Viewing blog posts written by Gino DiCaro

Response to Weintraub: CA's recovery requires action for high wage job gains

Posted by Gino DiCaro, VP, Communications on May 4, 2011

Dan Weintraub, who is often and appropriately looked to for well-reasoned and researched opinions of California's political and economic landscape, responded on the Fox and Hounds website to some issues I took with his original piece on California's employer climate.

Below are my responses to his points integrated into his exact piece.

Gino DiCaro of the California Manufacturers and Technology Association calls me out here for not being understanding enough about the plight of his bosses in the California manufacturing sector.

His beef is with a recent piece  in which I pointed out that employment growth in California last year actually outpaced the nation if you remove the effect of government layoffs and ongoing problems in the construction industry, which was particularly hart hit by the collapse of the housing market in California. 

My point was not that California is doing fine, but that analysts and lawmakers should exercise caution when deriding the "business climate" and demanding quick fixes that they say will lead to economic growth.


Response: Weintraub concluded that "[job] numbers bode well for the state's economic future."  That would tell any lawmaker that drastic measures or a substantial state jobs plan are not needed.  In fact, as I type, I just heard Senate pro Tem Darrell Steinberg quote Weintraub's original piece in a legislative hearing.

Manufacturers and other employers aren't talking about a "quick fix".  We are asking for long term attention to the state's dire need for substantial high wage jobs -- through predictability and lower costs.  We, at the California Manufacturers & Technology Assn., receive calls daily from lawmakers asking which one or two regulations they can fix to make manufacturers' world better.  If only it was that easy.  It's not about one regulation or one tax.  The problem is the complete paucity of actions that would lead to large-scale growth of manufacturers and high wage employers in this state.   

Imagine what would happen if the state said we must grow the job base by two million jobs by 2020 and held itself at least semi-accountable for it.  Much like the state's goal to boldly reduce our greenhouse gasses, lawmakers and regulators would start making it happen.


In his piece, DiCaro does not mention that recent research by the independent Public Policy Institute of California has shed significant light on this question.

One study by the institute showed that California actually loses very few jobs to other states, probably on the order of about 10,000 a year, less than a drop in the bucket compared to the more than 15 million jobs in the state's labor market. Yes, California probably also loses some opportunities for company expansion, but those are much more difficult to quantify.

Response: We can quantify the loss of opportunity in California manufacturing - a sector that provides a $69k average salary to more than 1.25 million Californians.  Over the last four years California is dead last in new manufacturing investment. Those are numbers provided by the unbiased Site Selection magazine.

Further, PPIC doesn't look at the wage disparity of the job losses in California.  From 2001 to 2008, before the recession, California's growing sectors paid on average only $43k while declining sectors paid $69K.


A more recent study was even more on point for this debate, looking at 11 surveys that ranks the states on their friendliness to business. California ranks low in many of those, in part because of the state's high corporate tax rate. And the PPIC found that some of those studies did, indeed, seem to be correlated with economic growth. But that was just the start of the story.

The analysis also found that the simplicity of a state's corporate tax code, not its rate, tracked most closely with economic growth. And while higher government spending seemed to correlated with lower economic growth, the biggest culprit was not spending per se but programs that gave people an incentive not to work. In fact, there is a good case to be made that spending on infrastructure, education, universities, public safety and the environment, even health care, all contribute to economic growth.

Response: The recent PPIC report stated the obvious.  Overall they said that California's natural advantages (favorable natural climate, favorable industry mix) offset the state's higher operation costs and our consistently low business rankings.  They also said regulations can't be quantified.  (sidenote:  They also said that manufacturing growth/decline -- and other high wage sectors -- associated more with business climate rankings.)

The PPIC concluded their presentation of the report by saying, "a better business climate would promote faster growth." 

Why are we so afraid to make a plan to grow the employer base with high wage industries?


DiCaro implies that I am suggesting a "do-nothing" approach, or at least providing political cover for those who would support such a strategy.

But investing in and improving kindergarten through community college education, protecting and enhancing the state's highly regarded four-year universities, and safeguarding the state's number one asset - it's incredible natural environment - would not be doing nothing. Combined with a fair and broad-based tax system, these steps would help put, or keep, California on the road to recovery.

Response: I'm not saying that Weintraub is suggesting a "do-nothing" approach.  I'm suggesting that Weintraub's piece gives Californians a false sense of security by implying that we don't need an extremely high-growth rate of high-wage employers.



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Weintraub ignores California's silver bullet: jobs plan and manufacturing

Posted by Gino DiCaro, VP, Communications on May 3, 2011

Last week the well-regarded Daniel Weintraub wrote an accurate but complacency-inducing everything-will-be-ok Orange County Register article based on 2010 job data. 

He emphasized that California's job growth, sans the construction and government industries, trended with the rest of the country.  Weintraub looked backward, saw some non-momentous trends either way and concluded that the job "numbers bode well for the state's economic future."

California's problems are so big, we can't afford to wait and hope for a large recovery to come our way.

When you're broke and you need to get un-broke, do you look backward, do nothing and wait, or start making good decisions for what lies ahead?  You unquestionably start preparing a plan for the future.  This is where we must start.

Quick lesson on California manufacturing:  Average wage is $69k.  Average multiplier effect is 2.5 jobs for every one job.  Average employee benefits are far higher than other sectors.  The economic upside is enormous. It must play a significant role in our future.  Unfortunately California per capita manufacturing growth is currently dead last in the country.

In his piece, Weintraub neglected the strategic actions needed to launch grand-scale economic growth in California.  To be fair, he didn't say we should expect better-than-national-average growth, but simply lagging the national recovery is not enough.  We'll need a much larger boom than the majority of the country, given our 2 million unemployed, a $20 billion deficit and our Charlie Sheen level cost of living.

Weintraub does not mention the manufacturing industry or California's jaw-dropping lack of a jobs plan.   In fact he mentions California's tremendous proclivity for venture capital, but ignores that it translates into very little new manufacturing.  For example, California received 48 percent of the nation's venture capital from 2005 to 2009, but received only one percent of the country's new manufacturing investment.  It's also worth noting that, of the growing non-manufacturing industries in 2010, the average wage was a whopping $15k less than manufacturing salaries.

California lawmakers proclaim that they are pro-jobs and they get by on words over action because they can.  Articles like Weintraub's help provide cover for their auto-pilot mentality.

We need action that includes a strategy with tactics to grow the industries with the highest wages and the highest employment multipliers.  Ergo, manufacturing.  Everyone wins! 

According to an ongoing survey by CMTA and many other industries, 85% of California businesses say they would not locate a business here if they were not already in the state.  A large majority of those respondents (and all the manufacturers) listed the possibility of future regulations as a barrier to growth. 

(quick note to the Business Journals and writers: we have 500 responding businesses to the survey, we need thousands more. Ask your readers to respond)

Today, the Assembly Business and Professions committee takes up 10 important bills to analyze and oversee regulations for their impacts on our economy.   These are forward thinking no-brainers, much like the 25 or so bills that died last year.  If California had a plan and a goal to grow our economy -- one that the legislature was accountable to -- many of these bills would be literal silver bullets.  Instead the back and forth over mind numbing we're-not-that-bad data points potentially paves the same ol' path toward economy-killing complacency. 

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California's new economy: Running on empty

Posted by Jack Stewart, on April 27, 2008

California is at a crossroads.  For twenty years we have neglected career technical education (CTE) in our public schools.  Each year the number of CTE courses offered to our students declines and, as a result, the number of CTE teachers and CTE student enrollments are at historic lows.

At the same time, the demand for skilled workers is growing and in many industries the demand has already outpaced the number of available workers.  Add to that dilemma the oncoming flood of baby boom retirements and the job demands of an emerging green economy and California’s economic engine could quickly run out of gas.

In his Sunday column, Dan Weintraub reports the upcoming flood of baby boom retirements will number between 2.4 and 2.7 million over the next ten years.  Weintraub puts those numbers into perspective: "250,000 to 300,000 job openings a year from retirements would just about equal the number of new jobs created annually in California between 1996 and 2006."

Add to those numbers the 89,000 new green jobs California’s global warming mandate is projected to create (view report) and the magnitude of the problem is quite clear.

Assembly candidate Dominic Caserta writes in the San Jose Mercury News that "At a January new-energy summit in San Francisco, corporate and government leaders bemoaned the shortage of qualified workers." and that "Our vocational and career-tech system should spearhead such training, but it's not known or stigmatizing for many students. And while community colleges can help fill gaps, many young people never set foot on another campus after high school."

A large majority of the new and replacement jobs will not require a four-year degree.  Most can be filled by new workers who receive 21st century technical training in their high schools and/or skills training in local community colleges.  Yet California’s education establishment increasingly insists that that every high school student be prepared for admission to a four-year university.

California needs to rethink our educational priorities and match our high school curriculum to real world job opportunities.  And, we need more clear thinkers like Dominic Caserta participating in the education reform debate.

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