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Dorothy Rothrock: California Legislators Need a Lesson in Job Creation

State sheds another 1,500 manufacturing jobs it can ill afford to lose

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

Dorothy Rothrock
Dorothy Rothrock

Assembly Speaker John Perez, D-Los Angeles, 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 startups. 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 percent 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 are high. Electricity costs 50 percent more than the national average. The ability to raise prices to overcome the higher costs is lower because of 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 do. 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 future costs to pay for crumbling infrastructure will dampen enthusiasm for new job creation in California.

It looks like we come up short in some critical areas. The California Manufacturers & Technology Association 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, click here for a look at the United States’ 14 most unemployed regions.

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

— Dorothy Rothrock is senior vice president of government relations at the California Manufacturers & Technology Association.

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