Gino DiCaro

The State of California Manufacturing

By Gino DiCaro, VP, Communications

Capitol Update, Jan. 9, 2005 Share this on FacebookTweet thisEmail this to a friend

Governor Arnold Schwarzenegger delivered a rousing State of the State speech this week, challenging lawmakers to help him solve the root causes of the state’s governance and fiscal problems. He wants to fix expensive public employee pensions, out of control spending, politically drawn districts and a broken education system, naming 2005 as a "Year of Reform."

CMTA applauds this ambitious agenda. The current fiscal train wreck and polarized political environment, on top of very high operating costs, makes California a very difficult place to do business. The California economy will not thrive unless these intractable problems are solved.

Putting a positive spin on California’s future prospects, the Governor noted that the California economy grew 150,000 jobs last year. Noting reforms in workers’ compensation and passage of Proposition 64 to curb shakedown lawsuits, he said, "We must continue this trend of recovery by enacting reforms that serve the people, repair the government and grow our jobs and economy."

CMTA agrees. But what the Governor didn’t say is that less than 1 percent of the new 150,000 jobs are in high-wage, good benefits, manufacturing jobs. Nationwide the news is also bleak – "Manufacturing companies, which shed more than two million jobs between 2000 and the end of 2003, added back only 96,000 jobs in 2004 – possibly the weakest rebound in factory employment of any economic recovery on record in the United States." (The New York Times, January 7).

To attract and retain new manufacturing employment, the U.S. and California must adopt policies on litigation, labor, tax, environmental and energy that will allow companies to successfully compete in global markets. California is particularly vulnerable to anemic growth in manufacturing because companies find much better business climates in nearby states, not just overseas. To ensure California gets its fair share of new manufacturing employment during the economic recovery, CMTA urges the Governor and state policymakers to remove the competitive disadvantages to manufacturing in California.

Three of the most glaring examples of California being out of step with the U.S. are the imposition of sales tax on the purchase of machinery and equipment used in manufacturing, electricity costs that are 70 percent higher than the national average, and an overtime pay policy that prohibits "flex-time" schedules.

Workers’ compensation reform is a great start. Now we urge the Governor and Legislature to finish the job and make California a great place to do business in the 21st century.
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