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San Diego Businesses Point To Looming Economic 'Pain Points'

EDC_REPORT_cover.jpg
San Diego Businesses Point To Looming Economic 'Pain Points'
San Diego Businesses Point To Looming Economic 'Pain Points' GUEST: Nikia Clarke, vice president for economic development, San Diego Regional Economic Development Corporation

This is KPBS Midday Edition , I'm Maureen Cavannaugh. From him -- some aspects the economy is doing great. With Laura and implement, successful startups, and housing values have stepped back from the great recession. There's a closer look at reviews areas of concern as our innovation economy creates widening areas of income and inequality. Those areas include a significant achievement gap. The large number of small businesses in our region means that wages are lower and because the cost of living is so high, 1 million San Diegans cannot afford to live here. A report issued by the San Diego economic development Corporation urges the business community to lead the charge in solving those problems. Joining me is the key a clock, Vice President for economic product about that with the San Diego regional economic development Corporation. Welcome to the program. Thinks, morning. The report causes three areas of concern. Economic pain points for San Diego. >> My question is, how bad is this pain? Could these pain points derail our economy? >> I think that's part of what we're trying to get to over the next year. We to be able to quantify the impact of some of this. Just to go back to what these pain points are and what they mean. When you talk about the minority achievement gap, a 5% of Hispanics don't have a bachelors degree or higher. That our fastest growing population. Right now, one third of Sunday Aikins are Hispanic or Latino. That number is growing rapidly. And that policy is equal to take on the jobs of the future, then obsolescent issue for all of us here in the medieval. >> I have read a quote from you that if an address, San Diego will no longer be in attractive place to live or do business. >> Is that what could be the consequence of these economic pain points for our region? >> Think that's the most extreme and outcome that we looking at. San Diego has been wildly successful over the past number of decades. Largely because of its ability to respond and adapt to large-scale changes. From a border town to Navy town during World War II, there was a hub for naval technology to an intercom today life-sciences innovation powerhouse. We've been able to be successful because we've continued to react and respond to the ways in which the global economy has changed. That transmission is not over. It's exhilarating. So I think, it behooves us as San Diegans to look at how those changes are going to impact our economy and to be proactive. >> Let's get into detail. You save more than 1 billion San Diegans can't afford to live here. But, clearly, they do live here. What does that number mean? >> That's statistic is a set of policy initiatives. It's not that 1 million San Diegans are living in poverty, but that 1 million San Diegans working families are unable to afford the basic needs to live in the region. That includes mortgage and/or rent. Childcare, food and housing, these are sort of very general standard of living. Is not achievable at the wages at one million San Diegans are being paid. That's a third of our population. >> Was actually affected not being able to afford to live in San Diego? Does it mean a second job? The city living with roommates? Does it mean having to be the county? >> You are seeing families and people make all sorts of diseases -- decisions economic decisions based on a coming. What we are looking at is how we stack up to other similar natural. For about the 50% of high tons of them graduates that leave this region after they graduate every year, they can adjust the cost of living and make more and get more for the money even in a place like San Francisco. We don't do something about those rising costs, then we are going to lose more and more of our top level talent as well as the people that already live here increasingly being squeezed. We are unable to stay. Is a, one of the big problems is wages. The fact that wages are depressed here, there are so many small businesses that can't pay as much as larger companies. Exactly, how do small business salaries compare with larger companies. >> What we see coming out of our research is that generally, small businesses pay about 20% less than the average wage. For large corporate, you will see a wage differential about 45%. If you work for QUALCOMM versus working for one of the 98% of companies in the region that are small camisa a massacre discussing terms of competitiveness. Is for employees honestly were getting paid less. For the companies themselves. For small companies, it is being about research development to make large-scale capital improvement. It is to connect the drivers of the economy it enables the grow. Is just more difficult. >> Also looked at the racial disparities in education. What are the business implications of those disparities? >> I think we need to look at -- I mentioned the growth drivers of our country. With a really strong life-sciences ecosystem. Of a big tech economy. With a lot of commercial defense work that's really cutting edge. These are industries that need highly skilled workers. >> There are also industries that are disproportionate nonrepresentative at the moment. I mentioned that one in three San Diegans is Latino, only about 90% of our workforce is Latino. >> Honestly, it's our fastest growing demographic is the least prepared for the jobs of the future, that present a competitive challenge for us. >> As I said in the opening, the EDC is urging the business communities to lead the charge in solving these problems. What can employers and businesses do to try to solve these issues? >> One of the most interesting things about this work over the last year that were doing with the Brookings Institution was understanding these extent to which some of these issues are already impacting employees and the ways in which especially large employers are responding in innovative ways. In terms of closing the minority achievement gap. One of our large employers here in Thermo Fisher traditionally, the higher very top and talent. They are large scale "life-sciences from. They have invested recently with the center for US-Mexico studies in a program that looks at rapid prototype which is being of interventions for cross-border youth. Since they personally have identified that the future workforce here in this region lies in the growing Hispanic population both sides of the border, they have made an investment in cultivating that workforce. >> I will give you an example in the small business space. We've run across several companies in the region have structured themselves with an employee ownership model. It is a effectively made them tax-exempt and enabled them to invest in capital and to invest in research development and to invest in wages in a really interesting way. The retention rate for those firms is much, much higher than the average small business. What we are hoping to get with our steering committee of next year is a, with regional recommendations around each of these pillars based on research and data. They formed a platform for inclusive growth as a whole. So they can try for. >> Have been speaking with the Kia Clark, Vice President for economic develop with the San Diego regional development Corporation. Thank you so much. >> Thank you, Maureen.

"Future of Grown in San Diego: The Economic Case for Inclusion"
A report from the San Diego Regional Economic Development Corporation outlining three "pain points" in San Diego's economy.
To view PDF files, download Acrobat Reader.

By most measures, San Diego’s economy is strong. Unemployment remains low, housing values have surged since the Great Recession and the region is attracting new startups. But that innovation economy is widening San Diego’s economic inequalities and creating “pain points” that could stymie future growth, according to the San Diego Regional Economic Development Corporation.

Those looming problems are a significant racial disparity in high school and college graduation rates; low wages paid by small businesses, which make up the bulk of San Diego companies; and a high cost of living that makes San Diego unaffordable for 1 million residents.

The EDC is a nonprofit that promotes San Diego to businesses and its board is made up of executives from some of the area’s biggest employers. If these issues aren’t addressed, San Diego will no longer be “an attractive place to live and do business,” the group warned last month. Nikia Clarke, the EDC’s vice president for economic development, says that’s a worst-case scenario.

“From a border town to a Navy town during World War II that was a hub for naval technology, to an engineering hub, to today a life sciences and innovation powerhouse, we’ve been able to be successful because we’ve been able to react and respond to the ways in which the global economy is changing,” Clarke said. “And that transformation is not over, it’s accelerating. So it behooves us as San Diegans to look at how those changes are going to impact our economy and be proactive.”

The EDC released some data on the problems last month. Hispanics are the fastest growing racial demographic in San Diego and will make up 40 percent of the region’s population by 2030, more than any other group. But 34 percent of Hispanics do not finish high school, compared to 12 percent of whites; only 15 percent graduate college, compared to 49 percent of whites.

“The fastest growing population is statistically the least prepared for high-skilled, high-wage jobs,” the EDC wrote in its report.

The EDC also found that small businesses pay up to 20 percent lower wages compared to the regional average salary; the biggest corporations pay 45 percent more than the average. But San Diego has fewer big businesses compared to its peers. Businesses with fewer than 100 employees make up 98 percent of all companies in the region. That makes it harder for those small firms to compete with the few big companies in San Diego for top talent and depresses overall wages.

And as for the 1 million people who cannot afford to live in San Diego, the figure is based on a study from the Center on Policy Initiatives.

“One million San Diegans, working families, are unable to afford the basic needs to live in the region. That includes mortgage and/or rent, childcare, food and housing,” Clarke said. “That’s fully a third of our population.

Clarke says that the business community will need to pitch in to devise solutions for these three “pain points.” The EDC will continue to study the issues throughout the year.

“Phase two is about building the kind of infrastructure regionally to drive forward an action plan,” Clarke said. “Our research team will be probing further and make actionable recommendations.”

KPBS Midday Edition will be focusing on the EDC’s study throughout the week and will speak with Clarke on Monday. We’ll hear about the impact of small businesses on San Diego’s income inequality on Tuesday.