Los Angeles unattractive to businesses
By Brad Greenberg
Nov. 20, 2003 9:00 p.m.
As the economy bounces back, many economists and urban planners
warn that business expansion in Los Angeles and Orange Counties is
being dampened by traffic congestion, pollution and housing
prices.
Though the state added 34,800 payroll jobs in October ““
the largest single-month increase since before the economy fell in
March 2001 ““ regional economists say Los Angeles needs to
become more business friendly if it hopes to bring back the jobs
that have been lost over the past two years.
One of the biggest concerns for businesses is the cost of living
in Southern California, especially the cost of housing, economists
say.
UCLA students know well the cumbersome costs of living in West
L.A., but housing is high-priced across much of the state. In
Orange County ““ a popular place for people working in Los
Angeles to live and raise a family ““ the average price for a
single family home is $502,600, 15 percent more than it was two
years ago. And income, increasing at about the same rate as
inflation, is not keeping pace.
The Anderson Forecast said Thursday that affordability of
housing in southern Orange County, including Laguna Beach and
Mission Viejo, is an even bigger problem than in the rest of the
county and the Los Angeles area. The forecast predicted costs would
increase almost 13 percent throughout Orange County in the next two
years.
In Los Angeles, the problems of high housing costs are
compounded by freeway traffic that comes to a standstill during
rush hour.
“Congestion, commuting times, housing prices all disrupt
economic activity and discourage workers,” said Ross DeVol,
director of regional economics for The Milken Institute.
Many people who work in downtown Los Angeles are forced to live
on the fringes of the greater Los Angeles area ““ areas like
Riverside, San Bernardino and Kern County ““ and commute into
the city.
In addition to the difficulties of supplying incomes adequate
for Southern California’s high cost of living, businesses are
also resisting adding employees because of state legislation costs
to businesses of all sizes.
Health care and workers’ compensation costs have
mushroomed in the last decade. In 1995, workers’ compensation
was a nine-billion-dollar state enterprise; this year it is costing
businesses more than $29 billion.
A lot of the tension between business owners and the state
Legislature comes from the fact that many legislators perceive
business as bad, said Jack Kyser, chief economist for the Los
Angeles County Economic Development Corporation.
“The most critical barrier to expansion is the cost of
doing business,” Kyser said.
A recent survey by the National Center for Business and Economic
Research found that 60 percent of business owners in Los Angeles
thought that state and federal regulations and taxes were the
impediments limiting business profitability and expansion.
Though Kyser said the vision for the Los Angeles economy needs
to come from local businesses and not Sacramento, Gov. Arnold
Schwarzenegger said Tuesday that he wants to reform workers’
compensation, significantly reducing its costs.
As for business stability, something essential for new hirings,
DeVol said businesses are “confident” this recovery is
“real.”
Kyser added that there has already been a surge in the temporary
employee market ““ a telltale indicator of a time when
businesses are ready to build up their payroll.
But even as the recovery loses its “jobless” title,
and lowers the state unemployment rate that has floated above 6
percent since the recovery began in November 2001, it is important
that Southern California looks to the future and develops a plan
and a strategy for fostering its economy, Kyser said.
Sitting on a panel with Kyser, DeVol and other urban planners
and environmental regulators at UCLA on Thursday, Cecilia Conrad,
Stedman-Sumner professor of economics at Pomona College, said
Southern California highlighted three criteria for luring
businesses to the region: high workers’ wages, an excellent
education system and a comfortable and enjoyable quality of
life.
In 2000, Los Angeles had the second lowest per capita income of
the 17 major metropolitan cities nationwide, down 13 spots from
1970. All public schools and universities sustained significant
funding cuts last year that resulted in cut classes and displaced
students. And Los Angeles is worldwide known for having hazardous
smog.
One of the panel’s speakers told the audience about the
prevalence of travel Web sites that recommend tourists consult a
physician before visiting Los Angeles.
“You can imagine how that affects the business
climate,” said Barry Wallerstein, executive officer for the
South Coast Air Quality Management District.
