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Don Cunningham: Looking for a Competitive Advantage

By Colin McEvoy on March 9, 2018

This column, written by LVEDC President and CEO Don Cunningham, originally appeared in The Morning Call and on the newspaper’s website on February 14, 2018. (Click here to read Cunningham’s previous columns.)

Don Cunningham

Don Cunningham

A few months ago I found myself in a grocery store with a clipboard, a list of 27 items and a pen.

It was my assignment to find everything from iceberg lettuce, chunk light tuna, and green peas to a pound of ground beef. I wasn’t there to buy them, just to record their price.

My grocery store experience in recent years is limited. My wife loves to cook and to shop. I am only a hindrance in the store in my self-assigned role as the one who points out that cheaper choices are available. The household director of grocery procurement has determined that role is non-essential and I’ve been let go.

But, in this case, duty called. I was on an economic development mission from work. Huh?

In 2016, we noticed that the Lehigh Valley was not included in the annual Cost of Living Index of comparative data for 269 major urban areas in the United States, published every year by the Council for Community and Economic Research (C2ER).

We called to see why not.

The report compares prices across major markets for everything from grocery items to housing, utilities, transportation, health care and a range of miscellaneous goods and services, including beer, wine, haircuts, appliance repair, movie tickets, and newspaper subscriptions. It includes 60 items in total.

As a good lawyer knows, don’t ask a question to which you don’t know the answer. The reason the Lehigh Valley wasn’t in the report is that no one was recording and submitting prices.

This led to the clipboard and me.

Participation in the Index comes with a fee to C2ER but, more importantly, the requirement to gather and report prices every quarter. The study occurs across the country during the same one-week period every four months in each participating region. C2ER standardizes products and services and is very specific on the brands, sizes, movie times, even the age of dogs (four years) for compare veterinary exam prices to ensure accuracy in market comparisons.  Grocery prices must come from multiple stores.

It takes a small army of price gatherers. Staff at the Lehigh Valley Economic Development Corporation (LVEDC), along with our spouses, family, and friends, took on the work in 2017. If you wish to volunteer send a note to this email address.  If not, please leave me alone when you see me at Wegmans with the clipboard.

The results are interesting, but more importantly, they are critical intelligence in the competition to attract and retain companies, create jobs and to recruit people to the Lehigh Valley. The Lehigh Valley is the 65th largest economy in the United States. We compete with other regions across the U.S. and the world and one of our best assets is our cost of living and quality of life.

We may live where we do because we always did. But, in this consumer based world people – and companies – pick areas after comparing them to others.

Prices matter. Quality of place matters. It’s critical to know thyself, and to know thyself in comparison to others.

It’s one thing to know that ground beef may cost more at Wegmans and tomatoes may be cheaper at Giant but what ultimately matters is how the prices in the Lehigh Valley compare to those in Pittsburgh, Newark or Manchester, England.

Our proposal to Amazon last year to attract the company’s new headquarters to the Lehigh Valley was filled with cost comparison data showing it would be much more affordable for their employees to live here than in the country’s tech corridors of Austin, Boston, Seattle, San Francisco, or America’s other larger cities.

In summary, in 2017, the Lehigh Valley was cheaper overall than the larger markets that we compete with for companies in the Northeast U.S., places like New York, Philadelphia, Northern New Jersey, Baltimore, Boston and Washington, D.C.  Being in the Northeast, however, our total price index was a tick above the national average. The Lehigh Valley ranked the same last year as the Minneapolis and St. Paul region.  Interestingly, Pittsburgh was slightly below national average.

The cost here for food, health care, utilities and miscellaneous goods and services was spot on national averages. Cost for housing and transportation, primarily gasoline prices, were 10 to 15 percent above the national average, bumping up our overall rating.

I consider this the New York effect. Our economy in recent years has been greatly linked to that of northern New Jersey and metropolitan New York.  While cheaper than those markets, the back and forth of people, work commuters, visitors and business investors has nudged some pricing in the Lehigh Valley.  That became clear to me the first time I ordered a Manhattan at a nice Lehigh Valley restaurant and was charged $17. That’s a New York price. A basic bourbon, a little vermouth and a dash of bitters should be cheaper in the Lehigh Valley.

More important, however, for continued growth and quality of life is the cost of housing, particularly rentals. Housing and economic development are hand and glove. A region needs to have affordable housing units commensurate with the pay of workers in every sector and level of employment. A shortage of housing units and lack of house sales following the recession of 2008-2009 has led to higher prices. Supply and demand is a powerful force.

In 2017, the Lehigh Valley housing prices ranked 16 points higher than the national average in the C2ER survey.  By comparison, Pittsburgh was 9 points below national average.  With new units under construction in the Lehigh Valley, it will be interesting to see the affect on comparative pricing in 2018.

C2ER is a non-profit organization. Its data is available to subscribers.  LVEDC is allowed to make available a certain amount of it for our work in economic development recruitment. There is a cost of living comparison tool on the LVEDC website and we’ll be releasing some Northeast metro market comparative data as part of our Annual Report this month.

So, just keep it between you and me that it cost $14 more last year to take your 4-year-old dog to the vet in Newark than it did here in the Lehigh Valley.

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9.1% of Labor Force
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$39.1 Billion

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2016

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City Center Lehigh Valley
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10% of Labor Force
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5,073

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