Viewing blog posts written by Gino DiCaro

Beacon report outlines emerging competitive issue for CA manufacturers

Posted by Gino DiCaro, VP, Communications on Jan. 15, 2015

Manufacturers have many advantages and disadvantages in California. A desirable climate, an innovation and research-rich atmosphere, world class universities, a long history of existing industry and supply chains all contribute to our nation-leading manufacturing community that employs more than 1.2 million workers.

On the flip side, the disadvantages have been well documented.  Energy costs, work comp costs, corporate tax burden (alleviated a bit by a recent sales tax exemption on equipment), time consuming permitting proccesses, and a ubiquitous amount of uncertainty all work against a manufacturer's ability to make long term California investments.

A recent Beacon Economics report highlighted another growing competitive problem for California's manufacturers -- housing costs.

"The cost of housing is perhaps the single-most important policy challenge facing lawmakers in the state today," said the report written by Christopher Thornberg.

"Not only do higher housing costs erode the quality of life for workers who need to devote ever-increasing shares of their take-home pay to afford to live here, it also drives up the cost of doing business by forcing employers to pay higher salaries in order to attract the talent they need."

Earlier in the report Thornberg emphasized that, "Golden State rankings would be that much higher in the growth rankings if we could find a way to make ourselves more attractive to new or expanding manufacturing operations."

Put simply: The talent that our manufacturers need won't be able to live here ... and everything starts with talent on a manufacturing floor.

Like the manufacturing equipment sales tax exemption debate and passage in 2013, we need to keep up the momentum on other competitive hurdles so we can attract new opportunities for our state's massive and often under-employed middle class.

The Wall Street Journal recently chronicled one baby-car-seat manufacturer's attempt to tiptoe back to the United States as wage costs and others balance out in China and other industrialized countries.  The race was close but China won out by a thread. The decision to scale up in the U.S. is becoming at least more defensible for site selectors looking at re-shoring but California must mitigate its own rising challenges if it hopes to attract large scale manufacturing facilities.

As manufacturers seek skilled talent and look for places to put bolts in the ground, California housing costs are on the wrong side of the pros and cons equation.

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Legislature's budget frame of mind: 'Hope for the best and ignore the obvious'

Posted by Gino DiCaro, VP, Communications on Jan. 6, 2009

I wrote before Christmas that momentum was growing for real economic stimulus in California.  Even President-Elect Obama is pushing a $300 billion federal tax cut to stimulate crucial job growth.  Unfortunately, the annual return to the State Capitol seems to have dampened economic growth and stimulus appetites, so here's a few more items for California policymakers, media and citizenry to consider:
  • The genesis of this blog's title came from an excerpt in the report, An economic backdrop for fiscal reform in California, released in November 2008.  The authors cautioned that assumptions had become very unrealistic in Sacramento.  The report predicts an 11 percent decline in sales, income and corporate tax revenues in the state over the next two years as a result of precipitous corporate profit declines, labor market concerns, consumer trepidation and, of course, the housing crisis.  Given the state's reliance on these taxes for revenue, this prediction indicates that the edge of California's "fiscal cliff" is near and that temporary revenue increases and budget cuts dangerously assume an automatic economic recovery in the private sector.  You can raise taxes but the base is weakening.  The report specifically argues for California's fiscal reform but also makes a perfect case for growing and stabilizing our revenue sources (In other words the jobs and salaries that increase our three core tax revenues).   Make no mistake, the economic stimulus that creates high wage job growth and our tax base is the light, the beacon, the granddaddy, the engine, the start and the future of California. This can't be overstated.

  • Sacramento Bee columnist Dan Walters made the previous point very well in his New Year's Day piece, indicating that economic growth (and by default real stimulus for middle class jobs) must occur alongside of temporary quick fixes.  Otherwise, in two years, we'll find ourselves right back here at the cliff .... or over it.

  • To put perspective on the Walters argument, about two years back we here at CMTA created a chart to show the declining and growing sectors in California, and their respective wages.  We found a clear indication of the growing loss of wealth.  The average wage of growing sectors was $40,000 and the average wage of declining sectors was $66,000.  You can see it here.  That reality no doubt made a national downturn much worse here in California over the last two years.   We'll dive in and see how those numbers have changed in 2009 and provide in upcoming blog.

  • Governor Arnold Schwarzenegger released his letter to President-Elect Obama today outlining his economic stimulus wish list for Washington.  It shows his deepening interest for growing high wage jobs.  This is good, but overall the feds will not seek to make California more competitive than other states and reduce our costs to national averages.  That crucial component has to start here in California with the Legislature and Governor agreeing that any economic recovery assumptions must start with BIG signals (example) to high wage job creators and a full economic understanding of policy impacts -- which does not occur now.
Let's stop ignoring the obvious and hope for reality.

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