1997, 175pp.
By: MARK DRAYSE AND DANIEL FLAMING, ECONOMIC ROUNDTABLE; DAVID
RIGBY, UCLA DEPARTMENT OF GEOGRAPHY
Overview
The City of Long Beach and other centers of aerospace production
that reaped the rewards of the 1980s defense-spending boom must
now confront the realities of restructuring. Since World War II,
the Douglas Aircraft plant made Long Beach an important center
of the US aerospace industry and dominated the local economy.
In 1992, the Long Beach aerospace industry employed 36,100 workers,
which was 22 percent of the city's total employment. Almost all
of these workers were employed by McDonnell Douglas. Long Beach
aerospace workers earned a total payroll of over $1.5 billion,
which was 30 percent of the city's total payroll. These figures
understate the total impact of aerospace on the Long Beach economy,
through linkages with firms in other industries that provide inputs
to the aerospace industry, and purchases of goods and services
by aerospace workers.
As a result of defense cutbacks, aerospace companies have restructured
their operations through mergers, divestitures, plant closings,
and layoffs. Since 1991, McDonnell Douglas has laid off close
to 26,000 workers in Long Beach and shifted a significant part
of its military production to St. Louis. The acquisition of McDonnell
Douglas by Boeing has created uncertainty regarding continued
production at Douglas Aircraft, although a plausible scenario
has Boeing shifting excess commercial airliner production from
its Seattle area plants to Long Beach.
Unlike other centers dominated by aerospace, Long Beach has developed
specializations in international trade and health services that
provide a strong basis for a diverse local economy. The Port of
Long Beach situates the city as a gateway in the Pacific Rim economy,
creating jobs in water transportation and transportation services.
In 1992, Long Beach employed 3,000 workers in these industries.
The continued growth of East Asian economies will sustain and
increase the international trade business in Long Beach. The city
is in the enviable position of benefiting from increased production
overseas, unlike communities in the US absorbing the impact of
layoffs and plant closings resulting from increased competition
between lower-wage producers in Latin America and Asia, and producers
in the US. Also, as American companies increase exports to growing
Asian markets, Long Beach benefits from the movement of goods
through its port.
The City of Long Beach is a regional center for health services.
The health services industries employed over 21,100 workers in
1992, 13 percent of total city employment. The city also has a
specialization in medical services and health insurance. This
is a strong non-defense sector of the local economy.
The restructuring of the Long Beach economy is closely related
to industrial restructuring throughout the Los Angeles region,
which has undergone dramatic economic changes in the last twenty
years. In the 1970s and 1980s the restructuring of heavy manufacturing
industries, including motor vehicles, tires, and steel, cost the
region tens of thousands of well-paying jobs. This restructuring
was initiated by rising oil prices and increased foreign competition
as the global economy entered a new era of increased international
production and trade.
The decline of traditional manufacturing was offset be the expansion
of production in the aerospace industries in the 1980s, due to
the increased defense expenditures of the Reagan Administration.
However, with the end of the Cold War and changing budget priorities
in Washington, the aerospace industry has experienced significant
restructuring as firms position themselves to compete in a shrinking
defense market, increase commercial operations, or both. As a
result, aerospace employment in Los Angeles County has plummeted
from a peak of 225,000 in 1986, to 101,000 in 1996.
The decline of aerospace employment has exposed a regional manufacturing
sector dominated by low-wage employment in industries such as
apparel, food products, and furniture. Each of these industries
depends upon immigrant workers. The apparel industry now employs
approximately one in every six manufacturing workers in the county.
Global trends have affected the development of the Los Angeles-Long
Beach economy. The Second World War and the Cold War infused billions
of dollars of federal defense spending into the economy through
contracts to Douglas Aircraft. Today, just as the end of the Cold
War contributed to declining defense spending, the new global
economy has created new opportunities in economic activities related
to international trade. Challenges and opportunities for Long
Beach's economic development include working with Boeing to retain
production at the Douglas Aircraft facility, and leveraging the
city's specializations in international trade and health services
to attract business to the city.
There are significant differences between unemployed and employed
Long Beach workers. Unemployed Long Beach workers are concentrated
in relatively low-wage occupations found primarily in the retail
and service industries. Blacks and Latinos are more highly concentrated
in the ranks of the unemployed than they are among employed Long
Beach workers.
Close to 60 percent of unemployed Long Beach workers were previously
employed in occupations that are expected to experience below
average rates of growth between 1990 and 1999. Only nine percent
were employed in occupations expected to have above average growth
between 1990 and 1999.
A few Long Beach industries emerge as significant employers of
unemployed Long Beach residents. Eating and Drinking Places are
major employers of janitors and cleaners and cashiers. Temporary
Help and Employment agencies are major employers of general office
clerks and helpers and laborers. Hospitals, colleges, and universities
are also important employers of general office clerks.
A strategy that would offer more stable employment prospects for
unemployed workers is to develop and strengthen training programs
that are geared to employment in more secure jobs in major Long
Beach industries, including Health Services and Transportation.
Otherwise, many unemployed workers may re-enter the labor force
in the same insecure, low-end jobs that they held previously.
Total employment in the City was 164,000 in the third quarter
of 1992. The major industry divisions in Long Beach were manufacturing
(47,600 workers, 29 percent of City employment), services (41,000
workers, 25 percent of City employment), and retail trade (21,500
workers, 13 percent of City employment.
Employment and Payroll
The industries with the highest employment were:
The industries with the highest employment concentration in Long
Beach were:
The industries with the highest payroll per worker were:
The industries with the highest percent of total Long Beach payroll
were:
Business Conditions
Long Beach has completed four annual cycles of surveying firms
in the City to assess business conditions and needs. A total of
1,532 firms have responded to surveys over the four years, providing
information about business trends in each firm as well as perceptions
of overall business conditions in Long Beach. The large survey
data base that has been created makes it possible to identify
long-term trends in Long Beach's business environment as well
as make detailed assessments of conditions in a number of specific
industries.
Some industries find strong locational advantages in Long Beach's
restructuring economy, while other industries are struggling to
remain viable. Industries giving Long Beach the most positive
ratings on business environment indicators are good candidates
for business recruitment initiatives. Composite scores for twenty-one
industry sectors were produced by calculating the ratio of responses
by each industry to overall responses from all Long Beach firms
to the same indicators. Since some of the business indicators
are positive and others negative, it was possible for an industry
to receive a score that was either positive or negative, depending
on how firms perceived the business environment.
The business indicators used to produce the composite score and
the weighting given to each indicator are as follows:
Positive Indicators Weighting Factor
Negative Indicators Weighting Factor
The weighting factor for each indicator was multiplied by the
ratio of each industry's responses to responses from all Long
Beach firms. Thus, if an industry had above-average positive responses
the composite score would be positive, and if it had above-average
negative responses the score would be negative.
Based on their composite scores some industries have exceptionally
strong perceptions of Long Beach's business environment, some
strong, some borderline, and some negative. The seven strongest
industries are listed below, ranked from highest to lowest scores.
Input-Output Analysis
The payroll data presented earlier indicates job quality in different
industries. It is also useful to look at the number of jobs created
in industries through their production linkages with firms throughout
the economy. Through input-output modeling of the county economy
it is possible to estimate how many jobs are generated for each
$1 million of output in each sector of the Long Beach economy.
This value, called the "direct effect", is the inverse of labor
productivity and reveals how labor intensive an industry is. The
direct employment figure ranges from a low of 0.92 in the petroleum
industry to a high of 39.62 in the military sector of the government.
The average number of jobs created by $1 million of output in
each sector is 14.34. Along with the military sector, the personal
services industries employ significantly more people per unit
of output than average. Along with the petroleum industry, the
metal mining, food, chemicals, motor vehicles, pipelines (excluding
natural gas), water transportation, utilities, and real estate
sectors employ fewer than 5 people for each $1 million of output.
An average of 31 jobs are created throughout the economy as a
consequence of meeting a $1 million increase in final demand in
each sector of the economy. Total employment creation is greatest
in the credit agencies and the personal services sector. Total
employment creation is lowest in the petroleum products industry.
The average industry employment multiplier (total jobs/direct
jobs) is 2.12. This means that on average, for every job generated
in a specific industry an additional 1.12 jobs are created in
the region's economy. Employment multipliers are highest in the
insurance carriers, water transportation, petroleum products,
motor vehicles, food, utilities and banking sectors. These are
sectors where the direct employment effect is relatively small.
Employment multipliers are relatively low in the agricultural
and government sectors along with other industries where the direct
employment effect tends to be relatively large.
Target Industries: Recommendations
Five industry indicators were combined to provide an overall "score"
of Long Beach industries and identify sectors for targeting by
the City of Long Beach in its external marketing program. Three
indicators have been described above: employment concentration
(based on location quotients), payroll per worker, and employment
change in Los Angeles County (1992-1996). The other indicators
used were (1) the Economic Roundtable assessment of Long Beach
business conditions in different industries, based on our analysis
of the 1994-1997 Long Beach Business Surveys, and (2) employment
multipliers. The employment multiplier indicates the number of
jobs generated throughout the economy by each additional $1 million
output per industry. Together these variables provide a "state
of the industry" summary for the target industries.
We recommend that the City of Long Beach reinforce and improve
existing specializations in international trade and health services,
while working to retain a presence in the restructured aerospace
industry. Firms in the electronic equipment industry should be
attracted to Long Beach to help diversify the local high technology
sector. The city should capitalize on the locational and logistical
advantages created by the port and the Alameda Corridor project
to target firms in other durables manufacturing industries such
as motor vehicles and equipment, due to their relatively good
wages and high employment multipliers. Finally, the City should
attract firms in professional and high technology services industries
that pay average to above average wages and are experiencing considerable
growth. The ten industries recommended for business retention
and recruitment initiatives are: