Viewing blog posts written by Dorothy Rothrock
Let's count the loss of Ashley Furniture's green jobsPosted by Dorothy Rothrock, President on Aug. 31, 2016
Last week we learned that Ashley Furniture will be shifting production out of California in favor of their other locations in the US. While you won't hear them labeled as such, the 840 jobs lost are part of our "green" economy. The Colton California location uses electricity fueled by mostly low-carbon renewables, nuclear, hydro and natural gas resources. Workers drive cars to and from work with gasoline blended with renewable fuel and pay about 11 cents per gallon in cap and trade taxes that lawmakers say is necessary to reach our state climate change goals.
Ashley Furniture locations in North Carolina, Wisconsin and Mississippi do not have the same strict climate change regulations as California. Any jobs that will be created there to offset the loss in California will not be green. An honest accounting would subtract the 840 Ashley Furniture green jobs against the 500,000 green jobs that state leaders claim have been created in the state.
That would be a good start to determine how effective our clean economy policies really are.
0 comments | Post your comment
Pay attention to manufacturing in the climate debatePosted by Dorothy Rothrock, President on Aug. 26, 2016
In the wake of the Legislature passing new climate change bills this week, Governor Brown was asked about the impact on jobs. Part of his answer was “Manufacturing has been declining as a part of the American workforce for decades, and the decline in America generally is very similar to California.”
Manufacturing is actually thriving in the United States. Companies are increasingly choosing to relocate to the US due to wage growth in developing countries, logistical concerns, and poor intellectual property protection outside the US. It’s a good thing, too, because the direct jobs and ripple effect of manufacturing in the broader economy makes the US a powerhouse nation. A recent study by the MAPI institute showed that each manufacturing job supports a whopping 3.4 other non-manufacturing jobs.
While the US as a whole is becoming more attractive to manufacturing than in prior decades, we have work to do in California. CMTA tracks manufacturing jobs and investment data in California compared to other states. Since the recession ended in 2010 we have seen only slow job growth in California while other states are enjoying the boom. In 2015, California had the lowest rate of all states for manufacturing investments for expansions or new sites. We haven’t received more than two percent of total US investments since the year 2000. That is far short of the 11 percent we need to attract each year to maintain our share of US manufacturing GDP.
It’s impossible to attribute any single state policy, even a big one like climate change, to any particular job growth or loss. Many costs of doing business, litigation risks, and permitting challenges discourage investment and job creation in California. But that shouldn’t give lawmakers a pass to not consider economic impacts when they adopt climate change policies. This is especially true when success depends on other states, who want to preserve their strong manufacturing economies, being willing to adopt similar policies and making meaningful reductions in global climate emissions.
California voters support climate change laws but also want to protect manufacturing. In a recent poll by the California Business Roundtable, when asked if they support new climate change regulations the answer is a resounding “yes.” But when asked if they would support these policies if middle-class manufacturing jobs would be lost, 66 percent said they opposed.
Reasonable regulations can be developed to achieve both environmental and economic goals for California. Manufacturing jobs in California produce greener and cleaner products for the world. It’s good policy and good politics to make sure manufacturing, in particular, is part of the climate change agenda.
0 comments | Post your comment
High costs of climate change policies don’t help California manufacturingPosted by Dorothy Rothrock, President on Sept. 11, 2015
Next 10 released an issue brief “California’s Manufacturing and Benefits of Energy Efficiency” (September 3, 2015) in which they engage in magical thinking to conclude that California manufacturers enjoy a competitive advantage and are prospering due to California’s ambitious energy and climate policies.
They highlight four facts in support of this conclusion, repeated below with our explanation of where they went wrong:
Next 10 Fact 1: California electricity and energy productivity in manufacturing is outpacing the rest of the nation.
CMTA: Manufacturers in California must be energy efficient to survive – in 2014 electricity costs were 70 percent higher than the national average. Next 10 ignores the fact that companies not able or willing to pay high electricity rates either shrink or don’t grow production in California, so their energy use profile is not reflected in this “fact”. Next 10 asserts that “companies in California can spend less on energy and redirect cost savings to other areas to boost the company’s competitive edge.” With such high rates, even energy efficient companies have nothing left over after paying the electric bill.
Next 10 Fact 2: Electricity bills are lower in California.
CMTA: Each company’s size and electricity use profile will determine the size of their bill. Manufacturers use electricity for pumps, compressors, lighting, robotics, conveyor belts, clean rooms, and other process related purposes. Next 10 is silly to compare state-to-state average industrial bills without correcting for company sizes, energy use profiles, and number of firms in each state. Companies certainly have an incentive to make energy efficiency investments to lower their bills when state policies raise electricity rates, but another option is to shift energy-intensive production out of state.
Next 10 Fact 3: California manufacturers spend a smaller share of total operating costs on electricity.
CMTA: It should be no surprise that as California manufacturing shifts from energy-intensive production activities to more R&D activities that energy expenditures would decline as a share of total operating costs. In fact, the shift in the composition of California’s manufacturing sector in the past two decades has been striking - the contribution of electric and electronic manufacturing as a share of California’s value added mix grew from 7 percent in 1987 to 30 percent in 2008 while the share of many other sectors have declined. (See the industry chart below from the American Council for an Energy-Efficient Economy).
But even if the composition of industry in California were the same over the last decades, other key information is missing - spending a smaller share of operating costs on electricity could be the result of spending a larger share of operating costs on labor, taxes, and workers’ compensation, or other costs in California.
NEXT 10 Fact 4: California is still the top state for manufacturing in the US.
CMTA: It is not news that California is a big state with 39 million people and that we can still claim the largest number of manufacturing jobs and output of any state. But if we adjust the data to remove our size advantage, a more interesting story emerges. Since 2010, on a per capita basis, Indiana and Michigan are the “top states” for manufacturing job growth. In fact, since 2010 there are only 12 states with lower per capita manufacturing job growth than California. Next 10 notes there are many reasons California manufacturing GDP grew between 2004 and 2014, including our geographic location and talented workforce. While Next 10 correctly notes that “low energy costs” are a competitive advantage to attract manufacturing back to the US from overseas, they don’t draw the flip side conclusion that high energy prices could be a problem in California. If climate policies lead to higher energy prices it’s hard to conclude that they serve as a “competitive strength for manufacturers.”
Interesting facts not mentioned by Next 10:
Since 2010 California manufacturing jobs have grown almost three percent, while U.S. manufacturing jobs grew by almost eight percent.
Since 2010 California attracted less than two percent of new and expanded manufacturing facilities each year. Since 2000, only one year saw investments exceed three percent.
0 comments | Post your comment
Hard facts undermine an easy tweetPosted by Dorothy Rothrock, President on June 16, 2015
CMTA is proud to provide accurate and useful information about the California manufacturing economy. We use Bureau of Labor Statistics (BLS) to track California manufacturing employment over periods of years compared to national numbers. Sadly, we’ve seen our manufacturing job growth consistently lag the nation since the recession ended in 2010.
So we were puzzled when an environmental activist said it was time for CMTA “to put away the tired, manufactured rhetoric” about the impact of higher costs on manufacturers because, according to a news release, “California manufacturers added over 31,000 jobs in the past twelve months, outpacing national gains.”
The news release said “According to data collected by MNI, California manufacturers added 31,525 jobs from March 2014 to March 2015, an increase of 2%, slightly ahead of the 1.5% national average increase reported by the Labor Department for the same time period.”
Turns out MNI was comparing apples to oranges. MNI does a different count of CA manufacturing by using outdated Standard Industrial Codes (SIC) and including more types of companies in their analysis (mining, extraction, among others) than does BLS. That’s fine if they want to redefine manufacturing, but they didn’t include those same additional companies in the national BLS number they were using for comparison. It’s not a surprise their California number was a bigger percentage increase than the national BLS increase.
What followed was an easy tweet by someone who liked the story of healthy manufacturing job growth but didn’t check on it’s validity. Ironically, she declared in the tweet – “I am familiar with the facts, are you?” Due to erroneous reporting, she wasn’t.
Here’s how California manufacturing job growth stacks up to the country based on BLS data for both.
1 comments | Post your comment
Why what CEO's think mattersPosted by Dorothy Rothrock, President on May 27, 2015
California is still the worst place to do business according to the 11th annual survey of CEOs conducted by Chief Executive magazine. It is very disappointing, but not a surprise, as we see CEO's voting against California by dedicating few manufacturing investments to the state. Last year California attracted only two percent of manufacturing investments made in the US. When given a choice, companies are making long term commitments to other states.
California has made great strides to improve the business climate for manufacturing in recent years by providing a sales tax exemption for the purchase of manufacturing equipment and launching the CalCompetes job credit program. We hoped to see better investment numbers in 2014 and an uptick in CEO sentiment this year. California remains a high cost state with plenty of regulatory challenges, so it will take time and effort to market the benefits in California and prove that our state offers tremendous advantages for companies willing to take another look. If we do get their attention again for possible investments, we will need to show that they can count on regulatory certainty, fair taxes, affordable energy, and reasonable labor policies to support their long term success.
Before we can make that commitment, we need to be honest with ourselves about what needs to be fixed in California. For many years CMTA has been urging legislators to pay attention to job and investment data to inform their decision-making on business bills. But other groups like to spin economic data to look better than it is, by touting an increase in gross numbers of jobs, for example, rather than modest percentage changes in our large economy. Playing games with the numbers might distract the media and give some legislators a reason to dismiss our concerns, but it doesn’t fool CEOs and other job creators. Legislators need to accept the truth of our situation and fix problems like high-taxes, skyrocketing electricity prices, a litigious permitting system, and out-dated labor laws. Until that happens, opponents of reform will get away with fudging the data to protect policies that support their interests and not the broader economy.
Our vision of California includes a dynamic, prosperous manufacturing sector with growing opportunities for high-wage employment for skilled workers. The state has tremendous natural resources, excellent access to markets and unbeatable innovation. Our business climate challenges are entirely man-made. They could be solved by dedicated leaders who face the truth of our current circumstances and take bold steps to improve the business climate. Let’s take action and change CEO minds before the next survey in 2016.
0 comments | Post your comment
View next 5 entries