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"We can now for the first time verify with precise data what previously was anecdotal and uncoordinated evidence," said Mr. Kosmont. "We felt that the California manufacturing sector is in serious trouble. We can now allocate precise figures to conditions that many of us have been aware of but until now have been unable to quantify."

In an extensive catalog of California's problems, Keystone highlighted the following:
  • Over 261,000 manufacturing jobs and $98 billion in gross sales of California-manufactured products disappeared in the three-year period between 1999 and 2002.
  • The loss in manufacturing jobs is particularly damaging because manufacturing jobs pay exceptionally well -- almost 50 percent more than the average of all California jobs.
  • For decades, manufacturing jobs in California have been the prized "one way ticket" to the middle class for those on lower rungs of the job ladder (in particular, the Latino worker).
  • Manufacturing jobs have a pronounced "multiplier effect" -- they create jobs in other sectors of the economy, at a rate at least twice that of the trickle down from the retail industry.
  • California legislation in recent years has had a noticeable anti- manufacturing bias.
  • State and local land use policies make the development of manufacturing facilities difficult.
Mr. Kosmont said, "As a result of all these factors, doing business in California is more difficult and more expensive than in neighboring states. California is drifting down the path of becoming a region of smaller storefront companies. Many of the large or mature companies are taking all or a portion of their operation out of town."

The disturbing new data highlight the financial importance of manufacturing to the State, and the very significant contribution manufacturing wages make to total worker's income. "We are losing high-pay manufacturing jobs and replacing them with lower paying or minimum wage jobs," said Kosmont. "Look at what we know today as a result of this survey that we really did not know yesterday:"
  1. During the 13-year period (1990 to 2003), California lost 400,000 manufacturing jobs. Between 1998 and 2003, a five-year period, 288,000 manufacturing jobs disappeared, and during a 3.5-year period between 1999-2002 261,000 jobs were lost. It is this accelerating rate of job loss that arouses special concern.
  2. While there were slightly more manufacturers starting up than closing down, the net overall job losses were substantial. During the study period (1999-2002) at least 30,300 California manufacturers went out of business or left the State and 38,900 started up or in-migrated. However, the approximately 750,000 jobs that were lost were replaced by only 489,000 jobs from start-ups, for a net loss of 261,000 jobs. Gross sales during this period from failed businesses would have been about $284 billion. Unfortunately, sales from start-ups were only about $186 billion -- for a $98 billion loss in activity.
  3. There was an insignificant difference in the number of manufacturing businesses that left compared with those that entered the State (during 1999- 2003). However, California lost substantially more jobs from out-migration than it gained from in-migration (8,126 more jobs left than came in). In- migrant companies generated $3.5 billion in sales versus $12 billion lost because of out-migration. During the same period 363 manufacturers left the state and 261 in-migrated from other states.
  4. Almost no industry sector is going untouched -- job losses are spread over a broad variety of sectors. Industry sectors with high job losses include:
    • Defense and Space - 104,000
    • Computers - 96,000
    • Electronics - 59,000
    • Communications - 54,000
    • Food Processing - 38,000
    • Wood Processing - 31,000
    • Aircraft - 24,000
  5. Average compensation for manufacturing jobs in California is $57,000 per year, which is over 50% higher than the median state income (as of 2000).
  6. Of the 363 firms that left California, 60% were mature businesses with five or more years in operation and 51 firms had over 21 years in the state.
"It's like watching our economy's foundation crumble, quietly yet broadly. In a sense, we appear to be replacing more with less," continued Kosmont.

"The data clearly indicate that California is taking a substantial economic hit as a result of the loss of well-paying manufacturing jobs," said Dr. Steven Frates, Rose Institute Senior Fellow. "It is also significant that California is losing manufacturing jobs to other states. California policymakers would be well advised to pay careful attention to the negative consequences of this trend."

This is just another in a string of studies like this that have been undertaken in various states and regions around the country in the past few years. These studies, however, only seem to report on the obvious problem, and little if any ideas for beginning to solve this massive problem of evaporating jobs that adversely affect manufacturing and related design and engineering. It's an extremely complex problem that involves many groups of people in different capacities on many levels - business, technical, legislative, education, labor, the list goes on and on. With this nationwide downward trend that continues in manufacturing, I'm afraid things will get worse before they get better, but I feel they WILL get better as we retool (again, on many different levels) to better compete in a global economy.

Jeffrey Rowe is the editor and publisher of MCADCafé and MCAD Weekly Review. He can be reached at Email Contact or 408.850.9230.

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