ALISON ST JOHN (Host): And you’re back on These Days with me, Alison St John, sitting in for Maureen Cavanaugh. A thriving community needs jobs that pay enough to support a family. But a growing number of people living in San Diego are not earning enough to get by, let alone thrive in San Diego. We're looking at a new analysis of San Diego's economy from the perspective of the average resident who’s just trying to make ends meet and create a decent life for themselves here. San Diego's Center on Policy Initiatives puts out a report every year called "Making Ends Meet," and
Murtaza Baxamusa is director of Research and Policy for CPI. Thanks for being here.
MURTAZA BAXAMUSA (Director, Research and Policy, Center on Policy Initiatives): Good morning, Alison. Thank you.
ST JOHN: Good morning, Murtaza. Also, we have Erik Bruvold, president and CEO of the San Diego Institute for Policy Re – the San Diego – No, the National University Institute for Policy Research that does economic trends here in San Diego from a more business perspective.
ERIK BRUVOLD (President and CEO, National University Institute for Policy Research): Sure. Good morning, Alison. Thank you for having me on.
ST JOHN: Great to have you both here. So Murtaza, why don’t we start with you. The Center on Policy Initiatives has released this report looking at the number of San Diegans who are struggling to make ends meet and you found that 70% of residents can make ends meet but that leaves 30 that doesn’t. Is that more than before?
BAXAMUSA: Yes, it is a significant – a significant – let me get to what it is that we are trying to measure here.
ST JOHN: Okay.
BAXAMUSA: The cost of living in San Diego, which is not the same as the federal poverty level, as we all know. What we captured here are data from the federal and state level and the market information on key elements of what it is that a family budget is composed of, which is housing, food, fuel, childcare and healthcare. And when we combined those two together, we calculated how much it cost to make ends meet. For a single person, single adult with no children, no dependents, it costs $27,733.00 just to make ends meet. No frills budget, no movie tickets, nothing, no toys.
ST JOHN: No savings…
BAXAMUSA: No savings.
ST JOHN: …for retirement.
BAXAMUSA: And no savings.
ST JOHN: No vacations.
BAXAMUSA: And most significantly, 85% pick up – It assumes 85% of the cost of healthcare will be provided by the employer.
ST JOHN: And that’s a good deal more than the federal poverty level, isn’t it, so there’s a huge gap between that and what it takes…
BAXAMUSA: Correct. The federal poverty level for a single adult is $11,161.00. Now to put that in perspective with the California minimum wage which is $16,800.00 if you’re working full time year round, 1.6 times the amount of the California minimum wage, which means if you’re working full time year round at minimum wage, you would have a income gap of $10,000.00 every single year. You will be falling behind.
ST JOHN: That you couldn’t sustain yourself…
BAXAMUSA: Umm-hmm.
ST JOHN: …even as an individual. So which groups are falling behind more in this – according to this self-sufficiency standard that you have.
BAXAMUSA: Right, so once we developed that standard, what we did, what University of Washington, and this was a joint project with United Way, we mapped it onto what it is that people make actually, which is through the American Community Service Census data. And this is the first time we were able to do that because of the richness of the data collected. What we found is that there are 229,000 households, 1 in 3 working age households that are struggling to make ends meet in San Diego, which is a significant amount. It was not what we had expected given the federal poverty level showed us. We are seeing the stereotypes being defied here in terms of what it is, who is it that is struggling. It is 65% are families with children, a broad spectrum of ethnicity and demographic diversity here. So every single economic sector is struggling.
ST JOHN: It sort of ties in with what President Obama’s talking about right now about strengthening the middle class. It feels like the bottom end of the middle class is falling off the…
BAXAMUSA: Correct. What we see is a teardrop-shaped economy where there’s a large base of low-wage workers that is bulging out and a shrinking middle class. What you see here in this data manifest is a dearth of middle income jobs and career opportunities for low wage workers.
ST JOHN: So how does San Diego compare to other cities around the nation in terms of this teardrop economy? Are we looking worse or better?
BAXAMUSA: We’re about the average in the nation. We’re – we compare – we don’t do too well or not too bad but in terms of cost of living, that’s where the problem comes. The cost of living is significantly higher than the rest of the country.
ST JOHN: That’s right. So now, Erik, you have – your institute has actually done a report fairly recently looking at one of the job sectors which has really helped boost the San Diego’s economy and has…
BRUVOLD: Yeah, I want to talk about some research that the National University system did and then just kind of maybe offer some additional comments on the material that Murtaza talked about. We took a look at the 2009 statistics on personal income. So the federal government looks at every metro area around the country and studies how personal income has changed over the course of the year. So in San Diego, we saw really exemplified by the recession about a 1.1% decline in personal income. But one of the things that data masks is the extent to which on the private sector we’ve seen a much more dramatic decline and really cushioned – about two-thirds of the blow has been cushioned by an expansion in military and federal government payroll. So if our economy, we sort of did some what ifs and we asked the question, well, what if federal spending had stayed sort of flat in San Diego? We hadn’t seen an uptick in spending on the military payroll side, and that would’ve put our economy much more like south Florida or the Phoenix area, you know, a decline of three to four and a half percent in terms of personal income. So that’s some data that we did. I was struck, and Murtaza, one of the things that I, in taking a look at the overarching study that was done, I think that there are a couple of things that jumped out at me. One, you asked the question about how we’re doing and the data, at least from the United Way study, says that this is a statewide problem, that San Diego sort of comes in just about where California does as a state. We’re better than Los Angeles, we’re worse than some of the cities up in Northern California, particularly San Francisco in…
ST JOHN: In terms of…
BRUVOLD: In terms of the…
ST JOHN: …affordability.
BRUVOLD: …number of people that are making that self-sufficiency wage.
ST JOHN: Right.
BRUVOLD: And then the second thing that I think was interesting was – is that fully 60% of the people, at least on the statewide data, that are falling below this self-sufficiency standard are working. So these – this is really the, if you will, the new or the changing face of poverty in our country, which is people that are finding it challenging to make ends meet or meet the cost of living but which have full time and regular employment. And then the third thing that struck me, and I hope we can talk about this because I think this is where some policy choices lie is that…
ST JOHN: In fact, that’s a question…
BRUVOLD: …the number of people that are failing to make that self-sufficiency wage, so the number of people that are falling behind dramatically declines according to this data the more education people have. So whereas, you know, fully somewhere between 60 to 65% of those people with less than a high school degree fall below that self-sufficiency standard, by the time that they have a bachelor’s degree or higher, we’re looking at the mid-teens. Now, that’s probably still too high but that just shows the dramatic way in which there’s a return on investment from education according to the bar that the study’s author set.
ST JOHN: Well, that’s an interesting observation, Erik, but on the other hand we just heard yesterday that there is a huge decline in the number of people who’ve just left high school and college finding work right now.
BRUVOLD: Sure, I mean, it’s been a bad recession so no doubt about that and I think, you know, that there’s some sort of – there’s some structural and cyclical issues in the economy that we have to do (sic) but if one of the key goals that we’re trying to do is trying to help people move up the economic ladder, move into greater and greater sufficiency in wages, clearly one of the underlying issues in this study shows education has a high return on investment.
ST JOHN: Get more education, yes, but then we are left with this question of whether even if we do manage to get more people going to school and going to college and graduating, are there the jobs that they can actually support a family and, I mean, owning a home has been a goal and isn’t necessarily a home but afford the rent even…
BRUVOLD: Well…
ST JOHN: …for a family here in San Diego.
BRUVOLD: …this study says that 85% of those people with a B.A. or higher are going to meet the self-sufficiency standard that Murtaza’s institute said.
ST JOHN: So, Murtaza, also you are talking about the number of people who fall below that standard and who are eligible actually for safety net services. What – how much are public safety net services actually helping people who fall below the standard?
BAXAMUSA: Not much, the key reason being that the federal poverty rate is significantly lower than the self-sufficiency so what you see is something like 3% actually qualifying for CalWORKS. Our food stamp participation is already low in the county. So…
ST JOHN: Three percent who qualify are participating?
BAXAMUSA: Three percent of those that are below self-sufficiency are participating. So we have a pretty – so this is only…
ST JOHN: So only 3% of the people who are not making ends meet…
BAXAMUSA: Umm-hmm.
ST JOHN: …are actually participating in…
BAXAMUSA: Correct.
ST JOHN: …the sort of safety net services.
BAXAMUSA: Correct.
ST JOHN: And, I mean, would you say that’s because they don’t make them easy enough to access? Or…
BAXAMUSA: It could be a combination of policy issues as well as access. Here, the questions did not go into…
ST JOHN: As to why they aren’t…
BAXAMUSA: …but the – there is a clear mismatch between the demographic that needs this and the demographic that is actually receiving.
ST JOHN: Okay. Well, obviously rather than providing more safety net, it would be nice to provide more jobs that people could survive on, wouldn’t it?
BAXAMUSA: Correct. And I want to address the important issue that Erik raised, that between demographic groups that have higher education, there might be a difference in wages. However, what’s happened over decades is that education does not pay as much as it used to pay. And just give you an example of productivity, as workers become more productive, their wages do not go up. In fact, over last – in five years, from 2002 to 2007 when there was an economic boom, productivity rose 11% but wages fell .1%. Erik’s research shows that income fell as well. So the big problem is the gap between productivity and wages and that is addressed by the wage structure, which is primarily due in by the private sector again.
ST JOHN: So like, Murtaza, you’re speaking from the point of view of the worker…
BAXAMUSA: Umm-hmm.
ST JOHN: …of saying, you know, we’re trying to be productive and the wages aren’t keeping pace. I mean, Erik, would you say there’s any kind of a message here for business about, you know, the structure of wages?
BRUVOLD: Well, I mean, the big problem or the big challenge with productivity and productivity gains in terms of the income gap has largely been a function of an increasing globalized economy.
ST JOHN: Umm-hmm. Which means that…
BRUVOLD: Yeah.
ST JOHN: …jobs are going overseas.
BRUVOLD: Well, no, which is American workers are competing globally now.
ST JOHN: Umm-hmm.
BRUVOLD: And so – and the challenges are is that, you know, the – in areas where there’s been large productivity gains—and this isn’t necessarily shipping jobs or shipping activities overseas—it just means companies are competing. So companies that are here are competing with software development companies in India or telecommunication companies in Eastern Europe. Wages are lower in those places, and it’s challenging then to have the economic returns that are achieved by great globalized economy translate into higher wages. Globalization is hard on a lot of workers, absolutely.
ST JOHN: So, you know, we’ve heard about the fact that the private sector has generated a few more jobs nationwide, that’s something President Obama…
BRUVOLD: Umm-hmm.
ST JOHN: …was talking about last week. Is the private sector in San Diego geared up to face a future where perhaps the amount of money coming from the Department of Defense may start to decline here in San Diego?
BRUVOLD: You know, that’s a big challenge for our region, Alison, and one of the biggest reasons it’s a challenge is that if you look at structurally at San Diego’s economy over the last 10 to 15 years, a key place that we’ve grown is in the area of real estate finance, sort of the financial services sort of the – part of the industry, along with construction and real estate. And it’s hard to see, at least in the short term, that part of the economy going – coming back. On the private sector in San Diego, we’ve got some deep structural changes that are going to go on in our economy and it’s probably going to be rough sailing for at least the next two or three years.
ST JOHN: What makes you think it might get better after two or three years?
BRUVOLD: Well, I do have some confidence that economies transition and economies change. Structural changes occur. People get retrained and retooled into different careers. We’ve seen an explosion in the demand for higher education services, not just in the state but in the county and throughout the reg – throughout the country. And people are looking to retool skill sets into areas and professions which are growing, such as healthcare and some other service areas.
ST JOHN: So, Murtaza, I mean, we’ve been seeing a lot of movement in San Diego to privatize public services. I mean, the discussion down at the City of San Diego is how can we save taxpayer money by privatizing services. Does that automatically mean that the jobs that are going to be generated are going to pay less?
BAXAMUSA: I think that the global picture here is how, as Erik pointed out, the structure of the economy is changing. There’s no doubt that in several sectors we will reemerge as a new economy. Let’s go down the list. For example, in manufacturing we have significant of outflow of jobs even despite of San Diego trying, struggling, to create those jobs. Those are middle income jobs, blue collar, they – that a hardworking person can actually make ends meet on. Then what we’re – what we’ve lost over the last few years, a third of the construction industry has shrunk. Those are middle income jobs. Average wages could easily be thirty, forty thousand dollars to support a family. We’ve lost some amount of financial sector. But we’ve also – we’ve lost but we’ve made a significant amount of gain in leisure and hospitality, the tourism industry, while these aren’t that well-paying jobs. And the problem with adding low wage jobs at multiple rates then we’re losing our own middle income jobs is that we are perpetrating the problem. These are income – these are jobs that we’re not competing with globally around. Construction is here to stay. Tourism is here to stay. Our restaurants are here to stay. These are jobs that people will be working here locally in and need to be able to support – to make ends meet to be able to support a family.
ST JOHN: So what do our regional leaders really need to be working on to create jobs that do have a salary where you can survive, you can be self-sufficient? So I don’t know, either of you.
BAXAMUSA: Well, there’s two pieces of what I am saying. First is retaining and attracting those jobs that are middle income jobs, for example, in manufacturing. The second component is raising the jobs – raising the wages of those jobs that are here to stay because that is the only way we can allow our lower income families to be able to support – makes ends meet and to be able to give career ladders to them so that they can rise up.
ST JOHN: Right. So however educated you are, you need a career ladder to move up, Erik, don’t you?
BRUVOLD: Well, I guess – Yeah, I guess I just, you know, I think that those things are important. I think, you know, we need to absolutely do what we can to retain jobs that pay good middle class wages. We need to do what we can to sort of at least think about how we’re investing and the kinds of jobs that we’re growing. But I think, you know, the underlying message of this report really says that there’s a dramatic gain and a dramatic return on investment from completing high school, completing an associate’s degree or completing a bachelor’s degree. I mean, the falloff is dramatic. I mean, you just take one subgroup here, which is, if you look at female Latinas, which go from less than a high school, fully 65% of them don’t make that self-sufficiency gap to that if they achieve a B.A. it’s down to 15%. So, yes, we need to do those things that Murtaza was saying about but we need to, within careers, within professions, help people move up the ladder and clearly the report suggests higher education is a critical component of that.
ST JOHN: However, Erik, I have to ask you whether what Murtaza is saying, that the jobs that already exist here that aren’t going away such as tourism, which is very prevalent and growing, whether the private sector can sustain those sectors and still keep paying a wage that people can survive on here.
BRUVOLD: Well, I think the challenge with the hospitality industry – and, you know, we’ve written reports that have been critical of the hospitality industry as well, the challenge is, is that is discretionary spending. And so as wages go up, the consumers of those service ultimately, you know, make a question which is that they say, you know, is that something which I need to spend money on? Is, is that if the cost of a hotel doubles because we’re paying now people who are working in those and hardworking people in the hospitality industry, but if the cost of the hotel doubles, you know, do I go on vacation four days? Or maybe I’ll cut it back to two. And in the end, that hurts wages just as much.
ST JOHN: Okay, so if you’ve – you’re living in San Diego and you’re either thinking about going to college or you’ve got kids that are thinking about what they might want to be, what kind of jobs in San Diego are going, in the future, to be able to allow you to get above that self-sufficiency line?
BAXAMUSA: Well, just Erik – look up the rates, hotel rates in San Francisco and look up the rates in downtown and compare. For the same star rating, you will see that they are comparable rates. Our hotel rates are the same but our wages are half, at minimum wage in – for hotel workers in San Diego. So regarding the idea that there should be – that we will be driving out business is a fallacy in itself, especially when productivity is so high that they’re – each housekeeper is cleaning up 30 beds now than they used to bef – they used to clean up 18, 20 beds. So it’s a pretty significant problem when we address it that way. Alison, going to the question of what about our children, our children need to be educated in those fields and areas that are emerging as the structure of the economy was…
ST JOHN: Such as…?
BAXAMUSA: Such as in energy. In terms of energy and healthcare, biotech, those kind of fields are not going away.
ST JOHN: And, Erik, I mean, you were talking about education…
BRUVOLD: I think, you know, science and technically related fields, math and science, engineering, those are all emerging sort of skill sets which, if you look at the fastest growing professions, the fastest growing industries, that sort of educational background will pay returns to not just kids and not just parents looking at what their kids can do but also workers looking for retraining and reskilling themselves to the new economy that’s going to emerge from this recession.
ST JOHN: Okay, well, gentlemen, thank you very much for talking about this new economy that’s going to emerge. It looks like it will be a challenge, though, for the next generation coming up to get above that self-sufficiency level.
BAXAMUSA: Thank you, Alison.
ST JOHN: Okay.
BRUVOLD: Thanks, Alison.
ST JOHN: Stay with us. Coming up next on These Days, a California man convicted of lying about winning a Congressional Medal of Honor was let off the hook and the courts now say the conviction infringed on his right to free speech. We’ll chew that over after the break and look at the legal implications of lying on your resume.
