Viewing blog posts written by Jack Stewart

Manufacturing job creation IS a state issue

Posted by Jack Stewart, on Feb. 3, 2012

Cross-posted at Fox and Hounds

A few days ago, Governor Jerry Brown made the surprising statement that our state’s massive loss of manufacturing jobs is not a unique California problem because we have “lost manufacturing at about the same rate as the rest of America.”

While it is true that both the US and California have suffered manufacturing job losses, California’s industrial job loss rate was nearly ten percent higher than the U.S. loss rate.  In real numbers, we’ve lost a staggering 626,000 manufacturing jobs in the past decade.  If California had tracked with the national manufacturing job loss percentage, we would have 55,000 more Californians receiving paychecks than we do today.

More significantly, economists are proclaiming manufacturing growth is leading the national recovery. Bloomberg notes, ”Manufacturing accounts for about 12 percent of the economy and was at the forefront of the recovery that began in June 2009.” Contrary to this national trend, California manufacturing is moving in reverse. During 2011, the U.S. created 227,000 new manufacturing jobs, while California lost an additional 4,000 manufacturing jobs.  These are the middle class jobs that our elected leaders say they covet, but do very little to encourage and protect.

State policy has a tremendous impact on manufacturing job growth. States with a positive business climate (competitive operating costs, a trained workforce and a predictable regulatory climate) outpace states with negative business indicators.  California’s 34 percent manufacturing job loss compares with Texas at 21 percent, Indiana at 29 percent and Louisiana at 19 percent.

Business climate issues also have a direct impact on new investment. From 1977 to 2000, California received 5.6 percent of the nation’s new and expanded industrial facilities.  Since 2001, California’s share of those facilities has plummeted to 1.9 percent.  Industrial investors plan on a 10 to 15 year time horizon when making large investments in land, buildings and equipment.  States with long-term budget deficits, excessive infrastructure needs and aggressive regulatory agendas seldom make the short list of corporate planners.

It’s true that California continues to be the innovation state – we receive a large share of investment capital. But in the past decade, we have lost our ability to both innovate and manufacture new products here.   From 2005 to 2009, California received 48 percent of U.S. venture capital investment, but only 1.3 percent of U.S. industrial investment.

The current model is to innovate in California, manufacture in a more cost-competitive state or country, and market back to California consumers.  Under this scenario, California gets the jobs advantage of small, start-up research and development firms, but loses the enormous jobs benefit when those new products move to the production stage.

California’s modern government grew up of an era of rapid industrial expansion.  During the 1950s, 60s and 70s, California led the nation in industrial growth, becoming the top manufacturing state in 1977.  With that growth came a flood of new tax revenues allowing California to invest in infrastructure, education and new social programs.  California became dependent on the largess of a robust industrial economy.

During the ensuing 40 years, California found pride in implementing “first in the nation” environmental regulations.  Clean air, land and water are laudable goals, but the associated regulatory costs have had an impact.  Four decades of accelerating environmental activism have taken a toll on our ability to attract new investment and jobs.

We’re told by financial analysts that American corporations have $3 to $5 trillion available for investment when the current recession ends and that more and more U.S. manufacturers are re-shoring their overseas operations.  The question is: will California attract a fair share of manufacturing investment, or will investors look for states with a more favorable business climate? Our efforts should be to prove that California is serious about rebuilding a manufacturing economy by acknowledging where we must make improvements, not resting on an assumption that this is simply a national problem.

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Regulatory uncertainty is the bane of investment

Posted by Jack Stewart, on Feb. 5, 2010

Uncertainty is the bane of investment, innovation and economic growth. California's economy will not recover so long as our state consistently implements regulations without regard for negative economic consequences.  I penned the following piece in today's Sacramento Bee as part of CMTA's effort to grow jobs and revenue by understanding regulatory impacts.  Our goal is to create 2 million new jobs by 2020 by reviving California's golden era of economic growth and prosperity.


Viewpoints: Thicket of regulation strangles jobs
By Jack Stewart
Special to The Sacramento Bee
Published: Friday, Feb. 5, 2010 - Page 15A

For all the rosy talk, California's new "green" jobs now account for less than 1 percent of the state's work force. Certainly we need these jobs and should be doing everything we can to nurture them. But pretending that they alone will pull California out of our current economic bog is naive. Growing thousands of green jobs while driving away hundreds of thousands of manufacturing jobs won't recapture our state's economic glory. We need both to reignite our economy.

California's manufacturing sector provides high-wage jobs for millions of middle-class families while generating billions of dollars in tax revenue for schools, infrastructure and other public services. But these jobs are disappearing. We aren't talking about old "smokestack" industry jobs, but aerospace, high-tech, biotech and other skilled positions that pay on average $20,000 a year more than service-sector jobs. This month, our last auto manufacturing plant is closing.

Manufacturing and other companies are leaving California or failing to expand, in large part, because of the state's notoriously expensive and uncertain regulatory environment. Businesses are afraid to invest here because the rules keep changing while the cost of compliance spirals ever higher.

"It's difficult for most employers to make a solid case for starting up or expanding a business in California," observed Trends Magazine recently. "Government regulations seem perversely aligned to discourage people from doing business there." Last year, one California company told the Legislature it had been inspected by regulators 165 times in 2008, nearly every two days, and that inspections had increased another 26 percent in 2009. Reports like this scare other companies away.

Since 2001, California has lost nearly a third of its manufacturing base, a 32 percent decline in just eight years.

The impact has been devastating: 600,000 lost jobs, $75 billion a year in lost wages and $5 billion annually in lost tax revenue, money that once helped balance the state's budget.

If we're serious about reversing California's reputation as a lousy place to do business, we need to get serious about regulatory reform. We don't need to dismantle environmental, worker or consumer protections to improve California's regulatory climate.

But we do need to remake the system so it's lean, efficient, predictable and accountable, with common-sense rules that are fairly applied. It's a smart way to begin repairing our image (and our economy) because it can be accomplished quickly and without cost. Moreover, the benefits will be felt almost immediately, as it will send a powerful message to the business world that we genuinely want their jobs and the revenue they provide. Very quickly, we'll once again be competitive with other states.

To achieve this, three things need to happen.

First, the Legislature needs to restore its authority over the state's regulatory bureaucracy. Unelected officials now have sweeping powers to impose new regulations, with no requirement that these regulations be reviewed or approved by the Legislature. This creates an uncertain and unpredictable regulatory climate that can easily be fixed by requiring legislative approval for each new regulation proposed by the bureaucracy.

Second, there needs to be a system that accurately measures the potential impact of proposed regulations on jobs and the state's economy, so informed decisions can be made about whether the benefit of a new regulation is worth the cost.

Requiring the Legislative Analyst's Office to complete an unbiased, independent economic impact report for every major regulation that's proposed will achieve this.

Third, to begin trimming California's regulatory thicket, the Legislature should review every regulation already on the books, and require periodic review for all new regulations adopted in the future. Doing so will ensure that regulations are working as intended, and rid the state of regulations that are outdated, ineffective and redundant.

Clearly, other steps must be taken to fully revive California's economy and stop the exodus of jobs and tax revenue. But regulatory reform is a good place to start because it provides tangible and immediate proof to wary investors and company decision-makers around the world that California is back in business.
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California awakening

Posted by Gino DiCaro, VP, Communications on Nov. 19, 2009

State policymakers are beginning to understand -- or at least face the realities of -- a fundamental reason for California's job loss and now a 3-year $81 billion budget deficit.  Basically we pass laws and move on to new ones and call it success.  Texas on the other hand -- a state that congregates its legislature in only odd years and requires a 2/3rds majority on every bill -- created 70% of the new jobs in the United States in 2008 and has a $2 billion budget surplus this year. 

I offer the following 3-week timeline of completely independent events and tidbits -- a syllogism if you will -- as a picture of evolving realizations of California's problem, as well as some minimal-cost concepts that are gaining traction. 

October 22

    » Treasurer Bill Lockyer testifies that two thirds of California bills shouldn't see the light of day and begs the Legislature to recognize the severe degree of dysfunction as it pertains to California's dire situation.

October 30

    » Trends magazine contrasts California vs. Texas and predicts whirlwind backlash and decline in the Golden State

November 1

    » The Milken Institute 2009 index shows California is 42 percent more costly than Texas in business taxes (TX is actually 27 percent below national average).  There is also a large disparity between wage and electricity costs, and their index does not even take into account regulatory costs.

    » The Milken Institute also comes out with top-performing cities index that shows four Texas metropolitan areas in top 10.  California had none in Milken's top 25.

November 4 (blog date)

    » SMA solar manufacturing locates in Colorado.  (another lost "green" opportunity to help back-fill 590,000 lost manufacturing jobs in California).

November 12

    » Attorney General Jerry Brown pronounces that California is over-regulated.

November 16

    » Harvard Business School blogs that manufacturing drives innovation (important for a state intent on innovating and leading the "green" economy).

November 17 (Senate Labor & Industrial Relations Committee)

    » Cal Portland Cement CEO, Jim Repman, testifies on closing a 100-employee facility this Friday, November 20, as a result of regulations, costs and uncertainty.  Invites Sen. Mark DeSaulnier to come see one of the Cal Portland facilities.  Key Repman quote:  "A cement plant cannot be picked up and moved, but the next new plant probably won’t be built in California meaning more good, high paying manufacturing jobs will be lost to Nevada or China or somewhere." (download testimony)

    » Vulcan materials' Angela Driscoll testifies that duplicative regulations and uncertain future costs are hurting their ability to compete. (download testimony)

    » NFIB's Michael Shaw testifies on dire situation for small businesses and the importance of streamlining regulations so they can return to creating jobs and growing the California economy.

    » CMTA's Dorothy Rothrock testifies on opportunity lost for $5 billion in income tax revenue as a result of declining manufacturing base.   Then provides minimal-cost oversight options to address California problems.  Basically analyze existing regulations for economic impact along with some other thoughts.  (download testimony)

    » Rothrock also floats "80/20" concept.   80 percent of our time should be focused on existing law impacts on the economy and jobs.  20 percent on new laws.   (I bet Lockyer loves it! See video link in Oct. 22 item)

    » State Senator Mark DeSaulnier supports oversight concepts, promises to continue to address our dire job situation and tries to find time to join Repman this Friday when he has to close his Colton facility.

November 18

    » LAO says California is in another gaping $21 billion hole.

    » Senate President pro Tem Darrell Steinberg released the following statement in response to the Legislative Analyst Office’s fiscal outlook report: "The numbers cry loudly for California to focus on rebuilding our tax base. The only tried and true way to do so is to use our fiscal levers to increase the number of high wage jobs (editorial note: insert manufacturing). Putting more people to work earning decent wages will help overcome our deficit. We need to protect our schools and universities, so as we create high wage jobs (editorial note: insert manufacturing) we produce a workforce able to fill them."


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Got Manufacturing?: 'We've lost 8 to 10 NUMMI's a year in CA'

Posted by Gino DiCaro, VP, Communications on Aug. 28, 2009

Unfortunately, the Toyota portion of NUMMI (New United Motor Manufacturing Inc.) will follow GM's path and vacate their Fremont, California manufacturing facility, despite broad support from the Assembly Jobs Committee at a Tuesday hearing.

NUMMI's decision shows what is certain to materialize for other companies and their suppliers if state policymakers don't produce a competitive manufacturing environment:  California facilities will be the first to go when tough economic decisions are made.  Uncertainty, regulatory costs and taxes are simply too high in California.

CMTA President Jack Stewart offered this salient point in his testimony on the overall picture in the state: "Since the dawn of this century we've been losing eight to ten NUMMI's in California every year."  With 580,000 lost manufacturing jobs since 2001, this statement rings true.  We are losing manufacturing jobs at a faster clip than the rest of the nation, both before and during the current national recession.  Because the overall losses have been more incremental in nature (as they always are), and not under the lights and attention that a NUMMI or Buck Knives received, these job losses have been widely ignored.  

It's important to note that in December 2008, before the recessionary job losses shifted into high gear, the state was bleeding 474,000 manufacturing jobs since 2001.  These losses cannot be blamed solely on the recession.  Our problems started long before the country's mortgage and stock market meltdowns.  And in the collective reality check of our nation and state, California must not deny where so much of our wealth begins -- on the new age factory floors and in the hands of our manufacturing workers.

Comments out of the Jobs committee indicate that the tide may be turning.  There appears to be interest by some to reinvigorate our manufacturing community, halt California's slide to a low wage service economy, and bolster our government bank account.

Remember the 'Got Milk' ad campaign?   The simplicity of the message was brilliant.   With two words, they got the whole country to ponder whether we had enough milk in our system and how dim-witted we were for ignoring such a necessity.  With the past dismissive legislative attitudes, the current employment and economic slide, and now the growing call for manufacturing policies, it's as if you can hear California's new campaign emerging, 'Got Manufacturing?'.   California just can't survive by losing the segment of the economy most responsible for creating California wealth.  

Many California family dreams and success stories were built on NUMMI's innovative factory floor.   Let's not lose eight to ten more NUMMI's in 2010.

View Assembly Republicans and Democrats, Labor and other NUMMI and manufacturing testimony from Tuesday's Assembly Jobs Committee:

CMTA President Jack M. Stewart (4:47)

California Labor Federation's Angie Wei (1:42)

Assemblyman Manny Perez, D (1:51)

Assemblywoman Mary Salas, D (3:08)

State Senator Ellen Corbett (D) (3:08)

Assemblyman Dan Logue, R (3:05)

Assemblyman Jim Beall, D (3:29)

Assemblyman Bill Berryhill, R (1:05)

Assemblywoman Alyson Huber, D (0:24)

UAW workers (3:19)

East Bay Economic Development Alliance Exec. Director Bruce Kearn (3:24)

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Manufacturers formalize ballot positions: Prop, 2, 7, 10 & 11

Posted by Gino DiCaro, VP, Communications on Oct. 2, 2008

The California Manufacturers & Technology Association (CMTA) Board of Directors has voted to oppose -- Proposition 2, the farm animal confinement initiative and Proposition 10, the alternative fuel vehicles and renewable energy initiative. The CMTA Board acted in June to oppose Proposition 7, the renewable energy generation initiative and support Proposition 11, the redistricting initiative.

California manufacturers employ 1.5 million workers in the state. These companies depend upon policies that prioritize State funds properly and reduce business costs comparatively to the rest of the nation. Propositions 2 and 10 work against those principles and burden our large and small employers in a way that affects all working families and consumers. CMTA President, Jack M. Stewart made the following official comments on the two propositions:
    Prop 2 (Standards for Confining Farm Animals)
    "Existing federal and state farm animal confinement standards have provided safe, sound and humane housing systems for our egg-laying hens. This initiative would require free-range production that would drive up business and consumer costs and force egg-production out of California. These types of regulations should be addressed by experts who understand the safety of our animals and not by the ballot box and 30-second campaign commercials."

    Prop 10 (Alternative Fuel Vehicles and Renewable Energy)
    "Proposition 10 provides a $5 billion bond for a pre-determined alternative fuel -- natural gas. Both the market and developing rules from the California Air Resources Board should dictate which alternative fuels get us to our greenhouse gas and other environmental goals quickest and in the most cost-effective manner. If the State is not careful and diligent about the source and direction of alternative fuel funds, Californians could easily be paying the highest cost for the least efficient fuels and technologies, while other states more patiently and thoroughly allow the market and developing research to decide which technologies and fuels are the least expensive and most efficient."

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