank had difficulty finding managers to staff its new East Providence call center. He said the bank tried to recruit from the company's offices in Tampa, Fla. and Richmond, Va., but those who responded were shocked at Rhode Island's housing prices.
Hatfield said the bank had to offer special benefits packages to convince some managers to make the move.
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