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| For Immediate Release August 22, 2002 |
Contact: Gino DiCaro |
Unprecedented Economic Analysis Details Manufacturing’s Importance
Milken Institute study presents problems, opportunity and a plan for the future
Sacramento, CA- - A groundbreaking economic analysis released today provides the most comprehensive understanding to date of the importance and impact of California’s manufacturing industry. As California struggles with a faltering economy and unprecedented budget deficit, the report issued by the independent Milken Institute is a clear call to action for state leaders to implement its suggested reforms.
“The evidence is presented in black and white - all that’s left to do is act on it,” said Jack M. Stewart, President of the California Manufacturers & Technology Association. “Advocates for economic reform are often asked to support the case for incentives to grow our economy. This report makes the case like it’s never been made before.”
Entitled Manufacturing Matters: California’s Performance and Prospects, the report examines in unprecedented detail the critical importance of the manufacturing industry to the state’s economic well-being and future potential. In doing this, the Milken Institute provides a new foundation of understanding for a sector of our economy that literally sustains and enhances millions of lives - and yet is widely misunderstood and significantly at risk.
The report expresses this concern: “There are limits to California’s ability to attract or even retain manufacturing production facilities in the state,” it says. “Other states are aggressively attempting to attract California manufacturers by highlighting their lower business costs, particularly electricity and tax rates, and by offering attractive location incentives.”
The inherently competitive nature of the manufacturing industry, combined with its capacity to innovate, make it an ideal target for other states to lure away by relocating out of California. For these reasons, the report outlines the need for a new strategic perspective that encourages California business to grow - and not call any other state home.
A centerpiece of the Milken report is an evaluation of the revenue and job growth benefits of a 5-cent reduction in the sales tax paid for the purchase of machinery and equipment used in manufacturing and research and development.
It shows that vastly increased tax revenues from higher economic activity quickly overcome a first year loss in tax revenues. Additionally, by the fifth year, the state enjoys a net gain of $114 million, with $75 million every year being added to the state coffers - in addition to the creation of 50,000 new jobs every year.
The study also provides new statistical data about an “economic multiplier” effect that is widely found in the manufacturing sector. As an example, for every job created in the state’s manufacturing sector, an additional three jobs are created in other associated sectors. By comparison, it would require more than six times as many service jobs to create a similar standard of economic growth.
“Manufacturing is the lynchpin of the new California economy,” said Stewart. “If made strong and viable, it can bolster other sectors and create needed jobs. If weakened, it will hasten further economic collapse. We’ve lost more than 157,000 manufacturing jobs in the last 18 months - fully eight percent of the industrial workforce. The Milken report’s suggested reforms are an essential first step in getting California moving again.”
The Milken study also highlights manufacturing’s seldom-considered social significance, including its vital importance to California’s emerging diverse population. Specifically, the report details how the manufacturing sector is a reliable opportunity for unskilled workers, allowing them to climb the economic ladder and achieve a better future.
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