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California needs to get on the job recovery on-ramp

Posted by Jack Stewart, on May 5, 2011

Earlier this week, I testified before the Assembly Jobs, Economic Development and the Economy Committee in support of AB 29 by Assembly Speaker John Perez. AB 29 would create a state economic development entity within the governor’s administration and has the potential of being the most significant piece of legislation in the last ten years. It could create the structure to jump start California’s job creation machine. But we have to get it right.

The new office must have the full support and authority of the Governor and its leader must have cabinet level status. Anything less would send the signal that economic development was not a high priority for California or for the administration. I learned on a recent trip to Austin, Texas that Governor Perry is the quarterback for his state’s economic development team and demands that every state agency participate in protecting and enhancing the climate for job creation and economic growth.

California needs a plan, too. Every politician in the Capitol will enthusiastically say their top priority is job creation, yet California lacks a clear vision for how to go about the task.

The leader of California’s new economic development agency’s first task should be the creation of a long term economic development strategy including long and short term job creation goals.

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Nothing makes a better case for developing California economic development strategy than the 2011 Best Cities for Jobs report published this week by Forbes. The authors, Joel Kotkin and Micheal Shires index the nation’s 398 metropolitan statistical areas (MSAs), or cities, for their job growth potential based on recent, mid-term and long-term employment growth trends using employment data reported by the U.S. Bureau of Labor Statistics (BLS).

The first thing I noticed when I read the report was California’s highest ranked city is Merced at 155. On the way there I couldn’t help but notice the preponderance of Texas cities high on the list. Killeen, TX gets the top ranking for job creation potential. In fact, five of the best six cities for jobs are in Texas. Bismarck, North Dakota is ranked second. I couldn’t stop myself and began highlighting the 28 California cities and 26 Texas cities included in the report.

Here’s what I found. Collectively, California’s 28 cities dropped a whopping 728 places in the past 12 months. Conversely, Texas’ 26 cities moved up a total of 345 places. California’s largest city, Los Angeles, placed 373rd in the rankings while Texas’ largest city, Houston, ranked 14th. California’s lowest ranking city is Oakland at 395. The lowest ranking Texas city is Wichita Falls at 274.

I also looked at how a few other large industrial states performed.

Michigan, the state hit hardest by the recent recession saw 12 of its 16 cities climb to higher ranking in 2011 than they had in 2010 for a collective gain of an impressive 983 rankings. Detroit’s ranking is still a pathetic 384.

11 of 16 Ohio cities had higher job growth potential in 2011 for a collective gain of 404 places. Cleveland was ranked 307.

11 of 14 Pennsylvania cities moved to higher rankings between 2010 and 2011 for a collective gain of 711 places. Philadelphia ranked 58th and Pittsburgh ranked 61st. The lowest ranking Pennsylvania city is Harrisburg at 205.

Only 6 of New York’s 14 cities saw upward movement and New York’s collective position dropped 119 places. New York City ranked 54th for job creation potential.

Forbes' Best Cities for Jobs report makes it clear that most of America is moving up the on-ramp to the job recovery highway, but California is still aimlessly meandering on economic back roads.  Some may say everything will be just fine if we're patient because California's natural beauty and our sun, sea & surf life style is all we need to attract investment and rekindle our economy.  However, rational observers may say it's time to crank up the GPS to find the jobs on-ramp and create a long term economic development roadmap for California.

If job creation was the #1 priority for California's elected officials last November, how do we find ourselves six months later still talking and not acting?



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California lost another 1,500 manufacturing jobs in November: Time for job creation 101

Posted by Dorothy Rothrock, on Dec. 20, 2010

On Friday we learned that California lost another 1,500 manufacturing jobs in November and that our overall unemployment is second worst in the country.

California Assembly Speaker John Perez showed his concern in his "welcome" speech to our new Legislature two weeks ago and said that increasing jobs for Californians is the main solution for the budget crisis.

We agree.  But he didn’t take the time to describe what it takes to create a job.  Let’s not assume that everyone knows.

Job Creation 101 - What creates a job?  First you need an entrepreneur with an idea for a new or better way to do things, who can find someone to accomplish the work. Then the entrepreneur must develop and sell the product or service for more than the wages paid and other costs.

Do we have what it takes to create new jobs in California?   Let’s break it down:

1. A good idea for new products or services

No shortage here – California is bursting with talent and innovation.  We boast huge numbers of patents, venture capital investments and small business start-ups.  But we are not alone. Other states and nations are getting better at this. 

2. Market demand for the product or service

California is a large market with international reach – an ideal place for market research, to conduct early commercialization and connect with suppliers.  Other locations are also favorable with greater ease of travel, communications, etc.  The “flat earth” is lessening our advantage in this area.

3. Predictable costs of operation and ability to maintain or grow facilities

This is one area where California falls drastically short. The regulatory and tax environment is uncertain and punitive.  Entrepreneurs justifiably fear that costs and taxes will go higher with little regard to impact on job creation. This is often reflected in surveys of CEOs and site selection managers. We are famous for long and uncertain timelines for licensing and permitting facilities.  A businessowner recently summed it up perfectly: "It is not about a single regulation. It is about an attitude of no respect or concern for business of any kind in this state."

4. Total costs of operations, wages, and taxes are less than the price of the product or service

Another black mark for California. Costs for manufacturers are 23% higher than the national average, for example.  Taxes are at the high end compared to other states.  Wages are competitive, but taxes, workers' compensation, and other costs associated with each employee is high. Electricity costs 50% more than the national average.  The ability to raise prices to overcome the higher costs is lower due to flat earth dynamics.

5. Access to workers with the skills that are needed to accomplish the work to be done

California once had a world-class education system but we are sadly seeing this decline.  Other states and nations are catching up.  Manufacturing job creation is particularly hurt by the drop in career and technical education in the public schools.  Two decades ago, 75 percent of our high school students enrolled in vocational courses, now barely 30 percent.  Housing is also expensive in California, putting upward pressure on wages and discouraging qualified workers from moving to California.

6. Adequate public infrastructure to support commerce and operations (energy and water supply, transportation, etc.)

A troubling area for California.  Budget deficits make it more expensive to borrow for public infrastructure and taxpayers are less likely to support new bonds while deficits and taxes are too high.  The prospect of higher costs in the future to pay for crumbling infrastructure will dampen enthusiasm for new job creation in California.

Looks like we come up short in some critical areas.  CMTA looks forward to working with Speaker Perez and his colleagues to address these concerns and add the jobs we need to bring California back in the black.

To fully understand the need for Job Creation 101 in California, have a look at the country's 14 most unemployed regions.

In 2011, every bill in our State Legislature should work toward improving one or more of these policies for job creation.

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