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Jobs: Creating Them / Keeping Them

February 09, 1992|Joel Kotkin | Joel Kotkin, a senior fellow at the Center for the New West and an international fellow at Pepperdine University School of Business and Management, is a contributing editor to Opinion

The future health of Southern California's diverse society is imperiled by the continuing--and rising--loss of better-paying industrial jobs. Should this trend, most recently magnified by massive cutbacks in defense spending, persist, an economic ladder for the region's growing, largely immigrant working-class population will be removed.

The threatened industries include many in the metal-bending and electronic-component fields, which rely heavily on local military and aerospace contracts. The proposed Pentagon strategy of funding research and development costs, but not production, for new weapons systems puts these companies at even greater risk. In addition, these businesses frequently use manufacturing processes that run afoul of the police from the Air Quality Management District and other environmental agencies.

As a result, the middle-rung industrial company is an increasingly endangered species, accounting for many, if not most, of the roughly 100,000 manufacturing jobs lost to the regional economy during the last two years.

To some free-market economists, as well as to their frequent nemesis, the environmental lobby, these job losses are a natural, even positive, phenomena--Southern California evolving toward a smokeless, "post-industrial" future. Yet the social and economic costs associated with a steady erosion of the core industrial base in Southern California can only be ignored at the expense of the region's economic prospects--and social order.

Perhaps the critical element in all this is that mid-range industrial companies provide the best economic opportunities for newcomers, mainly Latino and Asian, to the region. In comparison with garment jobs, which, in 1990, averaged a weekly wage of $250 to $300, employment in fields such as metal bending or high-technology electronic components can average $500 to $700 weekly.

Alarmingly, most recent data suggest that it is this higher-paying sector of industrial jobs that is eroding most rapidly. In the Los Angeles area, for example, the percentage of manufacturing jobs classified as low wage grew from 6%, in 1969, to more than 20%, in 1987.

The declining availability of good-paying jobs has prompted some in the media and in academia to rally around the defense giants or relics like the former General Motors plants in Van Nuys. Yet, these industrial dinosaurs are not the future of Los Angeles' vital core manufacturing.

Indeed, the region's manufacturing economy already depends largely on smaller firms. By the late 1980s, the Los Angeles area was home to more fast-growing manufacturing companies than Chicago, Pittsburgh and Detroit combined . According to one survey, nearly 2,500 of the country's fastest-growing industrial concerns do business here. The current decline in defense procurement has strengthened the region's dependence on such firms.

These smaller firms, not the slow-moving, bureaucracy-encrusted defense giants, hold the key to maintaining Los Angeles' mid-range industrial base.

This is nothing unusual for Southern California. During similarly wrenching transitions after World War II, the Korean and Vietnam wars, it was new, smaller firms, often started by unemployed engineers formerly employed by large defense companies, who helped the region overcome what was then an even greater dependence on Pentagon and aerospace activities. By contrast, attempts to diversify into commercial fields, notably by defense giants such as Lockheed, proved miserable failures.

Today, once again, such huge military contractors as General Dynamics and Northrop concentrate their prime energies on carving up the shrinking defense pie, while mid-sized, formerly defense-oriented companies, such as Kavlico, a maker of electronic components in Moorpark, have already made the transition to a more commercially oriented climate. So, too, have many smaller subcontractors, sometimes with as few as one to 10 employees, who market their services through such organizations as the 70-member American Manufacturers Network, or Amanet.

These firms, says Amanet President Robert Barbour, are well along in their diversification quest, producing auto parts, boating supplies, commercial-aircraft parts, biomedical devices and consumer electronics products. Their skills and willingness to take on the niche markets, which increasingly characterize today's manufacturing environment, suggest how the more vital, high-value-added portions of industrial Southern California can survive into the next century.

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