Unskilled workforce threatens future prosperity of L.A. economy report says

By CMTA Staff

Capitol Update, Dec. 16, 2005 Share this on FacebookTweet thisEmail this to a friend

According to a study released this week by the Milken Institute, Los Angeles, battered by the departure of high-end aerospace and manufacturing firms, the consolidation of the local banking industry and a recession, has been kept afloat and is making a comeback thanks to the growth of small businesses over the past decade.

But if the city’s economy is to grow into the global powerhouse its leaders envision, they must do much more to bridge the gap between its high-tech, research-oriented assets and its low-skilled immigrant workforce. These are the main findings of the year-long Milken Institute study, the "Los Angeles Economy Project."

"The City of Los Angeles is a city of tremendous resilience, best described as an economy with a core in large business and a future in small business," the study states. "At the same time, the city also remains polarized between high-end and low-end jobs. It suffers from a labor force that is disproportionately unskilled." Two factors have dramatically impacted the city’s economy in recent years, and how the city deals with them will have major repercussions on its future:
  • Two of the three sectors that defined the Los Angeles economy just two decades ago have significantly declined – manufacturing and financial services.
  • The city’s diverse business base is severely constrained from participating in the knowledge-based industries that are the key to the region’s long-term prosperity.

While job growth has been stagnant in large corporations, where much of the city’s employment lies, small businesses have been booming, more than filling the employment void left by the big firms. The problem is, these firms tend to be very local, serving just the surrounding community, and they generally employ low-skill workers making low wages – not the kind of jobs that will help the city economy grow and prosper, researchers say.

"If a well-trained labor force is one key to the city’s future prosperity, the other is an environment that attracts and sustains small and medium-sized businesses," the study says. "Here, the critical factor is access to reasonably priced capital appropriate to a given firm’s size and stage of growth."

The report’s recommendations revolve around the most urgent action item that the city has to address and effectively tackle – building a regional economy that fosters faster business growth to create enough jobs, particularly high-quality ones, for the people who are in need of work.

"Los Angeles will improve its economic performance by upgrading the skills of its workforce, providing adequate capital for its businesses and supporting entrepreneurial growth, including promoting the commercialization of the intellectual property provided by our leading research universities," said Michael L. Klowden, President and CEO of the Milken Institute.
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