Can California Compete In The Old Economy?

 

What really matters in economic development today? How about highway access – and labor cost – and energy cost?

Huh? What ever happened to the New Economy? You know, all those creative types sitting around coffee shops drinking lattes and typing on their laptops? (Which, by the way, is what I am doing right now.)

The answer is that there’s still plenty of “old economy” to go around in the United States. Manufacturing still accounts for more than 10 million jobs and more than 10% of the nation’s gross domestic product. And no matter how caffeinated manufacturing executives need to be, they don’t place a high priority on lattes. In researching my latest economic development column for Governing magazine, I ran across a survey of manufacturing executives conducted by Area Development magazine.

And what manufacturing executives want more – far more – than anything else is:

1. Highway accessibility
2. Skilled labor
3. Low labor cost
4. Cheap and available energy
5. Available land
6. Low construction costs

Since I’m blogging for a California land use publication, the obvious question that comes to mind is whether it’s possible to provide any of these things in the Golden State.

I’m going to surprise you. I’m going to say we have some of these things. We’ve actually got highway accessibility – though highways are often congested. We’ve got skilled labor, though not low labor costs. And because of California’s remarkable energy efficiency, our energy costs are actually pretty low.

Which brings us to the last two – available land and low construction costs. Construction costs are through the roof. And you’d think we don’t have available land – especially in the coastal metros where most of the skilled labor is located.

Think again. As CP&DR has written about repeatedly, there’s a big movement among many of our larger, older cities to use heavy regulation to protect industrial land. In a way, industrial land is the new farmland. Factories are running more efficiently now, because they don’t need the number of workers they used to. They are more high-tech. But they still need lots of land to operate – and the land they have historically used is under tremendous pressure to recycle to housing, retail, and office, largely because of its location. San Jose, Oakland, Los Angeles, and San Diego are all talking about using farmland preservation-style regulation to protect their industrial land for the future. L.A. in particular is in a knock-down-drag-out political fight over industrial lands.

A lot of analytical horsepower is currently going into the question of whether to preserve this land through regulation and, if so, which parcels and uses should be priorities. I’d say the answers might lie partly in the priorities of manufacturing executives. If we’ve got skilled labor, highway access, cheap energy and available land – 4 of the Big 6 priorities – is that enough? Or is the cost of labor and construction just too high to make it worthwhile to preserve industrial land?

I’ll ponder this question as I sip my latte.

– Bill Fulton