Bay Area’s Lower Regulation Helps It Beat L.A.

San Francisco's Golden Gate Bridge (Associated Press)
Associated Press
Newport Beach, CA

The Center for Jobs & the Economy has published a study entitled, “Economic Tale of Two Regions: Los Angeles County vs. Bay Area.” Their research, which compiles data to track jobs created in the past 24 years, reveals that the two regions have been at opposite ends of the wage spectrum. The Bay Area experienced high-wage growth that lifted the middle-class, while Los Angeles slumped toward a two-tier economy as higher-wage jobs shriveled and were somewhat replaced by lower-wage jobs.

Data mining the state’s key geographic jobs centers, Los Angeles County and the Bay Area, the new report shows a steady decline in middle-class wage jobs since 1990 and a substantial increase in lower-wage jobs. The report highlights that the economies in these two regions are being driven by contrasting industry structures.

Silicon Valley information technology and related industries have been subject to far less direct regulation and therefore pay high salaries. But employees need to cope with high housing prices, growing energy costs and other costs of living. The Bay Area accounts for more than 60 percent of the state’s net employment gains since 2007.  Its job growth was led by higher wage jobs in the expanding new industries, and lower wage (primarily service) jobs that support the higher-wage growth.

L.A. County has a traditional industry mix that is more directly impacted by the state’s ever-growing regulatory, tax and energy costs. L.A. presents a trend of jobs stagnation under which middle class wage jobs have been steadily replaced by lower wage service jobs.

The Bay Area’s job growth from 1990 to 2014 has created 25.3 percent more jobs, which outpaced its population growth during the period.

L.A. County’s population grew by 13 percent, but actually lost 1.2 percent of jobs. The availability of jobs dropped from 472 per 1,000 residents to 413; a 12.5 percent fall. The only good new for L.A. County is that 2014 was the first time in 24 years that it experienced positive private sector job growth.

The Center for Jobs & the Economy researchers said that the report reinforces what many economists and some policy makers have been saying–namely, that jobs recovered are not the same as jobs that were lost.

The failure to grow middle class jobs, especially in L.A.County, means that lower wage earners have fewer economic opportunities to move up the wage ladder to improve the their lives and those of families.

The Los Angeles City Council’s approval this week of a $15-per-hour city-wide minimum wage by 2020 is a perfect example of the regulatory, tax and energy costs that have already proved to be middle-class-wage job killers in the Southern California region.

The City Council’s action may have been good politics, but it is an anti-middle-class job action that came just after the first year of positive job growth in almost a quarter century.