The Cost Of Attracting Companies To San Diego
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March 4, 2014 1:22 p.m.
Erik Bruvold, National University System Institute for Policy Research
Murtaza Baxamusa, Secretary-Treasurer, Middle Class Taxpayers Association, San Diego
Related Story: The Cost Of Attracting Companies To San Diego
MAUREEN CAVANAUGH: This is KPBS Midday Edition, I am Maureen Cavanaugh. San Diego County officials say that the job market continues to improve but it has not been helped by a few recent announcements of layoffs and transfers in San Diego Cox can medications is laying off 500 employees and Sony is cutting 400 jobs and perhaps most troubling, WebSense is moving to Texas and taking most of its workforce with it. These cuts also indicated some troubles ahead for San Diego economy, I would like to welcome my guests Erik Bruvold and Murtaza Baxamusa. First of all let's start with the county's assertion that the health of the San Diego job market, Marney Cox over at SANDAG is quoted in the KPBS story about the layoffs and he says that the job losses don't reflect what is happening in the local job market and the unemployment rate is going down in more jobs are being created, Erik do you agree?
ERIK BRUVOLD: I think we looked year-over-year job growth San Diego is back into the positive area and starting to climb back up the lost decade for the great recession and that is all good, I would agree with Marty that things overall a pretty good. If you look specifically for the numbers the troubling trends that we have added jobs at the lower and of jobs for spectrum, a lot of service jobs and jobs in hospitality industry and those are important for people but they are not the kind of jobs that are equivalent to the wages that are paid in company like websites were Sony or even some call-center jobs being lost to Cox.
MAUREEN CAVANAUGH: Especially considering to you Murtaza Baxamusa. Because the kinds of jobs the treated don't exactly correspond with the kinds of jobs that one might find in a Sony Corporation.
MURTAZA BAXAMUSA: I agree with Erik here the middle class is shrinking, we had a hourglass economy and we're not really creating a middle-class jobs in the last economic cycle we were creating low-wage jobs at a rate that was eight times the number of jobs we were creating at a higher end of the scale and what is happening is if huge booming of middle of the low-wage jobs in San Diego which depresses the average income in San Diego.
MAUREEN CAVANAUGH: What to Sony and Cox have to say about why they are cut jobs here in San Diego?
ERIK BRUVOLD: Think those two companies are really examples of the fact that there is always so much to the public sector can to, these are two firms in their respective industries that are undergoing extreme competitive pressure and so the case of Sony dealing with this rapid church in technology and kind of things that we do and the choices in terms of product development which the marketplace but it was just generally that makes a lot of pressure on a company like Sony and in the case of Cox have this transformation of how we're getting our information into our homes, TV, cable, or wireless and that is putting pressure on the legacy cable companies and soap and those two cases we have job losses that are really associated with industry wide transformations and those from positions inside the respective sectors.
MAUREEN CAVANAUGH: That move on to the healthy IT firm that is moving to Texas. What you think about the web since move?
ERIK BRUVOLD: I agree with the article that Eric Anderson put up on the KPBS website that is an IT from that specializes in cyber security and that application is a secure network and a growing industry that we're going to put out a report in another month or so along with the on that industry on its growth in San Diego and this is an important company and their move seems to be associated to shrinking that middle-class and that is the competition for talent and these firms be the kind of talent. In San Diego's high cost of living which puts a real competitive pressure on firms in terms of the salaries that they have to pay to keep people here working for the company and to retain them as other offers commit.
MAUREEN CAVANAUGH: WebSense is moving about 470 jobs to Austin Texas and is being paid $4.5 million from the state of Texas to move plus a half a million from Austin, but does the state need to pay companies to move there?
ERIK BRUVOLD: I would like to separate these two things because they're really important for us. The $5 million honestly is part of the payment against Governor Perry and opportunity have a bunch of photos and look good for saying it but in the end what this is about is 400 people? Or to move to Austin what they're going to find out is San Diegans by the light and now this is that Austin is not the captain jeer union and that the plaintiff is a really nice place to live and the University of Texas at Austin churns out thousands of well-trained engineers every single year and the cost of living if after we looked at price of housing we can get about double what you can get in San Diego if you live in Austin and what would cost you for 200,000 or 2000 for the 2000 ft.≤ home in San Diego on a 1/8 of an acre is about 4000 ft.≤ on half an acre or more in Austin and we start looking at that it just becomes a pretty compelling offer in terms of for the employees and the firm's employees abilities to maintain power and we have to do some thing about the high cost of housing in San Diego where websites is moving were losing more overtime.
MAUREEN CAVANAUGH: Some might argue that the situation is like that in Austin and because Austin is in Texas.
ERIK BRUVOLD: For every home that we have permitted over the last decade box Austin has permitted three, so Austin has not had the sort of really antithetical and hostile view towards growth that pervades San Diego's coastal communities and I know people may say that they've is that we've sprawled and grown so much that week compared to please like Texas at Austin have a much more pervasive attitude towards growth of that is whether half housing costs about half of us.
MAUREEN CAVANAUGH: What kind of incentive does this have to be to keep and attract businesses?
ERIK BRUVOLD: We have a few, we have less than it used to we have programs like the enterprise zone and programs that are on the training site. They make a difference, but again if we really want to look at where the economy is going this is a race and a competition for talented employees and in the end these incentives are not as great of a deal as differences in cost of living and the quality of life in your community and your ability through institutions of higher education to continue to refresh and refill that talent pipeline as people age out of the labor market.
MAUREEN CAVANAUGH: Number to set was funny but critical business incentive program for cut taxes to the bone to attract businesses to an area, how can those incentive programs that however wire those it organizations against those? How can those incentive programs be harmful?
MURTAZA BAXAMUSA: Economic involvement is really up partnership between employers and workers and the city government and each of these key legs of the stool have the role to play in attracting and retaining workforce. In terms of employers, and in the employees there is a significant amount of overlap into what Erik mentioned as a talent pool, the more we can squeeze in terms of the defendants density and good quality jobs the more that we can attract some more of the economic drivers such as innovation in the economy and the more there is for workers to have opportunities to move up. We also need to have a training program that allows lower wage workers to climb up in scale and that too means a partnership with the employer and an employer cannot just leave it to the government to train people, they have to participate in that workforce development, so the three legs of the stool have to work together to rise up in scale and the problem that we have in San Diego is a big disconnect between the cost of living and the wages that workers earn it is about 52,000 is the average raised but if I judge of the for the cost of living we are at the bottom of months amongst major cities in the unites states and the cost of living is very important the cost of housing is a significant factor in that equation and so, the three players here are to have a real the really have to have a net honest conversation about how our workforce is going to live here where workers are paid appropriately based on the cost of living and our cost of living is affordable.
MAUREEN CAVANAUGH: There's been a jobs rivaled between California and Texas for several years now and besides offering billions of dollars and perhaps a lower price to buy a house, what can Texas offer pop property companies that do forty cannot?
ERIK BRUVOLD: This is an interesting story about how states pursue long-term economic development strategies, if you back up to twenty years ago all that Texas had to offer was a incentive package and low cost of doing business in the Lone Star State and I hope I did my accent right, my grandmother was from Waco incident is important to recognize that but over the last twenty years Texas has made significant investments in institutions of higher education impressively at the University of Texas at Austin and that you have universities which are not necessarily all the way on par with our institutions of higher learning in the state but have sick if it can't be improved and so, that is but important part of the competition, what can California do? California can continue to do what it does well which is worked invested workforce training, institutions of higher education and create the kind of environment that allows companies to innovate and really get products out into the marketplace fast, Murtaza and I go back and forth sometimes on some of the specifics and sometimes debate and I know she would disagree that that sort of investment in workforce, quality and innovation quality capacities really in the and long-term important for the state.
MAUREEN CAVANAUGH: Do most of the businesses that we have in California develop here or they really acquainted?
ERIK BRUVOLD: Most of the time here in California if you look at it ends sometimes in the early stages for five founders will come from someplace else like fake Facebook and Mark separate parts are covered coming for the East Coast but the most part the major companies that have driven California, it economy start here and that is different anywhere else, it takes a lot to move the business and there is a lot of sub costs and disincentives to do so, but in the end that is what is going to get California a good shape getting and they will place where new companies form and fast-growing from companies.
MAUREEN CAVANAUGH: It sounds like you are saying that California needs to get back on its feet and do it is been doing to the order to retain the business.
ERIK BRUVOLD: I will disagree a little bit without I do want to put a fine point of this, the last thirty years in California have been a challenging one and it's because for whole variety of reasons we have lost competitive advantages in terms of the quality of life and the cost of living along the coastal strip where most of our higher indicate institutions look at it and must that innovation capacity is located and said you can compete in cost of living in Silicon Valley in New York City but those two entities offer something that it's hard for San Diego to compete with New York City offers being up the center of the United States and terms of culture and its literary and media surge culture of silicon valley offer offers the opportunity have a really big paycheck if the company hits big and that is not believe the San Diego story, and that is a real problem if our cost of living is as high as sound San Jose are midtown Manhattan we are in trouble about growing San Diego economy.
MAUREEN CAVANAUGH: What can California do?
MURTAZA BAXAMUSA: California can only come back and the GDP's expect to grow 2.5% and a high of one $54 billion and we are the eighth largest economy in the world and we are putting together a program that can increase wages and create jobs and depose unemployment and the unemployment rate is falling faster than any other state. So what we have is a olden opportunity in California to be able to attract and attract businesses and faster growth part of the fastest Fortune 500 companies try four of them are located in California and we have a significant talent for in our education research universities and every single indicator show that California is making a comeback, how do we tap into it? Had we tap into that growth? So that is also directed towards San Diego, where we have to have the Eger picture and fitting in and being able to coordinate on a regional scale with other actors in California because we're a global economy and our trade and commerce are competitive and this will be determined about how we're playing with others in the state.
MAUREEN CAVANAUGH: Erik delineated quite well how San Diego stacks up when it comes to cost of living as opposed to if it's the same amount to live here as it is in New York or San Francisco, there's a certain disadvantage for San Diego, one of the advantages of services staying here?
ERIK BRUVOLD: A couple of them come immediately to mind, we have among the major metro areas one of the most seamless transitions and interfaces between our institutions of basic research like San Diego state, UCSD, the Scripps Institute and the company the put those products of them in place, you go into the around the country and people are promoting about the ability inability to partner with universities and use your great success stories about taking renovations for the lab into the complacent that is a serious competitive advantage for San Diego and the other sort of competitive advantage that we have is that we have a diversified company so it was once described as a three-legged stool for that and we have a strong service instant industry issues about wages but is one of the strongest service industries in the nation, we have a military industry too, San Diego and we have the innovation economy, with intersections between the three but the nice thing about that in the straight one can one sector can get cold and the other two can still maintain.
MAUREEN CAVANAUGH: Do think that Is the move to Texas will regret it?
MURTAZA BAXAMUSA: I think that San Diego the weather beats at all, we have a little bit of rain and now we're back and people who want to come here and in the talent that wants to come here to be able to innovate and grow the kind of jobs that Erik refers to are looking at quality of life as a top value and yes we have to have a positive orientation towards growth but we need to also maintain quality of life.
MAUREEN CAVANAUGH: And my last question, how have you seen San Diego's job market fairing?
ERIK BRUVOLD: I think we did do did modest growth and a little bit better but this a little bit better than last year, but I think that that sort of assumes that things continue on and I think there's been some news this week in terms of the international fund and that it doesn't cut of interesting for San Diego there is the paradox is that when the world has crisis San Diego tends to do well because people invest in these tools, the military and we will see how things develop and I think that is how we see the future coming in 2014.
MAUREEN CAVANAUGH: Thank you both so much.