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COLUMN ONE : Big Guns Aren't Sole Casualties : From saxophone sellers to landscapers, small contractors feel the Pentagon's knife, Times study finds. But federal retooling may not help this often overlooked mainstay of the defense economy.

Big Guns Aren't Sole Casualties. FIRST OF TWO PARTS

May 23, 1993|MELISSA HEALY and GLENN F. BUNTING and DWIGHT MORRIS | This story was reported and written by Times staff writers Melissa Healy, Glenn F. Bunting and Dwight Morris

Golden Bear Arborists is just one example. Boyajian launched the company in 1968 as a one-man operation cleaning yards and garages near Los Angeles International Airport. He expanded into commercial and municipal landscaping, won defense contracts to maintain greenery at four large California military facilities and employed up to 50 people.

Today, Golden Bear operates out of a remodeled, tan steel building on a lot surrounded by a chain-link fence. Inside, towers for tree trimming loom over a large pile of firewood, a small nursery and an array of tree-cutting equipment.

Golden Bear did about $2.5 million in business last year--about 40% of it for the military, Boyajian said. The firm has avoided layoffs, but the future looks grim: no new defense contracts, several already lost and work at El Toro Marine Corps Air Station in Orange County and Mare Island Naval Shipyard in Vallejo in jeopardy since the two facilities were included on the Pentagon's initial list of proposed base closures.

Now, 13 major military installations in California are targeted by an independent base closure commission, which has until July 1 to send its recommendations to the President and Congress. If neither disapproves, the panel's proposals would take effect Sept. 1.

"We are in a position now where (the work) is all going to go away," said Boyajian, who has cut back on pay raises and is searching for municipal work throughout the state. "It is going to hurt us and cost us jobs."

The worst part, Boyajian said, is the uncertainty.

"Part of the problem is they don't tell you anything," he said. "It's hard to forecast and plan when you're in the dark. They can give you 30 days' notice and you're done."

Three thousands miles away in New Jersey, Russo's Music relies on defense contracts for about one-quarter of its sales by providing instruments and amplifiers for military bands and schools.

The decline in Pentagon orders is "not crippling to me," said Don Holloway, Russo's store manager. "But we have to do a lot more work to make up for it. It's a lot harder to sell saxophones one at a time than to do a dozen or more in one shot."

Russo's also has avoided layoffs. But in 1992, the decline in Pentagon business contributed to the Russo family's decision not to give its 21 employees raises and to scrub the annual Christmas party.

With decisions like those come the less visible effects of belt-tightening by the Pentagon, Holloway said. Russo's employees, and thousands others like them, are not buying new cars or adding on to their homes.

Such side effects are detailed in a new report by the Congressional Budget Office. In California, direct Pentagon spending--including purchase contracts, salaries, pensions and grants--totaled $55.8 billion last year. But the overall benefit to the state economy ballooned to $86.7 billion when the indirect effects were taken into account, the report said.

Now that Clinton has announced plans to slash an additional $124 billion from the Pentagon budget through 1997, many defense businesses and their workers are bracing for the worst.

The nation's service sector--a source of stable, middle-class, white-collar jobs--would take a major hit. The Bureau of Labor Statistics estimates that about 286,000 service jobs would be lost in the next five years because of smaller defense budgets, as would another 139,000 retail and wholesale trade jobs that depend on defense spending.

Prospects are the worst for the manufacturing industry, which employs 57% of the 2.9 million private-sector workers who owe their livelihood to Pentagon contracts. Labor Department experts say manufacturing would lose the most jobs, dropping 594,000 positions over the next five years.

The irony is that many are exactly the kind of high-wage, high-skill jobs that Clinton is intent on creating. The number of positions involving precision production or repair, such as aircraft and satellite assembly, are projected to fall from 820,000 at the height of Pentagon spending in 1987 to a little more than half that amount, 442,700, by 1997.

The Times' computer analysis traced the trend, finding that spending on manufactured products represented the fastest-shrinking segment of Defense Department contracts. In 1989, the Pentagon spent $76.1 billion on manufactured goods, 57% of all defense purchases. In 1992, spending had dropped to about $60 billion--49% of the total.

The rate of decline is even steeper among lower-skilled workers, whose jobs nonetheless are highly paid.

Disappearing at a furious rate are jobs for operators, fabricators and laborers, all semiskilled workers who do everything from putting rivets in airplanes to sweeping hangar floors. By 1997, the defense sector will have 437,400 such jobs, down from 890,000 at its 1987 peak. And almost two-thirds of those losses are yet to come, the Bureau of Labor Statistics has estimated.

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