The Indifference to LA's Jobs Crisis
Quote of the Week
"Jobs do not require four-year college degrees. Employers do. The last decade was characterized by a widespread phenomenon of “degree inflation.” Employers who had not asked for
a four-year college degree historically started adding college degrees as minimum education requirements even for jobs that had not materially changed."
J. Fuller, M. Raman, et al. (October 2017). Dismissed By Degrees
Proposition to Support - Prop 28
The measure would require the state to allocate at least 1% of Prop. 98 funding — money guaranteed for public schools and community colleges in the state budget — for music and arts education. That’s estimated to be a $1 billion annual set aside.
Schools with high proportions of students from low-income households would get more funding. School districts will be required to spend 80% of the new funding on hiring arts and music instructors, and they will have to publish annual reports on how they spend the money.
Big Picture
This past August, employers in the United States added 315,000 jobs and 786,000 workers joined the labor force.
In July, employers in California added 84,800 non-farm payroll jobs, while 24,500 jobs disappeared in Los Angeles County, along with 15,000 Angelenos who decided to leave the labor force.
Driving down LA's number was a steep decline in educational workers due to the summer school recess. And the jobs gained in leisure and hospitality, accommodation and food services, arts, entertainment and recreation and trade, transportation, and utilities were not enough to overcome the decline.
Education services is now LA's third ranked employer (352,000), behind healthcare (751,000) and tourism and hospitality (622,000), having surpassed the continually declining population of middle-class manufacturing jobs, which stood at the top of the list in 1990. Manufacturing now falls into the "other sector" category after professional and administrative services.
For those, including myself, who love LA, these numbers do not bring joy. LA's past leadership in entertainment, aerospace, manufacturing, etc. has been squandered and we continue to be lapped by our global and national peers, as measured by growth in population, GDP, jobs and productivity. (Some new research in the works will show not only LA’s shifting jobs landscape, but just how many jobs we should have created when compared to our peers in the past decade alone .)
This competition will not let up. In the coming decade, more than 100 new peer regions will come on-line attracting the attention of the world's talent, capital and resources.
To be fair, globalization and deindustrialization have not been kind to many Angelenos and America's middle and working-class.
Most metropolitan regions across the U.S. have experienced varying degrees of labor market polarization with the rapid influx of technology in the workplace, shifts towards a service-dominated economy, and reshuffling of the population by age, race, and ethnicity.
The chart below illustrates this point.
But that does not mean LA's leaders should continue to go down a path of indifference to the jobs crisis we face. An economy that has high levels of unemployment, underemployment and informal workers is not sustainable.
Nor is the growth in our state and local governments as they expand methods to generate the dollars necessary to provide the level of services and programs needed to support Angelenos.
Two of those methods we can call "wealth transfer schemes" are ongoing efforts to increase taxes on high-income earners and real estate investors and their investments.
And a third one, as the City of L.A. illustrates, is the generation of revenue from licenses, permits, fees and fines. They now exceed every other revenue category, except property taxes and most likely hits the wallets of struggling Angelenos. A healthier economy would have the sales tax revenue back in the number two position where it once was!
This system cannot go on forever, as more businesses and high-wage earners leave the state, leaving more of the tax generation burden on those who remain.
The San Francisco Chronicle recently found that 39,000 San Franciscans who had filed federal tax returns for 2018 had moved out of the city before filing 2019 returns. Collectively, they took $10.6 billion in income with them while people who moved to the city during that period reported just $3.8 billion in income.
The other piece of the puzzle shows that a large majority of the world's money has flowed into real estate investments and LA remains a popular investment site.
This form of passive investing is good when it builds out the infrastructure we need for homes and businesses, but when two-thirds of global net worth is stored in real estate and only 20 percent in other fixed assets, it raises questions about whether societies store their wealth productively.
Growing out of this imbalance would require all economic actors to redirect capital into productive and growth-enhancing investments such as sustainability, affordable housing, digital infrastructure, and yet to-be-discovered 21st-century stores of value for savers.
We must also do a better job in helping Angelenos learn a skill that will help them secure a good paying job.
Today LA supports about ~ 5 million jobs, about ~25% of CA's total, and if you look at the top 10 industries that will add the most jobs from 2020-2025 (see chart below), you will see a mixed bag of opportunities for Angelenos. The better paying career oriented jobs will obviously support one's potential for residential and economic upward mobility.
The problem is even as LA creates these jobs, far too many of the middle-skilled occupations now and in the future will sit vacant without a better game plan. The chart below from the LA Regional Plan Update highlights this.
Nearly 7% of all annual openings in LA County are represented by these 10 occupations, with registered nurses, bookkeeping, accounting, and auditing clerks having the most openings.
The big question is why are Angelenos not filling these jobs?
Government is pushing out a million solutions, from subsidized childcare, free community college tuition, transportation vouchers, etc. and LA is spending $100 million each year in workforce development dollars.
On top of that, there are more than 100,000 graduates coming from our local schools each year with a degree or certification. Recent data is showing that a growing number of these graduates are heading out of town in search of something better.
Yet jobs remain vacant as LA's labor force participation rate sits at ~62 percent, its lowest level in decades.
A few explanations to consider:
More Angelenos work for small or medium sized business (<500 employees). Throughout the past decade, 64% of LA's employment growth has been driven by small and medium businesses, representing a 52% share of the LA's region's employment base.
More younger Angelenos are also part of a growing segment of the population that operates in a more informal part of the economy that designs, creates, and sells a diverse range of products and receive compensation through crypto, venmo, etc.
Automation will have an impact in 2.7 million jobs in the county by 2030, leaving those who do not get up-skilled without employment now or in the future.
Greater numbers of good-paying jobs now require either two- or four-year college degrees. These jobs are especially prevalent in the growing service sectors of the economy, particularly in fields such as health care, education, and finance. Jobs for non–college graduates in these fields also expanded dramatically, though they paid much lower wages. Only 34% of Angelenos have a bachelors degree and 90% of the projected fastest growing, best paying jobs require a degree. (*see note at the bottom)
A good part of LA's underemployment problems are being driven by a skills mismatch.
In labor economics, the reservation wage is the lowest wage rate at which a worker would be willing to accept a particular type of job. This wage is a theoretical representation of the hourly rate at which an individual values their own leisure time. The question is, what is this rate for LA's residents???
I welcome any feedback my readers may have on this topic, and ideas on how to help advance what I see as the most critical first step in getting LA back on track - filling the jobs we do have available today, as we work to grow the jobs of tomorrow.
*There is a growing movement by activists to limit or eliminate absolute degree requirements. (Read The Burning Glass Institute report). That movement will become more pronounced once Opportunity@Work launches its Ad Council supported campaign in a few weeks.
As more companies look to institute their own new policies around this topic it has yet to be seen whether the skill requirements are still embedded at the level of specific job descriptions. In other words, while they’ve foresworn the requirement at a corporate level, they are still applying it to most of their actual positions. After all they are seeking out the best candidate.
As to who will benefit the most from this...for certain positions (a good example would be IT Help Desk technician), there are qualified candidates without degrees and there are credible programs generating an additional supply of non-degreed candidates.
Additionally, one premise is that removing requirements will support the growth of education to employment programs short of college degrees that will increase the supply of candidates over time.
You can read more on this topic here: Hidden Workers: Untapped Talent (hbs.edu)