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Lee Joe
Joe Lee
Research Analyst, Regional Economics Research
Joe Lee is a research analyst with the Milken Institute on the regional economics team.  He specializes in labor economics with a focus in human capital and economic development. 
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Harnessing Inland California’s Economic Potential 

By: Joe Lee
October 24, 2016
   
   

The strength of California’s high-tech sector drives economic growth and creates new opportunities, as shown by California’s fourth-place ranking in the 2016 State Technology and Science Index. The popular vision of California is that of a scientific, technological and entertainment utopia where innovations that change the world are developed. This image is built primarily around the San Francisco Bay Area, Los Angeles and San Diego. These coastal metros are home to concentrations of computer science, engineering, entertainment and pharmaceutical/bio-tech sectors. Manufacturing the latest products from pharmaceutical, biotech and other high-tech sectors can link the coastal and inland regions of California into a more cohesive economy. There is great potential for career technical education (CTE) to expand access to employment opportunities in these high-tech industries. CTE can also help reshape the overall Californian workforce to support an advanced manufacturing industry in California’s lower-cost inland regions that capitalizes on the coastal high-tech sector.

chartheader 

chart ca

 

Sources: Bureau of Labor Statistics, Milken Institute.

The story of inland California has worldwide resonance. Globalization and improved technology have led to high levels of manufacturing output with fewer, more productive employees. As this happens, global manufacturing centers such as China are losing production jobs to lower-cost countries. For example, Foxconn Technology Group, the Taiwan-based contract electronics manufacturer, which has had a strong presence in China, is investing in operations in Vietnam.1 Mexico, another low-cost labor market, has increased exports to the U.S. by around 29 percent since 2010 by taking advantage of its proximity to U.S. markets.2

Likewise, the relatively lower cost of living and labor in California’s inland areas and its geographic location close to the high-tech sectors in coastal California provide an opportunity for the inland region to manufacture the products designed in California’s high tech clusters. Inland California has long had the support networks and infrastructure needed for advanced manufacturing, including access to large ports, a well-connected land transportation network and relatively low land and labor costs.  The creation of an advanced manufacturing industry based on these advantages would harness the inland economy to California’s engine of economic growth. 


chart ca2

Source: FRED, Moody’s Analytics.

This raises the question, what is the future of manufacturing in California? Will the state have the workforce required to attract high-tech-related industries and the jobs that they provide? Coastal metros drive innovation in business, technology and culture across the globe and the need for a workforce with the technical and vocational skills required to support these industries is more important than ever. By investing in CTE programs, California can create a skilled workforce that not only attracts the production side of high-tech, but also benefits other economic sectors as well. But none of the steps outlined above, by themselves, will make California competitive. The business climate also requires reform to become more hospitable to the entrepreneurs and industries that foster job growth and economic expansion. We will address these issues, including high regulatory burdens, the cost of living and CTE at the California Summit on Oct. 25 in downtown Los Angeles.


References

1 Ivana Kottasova, “Microsoft is Selling Its Cheap Phone Business to Foxconn,” CNN Money 05/18/2016 http://money.cnn.com/2016/05/18/technology/microsoft-phone-business-foxconn/ accessed 9/23/2016

2 “Trade in Goods with Mexico,” http://www.census.gov/foreign-trade/balance/c2010.html accessed 9/23/2016

Real output in the manufacturing sector is measured in “value” (dollars) of shipments from manufacturing sectors to non-manufacturing sectors and indexed to the 2009 levels of manufacturing output.

Overview of Output Measures Used by BLS to Construct Productivity Statistics for Major Sectors of the US Economy,” Bureau of Labor Statistics: Division of Major Sector Productivity 09/24/2014 http://www.bls.gov/mfp/outputnote.pdf accessed 10/10/16


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