LA #1 - On a Sinking Manufacturing Ship

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Here's a shout-out to a comprehensive profile of LA's manufacturing situation by Howard Fine in the Los Angeles Business Journal.

LA may be the nation's leader in terms of manufacturing jobs, he notes, but the pie is shrinking. "Yes, yes," you say. "Tell us something new.  We know about the cheaper labor costs and looser environmental regulations in Asia."

Well, Fine details a number of other factors behind the fact that more than half of the manufacturing employment base in LA has disappeared in the last 20 years.

- Harris County, Texas, which includes Houston, has added 20,000 manufacturing jobs since 1990. Houston area economists credit cheaper land, lower taxes, lower labor costs, and refocusing the oil industry toward international markets.

It's hard to argue local government can do much about land or labor costs, but the corporate tax rate in Texas is 1%. The lowest rate in California, Fine says, is 8.8 %.

-Daniel Flaming, president of the Economic Roundtable, a non-profit research group, says LA's leaders should have paid more attention as Southern California lost shipbuilding, tire manufacturing, steel manufacturing and then auto manufacturing. But because many of the workers were absorbed by the flourishing aerospace sector, the long term trend hid ... until aerospace jobs disappeared.

-LA's loss may be the Inland Empire's gain. For example, consider the case of AEM Performance Electronics, a Hawthorne-based maker of high-performance automotive electronic parts. A year ago, the company sold its manufacturing operations to a competitor, who merged the operations into an existing plant in Riverside County. (Those of you familiar with Inland Empire economist John Husing know his theory about the value of cheap dirt.) Most of the firm’s 100 factory employees made the move; those that didn’t were replaced with hires in Riverside County.

The LABJ is a subscription-based publication, but this particular article appears to be free. I recommend the read.

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About Rachael Myrow

Rachael Myrow hosts the California Report for KQED. Over 17 years in public radio, she's worked for Marketplace and KPCC, filed for NPR and The World, and developed a sizable tea collection that's become the envy of the KQED newsroom. She specializes in politics, economics and history in California - but for emotional balance, she also covers food and its relationship to health and happiness.

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