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Access a provocative presentation by renowned author and futurist Joel Kotkin about restoring the economic competitiveness of Los Angeles and California. This presentation was made during the 12th Annual SoCalBio Conference held on November 4, 2010 at the J W Marriott of L.A. Live. See: http://www.socalbio.org/SoCalBio_2010/Kotkin_Presentation.pdf
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Can Los Angeles be saved?
Presentation to the 12th Annual SoCalBio Conference by Joel Kotkin, Distinguished Presidential Fellow in Urban
Futures, Chapman University
Los Angeles November 4, 2010
“Japan is replacing America as the world’s strongest economic power. It is in everyone’s interest that the transition goes smoothly.”
- Expert Testimony to Congress, 1986
Photo: urbangarden
Europe’s Decline as Asia Grows
North America has good fundamentals
• U.S. has healthier long-term demographics than most competitors
• U.S. only advanced country with large, growing population
• We still have a significant resource, energy, land and water base
• But will LA be part of an American resurgence?
The Great Recession in California
• Too Much Regulation and Taxation driving out productive industry, leaving only the very high and low end
• Lack of Balanced Approach that seeks to accommodate economic, social and environmental concerns
• California now home to four of the nation’s ten largest concentrations of poor people
Is This Southern California’s Future?
Or is this?
Where Are We Headed?
• The big issue nationally and in California is jobs
• California: a consistent under-performer
• Migration goes to areas that are affordable and have jobs
• Can LA be the center of an American Multiracial Superpower
• Back to Basics Key to Success
Projected Jobs Deficit
22.8 Million Jobs
19.8 Million Jobs
U.S. Chamber of Commerce,
University of Kentucky StudyNew America Foundation Report
Broader Measure of Unemployment
Source: Bureau of Labor Statistics
New America Foundation Chart
Includes
marginally
attached,
discouraged,
and involuntary
part time
workers
12.0%
11.2%
4.2%
1.3%
-1.0%
-1.5%
-1.9%
-4.2%
-5.6%
-7.5%
Houston
Washington, DC
Dallas
Miami
Atlanta
New York
Philadelphia
Boston
Los Angeles
Chicago
2000 - 2010 Employment Growth in 10 Largest Metropolitan Areas
Q2 2000-Q2 2010
US Bureau of Labor Statistics
Current Employment Statistics
High Tech Shifts
31%
24%
23%
23%
20%
19%
18%
16%
16%
16%
15%
North Dakota
Wyoming
Nevada
Utah
Virginia
Alaska
Hawaii
New Mexico
Texas
Washington
South …
Growth in Science, Technology, Engineering, and Mathematics Jobs, 2002-2009
16%
15%
15%
14%
14%
13%
12%
12%
12%
12%
11%
10%
10%
10%
10%
9%
8%
8%
8%
8%
8%
Utah
Nevada
Wyoming
Hawaii
Texas
North Dakota
Alaska
Arizona
New Mexico
Washington
Idaho
Florida
Maryland
Montana
Oklahoma
Georgia
Colorado
District of Columbia
New Hampshire
South Dakota
Virginia
Middle Class Job Growth, 2002-2009
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.01
93
9
19
42
19
45
19
48
19
51
19
54
19
57
19
60
19
63
19
66
19
69
19
72
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
20
08
Share of United States Non-Farm Jobs
California
90.0
95.0
100.0
105.0
110.0
115.0
120.0
125.0
130.0
1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008
California's Share of U.S. Per-capita Personal Income
0
100
200
300
400
500
600
700
800
thousands of jobs Job Gains/Losses: 1990 to 2000
-600
-500
-400
-300
-200
-100
0
100
200
300
400
thousands of jobs Job Gains/Losses: 2000 to 2010
-250
-200
-150
-100
-50
0
50
100
150
Los
An
gele
s
Ne
w Y
ork
Ch
icag
o
Bo
sto
n
Was
hin
gto
n D
.C.
Ph
ilad
elp
hia
Ho
ust
on
Atl
anta
De
tro
it
Dal
las
Thousands of U.S. Jobs Lost
U.S. Manufacturing Job Losses Due to Region from 1990 to Now
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0Ja
n-9
0
De
c-9
0
No
v-91
Oct
-92
Sep
-93
Au
g-94
Jul-
95
Jun
-96
May
-97
Ap
r-9
8
Ma
r-9
9
Feb
-00
Jan
-01
De
c-0
1
No
v-02
Oct
-03
Sep
-04
Au
g-05
Jul-
06
Jun
-07
May
-08
Ap
r-0
9
Ma
r-1
0
Jan 1990 to July 2010
Seasonally AdjustedUnemployment Rates
Los Angeles New York Chicago Boston
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0Ja
n-0
7
Mar
-07
May
-07
Jul-
07
Sep
-07
No
v-0
7
Jan
-08
Ma
r-0
8
Ma
y-0
8
Jul-
08
Sep
-08
No
v-08
Jan
-09
Mar
-09
May
-09
Jul-
09
Sep
-09
No
v-09
Jan
-10
Ma
r-1
0
Ma
y-1
0
Jul-
10
Percent above the U.S. Jan 2007 to July 2010 Seasonally Adjusted
Unemployment Rate Gaps
Los Angeles Washington D.C. Philadelphia Houston
Declustering: The New Demography
• Nationwide people heading to smaller towns and cities
• Shift to opportunity regions
• Social trends strongly pro-suburban
• US Population growth will increase interest “flyover country”
-151
-215
-389
-434
-384
-256
-151
-92-81
-63-46
-120-97
-160
-249
-313
-265
-143
-99
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
Domestic Migration
Center for Economic Research and ForecastingCalifornia - (thousands of persons)
15.9
14.2
9.5
5.9
5.0
1.4
-0.8
-1.0
-2.1
-2.3
-4.8
-5.8
-5.8
-6.5
-9.0
-9.2
-11.4
-11.7
Phoenix
Riverside
Atlanta
Dallas
Houston
Seattle
Minneapolis
Cincinnati
Philadelphia
Washington, DC
San Diego
Boston
Miami
Chicago
Detroit
San Francisco
New York
Los Angeles
Net Domestic Migration RateAnnual Average, 2001-2009
Praxis Strategy Group analysis of
U.S. Census Population Estimates
16%
15%
15%
14%
14%
13%
12%
12%
12%
12%
11%
10%
10%
10%
10%
9%
8%
8%
8%
8%
8%
Utah
Nevada
Wyoming
Hawaii
Texas
North Dakota
Alaska
Arizona
New Mexico
Washington
Idaho
Florida
Maryland
Montana
Oklahoma
Georgia
Colorado
District of Columbia
New Hampshire
South Dakota
Virginia
Middle Class Job Growth, 2002-2009
Cost of Tax System on Small Business and Entrepreneurship
#1. District of Columbia#2. New Jersey#3. Minnesota#4. California#5. New York#6. Maine#7. Iowa#8. Vermont#9. Oregon#10. Massachusetts
Source: Business Tax Index 2010, Small Business and Entrepreneurship Council
Where’s the Hope?
• Growing role of immigrant entrepreneurship
• Pattern of multi-polar job regions can be built on in an intelligent manner
• Restoring traditions of infrastructure spending and attention to growth, particularly in industry, trade, science and information
The Foreign-Born Population is at an All Time High
Source: U.S. Census Bureau, 2000 - Center for Immigration Studies,
2007
Largest 7-Year
Immigrant Influx in U.S.
History
27
Immigration Is Driving American Demography
Foreign-Born Population (in Millions)
Percent of Total Population
The Millennial Generation is the Most Diverse in American History
Percent of U.S. Population That Is African American, Hispanic, Asian Pacific Islander, American
Indian, and Other; By Age – December 2006
Current Population Survey, U.S. Census Bureau, Dec. 2006
Echo Boomers
Generation X
Baby Boomers
Pre-Baby Boomers
A Majority of Immigrants Now Reside In The Suburbs
U.S. Census Bureau, 2007 American Community Survey
California is Home To....
12% of U.S.
Population
30% of 1990s
Immigration
34% of Hispanic
Population
40% of Asian
Population
Source: Bill Frey, demographer, US Census
Ethnic Purchasing Power Continues To Soar
Source: Selig Center for Economic Growth, Terry College of Business, University of Georgia (2008)
Spending Power by Ethnic Groups (in Billions) 1990, 2000, 2008, with 2013 projections
$318.1
$211.9
$116.5
$590.2
$489.5
$268.9
$913.1
$951.0
$509.1
$1,239.5
$1,386.2
$752.3
Black
Hispanic
Asian
1990 2000 2008 2013
Gross Product Comparisons, 2003 (in Billions) World
rank1
2
3
(6)
4
5
6
7
United States
Japan
Germany
United Kingdom
France
U.S. Ethnic
Italy
China
$10,882
$4,326
$1,795
$2,401
$1,748
$1,685
$1,466
$1,410
Source: World Bank Indicators database, World Bank, September 2004 and Selig Center for Economic Growth, University of Georgia “The
Multicultural Economy 2003”
If the U.S. ethnic purchasing power was represented separately, it would
be the 6th largest national economy in the world
8.0%
10.4%
8.5%8.3%
5.8%5.7%
6.9%
4.8%
Total Los Angeles Co Orange Co Riverside
Self Employment Rate, 2006
Foreign Born Native Born
Brin, Google Yang, Yahoo Grove, Intel Kholsa & Bechtolsheim,Sun Microsystems
Immigrants and the Economy
Between 1990 and 2005 immigrants started one quarter of all venture-backed companies
Even in Corporate America:Fourteen of the 2007 Fortune 100 CEOs were immigrants
71.6%
11.6% 11.4%
5.3%
50.1%
23.7%
13.4% 12.8%
White non-hispanic Hispanic Black Asian and other
Share of Labor Force by Race/Ethnicity
2000 2050
Shifting Ethnicity of Labor
U.S. Bureau of Labor Statistics
95%
45%
Ages 18 - 29 Over age 64
Approve of interracial dating...
A More Tolerant Population
Gallup Poll
81.6
57.3
81.0
Millennials (Age 12 - 30) Gen X (Age 31 - 44) Boomers (Age 45 - 64)
Population in Millions
Millennials rival Boomers
U.S. Census Population Projections, 2008
40
41
42
43
44
45
46
47
2000 2005 2010 2015 2020 2025
Millio
ns
U.S. Population Age 30-39
U.S. Census Population Projections, 2008
Millennials Entering Middle Age
Redefining Sustainability
Social
Environmental
Economic
The Archipelago of Villages: Towards “Smart Sprawl”
• Housing near jobs
• Emphasis on families
• Strong role for village shopping streets and markets
• Provision of open space around the village core and housing estates-
• Solving the problem of “sprawl” within the Sprawl
Southern California: A Vision of a
“Los Angeles will retain the flowers and orchards and lawns, the invigorating
free air from the ocean, the bright sunshine and the elbow room. It will not be congested like the older cities, for the transportation lines built in advance of the demands, have made it possible to get far out in the midst of orchards and fields for homemaking.”
Editor of the Los Angeles Express in 1905
New (Sub)Urban Paradise
The Key to a Smart Regional Strategy
This above all: to
thine own self be
true
William Shakespeare
Rethinking the Future:Back to Basics
• Regional economies need to produce real wealth or become irrelevant
• The key remains creating jobs and strong middle class neighborhoodswith high degree of livability
• Culture comes after commerce not the other way around
Arts and Culture: Cause or Result?
• Great Cultural Centers generally rest upon commercial success
• Venice, Florence, Amsterdam, London, New York, Los Angeles all became cultural centers after developing an expanding economy and strong middle class
• Patrons of arts, not the public, key to development of cultural institutions from Macenas to the Medici, Carnegie and the Rockefellers of the 20th Century to today’s multi-billionaires
Beyond elitism: Jane Jacobs on the proper
role of an urban economy
“A metropolitan economy, if it is
working well, is constantly
transforming many poor people
into middle class people
...greenhorns into competent
citizens... Cities don’t lure the
middle class, they create it”
The Biggest Challenge: The Issue of Class
• Growth of poorly educated newcomers and youngsters poses a unique problem, particularly with the end of the property boom
• High drop-out rates in high schools can guarantee the rise of an underclass
• Economic development needs to focus on upward mobility — not “luring” the middle class, but creating one”
10.0
11.0
12.0
13.0
14.0
15.0
16.0
17.0
18.0
19.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Poverty Rates
United States California
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Less than $35,000 $35,000 to $74,999 $75,000 and up
Change in percent share of Groups from
1999 to 2007
Change in Income Groups1999 to 2007
California Texas
California’s Wealthiest Taxpayers Nearly Doubled Their Share of Adjusted Gross
Income
Share of Income(Top 1% of Taxpayers)
1993 13.8 %2007 25.2 %
Source: California Budget Project / Franchise Tax Board
0.0
5.0
10.0
15.0
20.0
25.0
U.S. Census Bureau
CA Capital Outlay Share of Total Expenditures
California Back to Basics
• In 1960 20 percent of state
Budget went to infrastructure
• Today roughly 5percent
• California schools, roads, ports, water and power once pre-eminent, now fading
• Government needs to encourage business, not ignore or harass
• Solution: A return to basics oriented government
The Good Brown: Pat Brown
Education Is a Key Part of the Upward Mobility Engine
Education attainedMedian weekly
earnings in 2005
Unemployment rate in 2005
(Dollars) (Percent)
Some high-school, no diploma 409 7.6
High-school graduate 583 4.7
Some college, no degree 653 4.2
Associate degree 699 3.3
Bachelor's degree 937 2.6
Master's degree 1,129 2.1
Professional degree 1,370 1.1
Doctoral degree $1,421 1.6
Source: Bureau of Labor Statistics, U.S. Department of Labor
America and LA Need A Better Plan for
Investing In People
Higher
Education:
$22 billion in
federal funds for
50 million jobs
Workforce
Training:
$3.5 billion in
federal funds for
70 million jobs
Source: National Skills Coalition
Looking Ahead: North America and
Southern California in 2050
• Employ infrastructure to support a dispersed, flexible workforce• Understand and accommodate middle/working class aspirations• Focus on “greening” suburbs and how people prefer to live• Immigrants are our future --- positive or negative?• We need to get back to basics to revive LA’s entrepreneurial economy
JOELKOTKIN.COM
A vivid snapshot of America in 2050 focusing on the evolution of the more intimate units of American society—families, towns, neighborhoods, industries.
It is upon the success or failure of these communities that the American future rests.
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