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SMALL BUSINESS | Special Report: Small Business Survey

Labor Supply Falling Short

Southland: A lack of skilled workers has been a severe constraint on one-sixth of region's small businesses.

September 23, 1998|DON LEE | TIMES STAFF WRITER

A shortage of qualified workers, once thought to be confined to a few select areas and companies such as software makers, has become a widespread, critical problem afflicting many small businesses throughout Southern California.

For high-growth firms, finding skilled labor is now their most pressing issue, more than competition, access to capital or even taxes and government red tape, according to a survey of nearly 1,700 small businesses by the Los Angeles Times and professor William Gartner of USC's Marshall School of Business.

The Southern California Business Climate Survey, conducted by mail in June, found that a majority of small businesses are grappling with a labor crunch to some degree. The problem cuts across skill levels and geographic and industry lines. Strikingly, a full one-sixth of all businesses said that a lack of capable workers has been a severe constraint on their companies in the last year.

Follow-up interviews with survey respondents indicated that, short of throwing out their hiring budgets, small businesses have taken all sorts of steps to alleviate the situation. But few have found antidotes to this condition, which has been festering nationwide.

Small-business owners in the region had harsh criticisms for local schools and training programs, complaining that too many workers come with narrow skills and poor work habits.

John Ramirez, president of Digital Image Studios in Fontana, never thought he would be turning away business. But that's what he has been doing in recent months, he says, because he doesn't have adequate help.

"It's stunted my growth," he said.

Ramirez, 34, started his computer animation firm a decade ago in his home, investing $4,000 in a single computer and some supplies. The business now has eight employees who jump from one of two dozen computers to another in Fontana and Rancho Cucamonga. But Ramirez could use at least three more workers. Two 3-D animation openings, he says, have gone begging for a whole year.

Expertise Is Hard to Find

Such specialty jobs, of course, have never been easy to fill anywhere. But these days, with the nation's unemployment rate continuing to hover at its lowest in a generation (it was 4.5% in August), employers across the board are struggling to find and keep good workers.

"You're talking about insurance agencies, restaurants, car dealerships. Go up and down the street, there's just a lack of people," said William Dennis, chief economist at the National Federation of Independent Business, a small-business research and lobbying group in Washington.

"For the first time ever," Dennis noted, "our monthly survey showed more than 20% of the small-business population is finding that skilled labor is the single most important problem."

The problem will probably diminish as the economy continues to slow, which will push up the unemployment rate. But that's less likely to happen right away for relatively fast-growing areas such as Southern California.

Tim Baskerville thought he had an answer to his labor shortage. A year ago, he moved his business publications company from a sleepy street in Thousand Oaks to a busy area in Sherman Oaks crisscrossed by two major freeways, just so he could draw from a bigger pool of workers.

But where did Baskerville find his last two analysts? In Washington and London.

"This does not pass the common-sense test," said the owner of Baskerville Communications Corp., which has a staff of 30 scattered throughout the world.

"It wouldn't seem too big of a stretch to find someone with expertise in Latin American telecommunications in L.A.," Baskerville said. "We got dozens of applicants, but we just couldn't find enough experienced people." In the end, he settled on a person in Washington.

What employers like Baskerville are experiencing does seem perplexing, given Southern California's huge and dynamic labor market, which is fed by a stream of new arrivals from other states and regions of the world.

But it is the sudden burst of demand for workers, especially in multimedia and certain manufacturing industries, that has strapped so many employers.

In just a matter of a couple of years, labor markets in Orange and San Diego counties have become among the tightest in the nation, as those areas have produced new jobs at a sizzling rate. Even Los Angeles County's jobless rate has fallen sharply, to its current figure of 6.1%.

The region's bigger and more diverse economy also means that it has that many more needs.

Successful Firms Feel the Pain

In this environment, no one is as hard-pressed as the fast-growing small company. On the one hand, such businesses have a tremendous need for workers to meet burgeoning orders. Yet they are often unable to compete with large firms for workers.

Digital Image's Ramirez, for example, says his starting pay for animation artists is about $60,000--nowhere near the kinds of salaries offered by big specialists such as Pixar Animation Studios in the Bay Area.

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