CHAPTER 4 : THE CHANGING GLOBAL ECONOMY: IMPACTS ON THE JOBS AND LABOR FORCE "The global economy has important implications for regions: develop human resources, lower the costs of goods and services, and use scarce investment capital wisely." Theodore Hershberg The recent integration of the global marketplace, and innovations in communications, technology and transportation, has led to profound worldwide economic restructuring. These forces have impacted the types of jobs, where they are located, and the skills needed to perform them. This chapter provides context on how global economic restructuring has impacted — and will continue to impact — cities, suburbs, and the resident labor force. The Changing Economy Fifty years ago, the economy was municipal and cities were industrial. Cities were dynamic urban centers teeming with factories and plants. In 1940, a majority of the San Francisco Bay Area’s population both lived and worked in either Alameda or San Francisco County.3 Today, however, the economy is increasingly global, based on high technology and information, and is extremely competitive. In the Bay Area, the economy is concentrated in the information-based segment of the global economy — business services, government and FIRE (finance, insurance and real estate). Cities and suburbs now form an interdependent, geographically-dispersed regional economy, each with distinct functions. Impacts on Cities Many traditional manufacturing and defense-related industries in older Bay Area cities have either downsized, moved, or closed — leaving in their wake unemployment and corridors of underutilized land along waterfronts and rail lines. As blue-collar, defense, and manufacturing jobs have declined, jobs in information and business services have emerged, requiring different skills and levels of education (see Figure 4-1). These new jobs are concentrated in the cities’ downtowns and include both professional, high-end jobs that are critical to the information economy (such as financial management, computer services, and advertising), and low end jobs (such as janitorial and food and hotel services). There are fewer middle-income jobs associated with these sectors of the economy. Middle-income wages are largely connected with traditional or high technology manufacturing — and those jobs have moved either to suburban locations or to other areas or countries with lower labor costs.37, 59, 2 Impacts on Suburbs Suburbs, too, have experienced tremendous change as they have transformed from bedroom communities to sprawling residential and commercial centers. Jobs are no longer tied solely to central cities, as changes in communication, transportation, and other technologies have made proximity to raw materials, ports and rails lines less important.59 Suburban areas now house more middle and upper income jobs, such as high technology manufacturing and corporate back-office operations (e.g., accounting, check processing, payroll, data processing, and information management).37 Labor Force Implications Wages Although the number of new jobs in San Francisco between 1980 and 1990 grew for people with a high school education or less, the constant dollar median wages dropped by 13% — while wages for those with a graduate education increased by 34%.37,20 There are also income disparities between the resident labor force and the commuter labor force; commuters earn significantly higher average wages than city resident workers. The decline in real wages is particularly startling for immigrants. For example, the real wages of Asian immigrant women garment-industry workers in San Francisco declined 44% over the last decade. In contrast, the real wages of lawyers, judges and other professionals (disproportionately held by Non-Hispanic White, native born, males) increased by 50% during the same period.2 Racial Disparities in the Labor Force There are also considerable racial disparities within the work force.2 Between 1980 and 1990, for example, minority participation in the Alameda County work force increased while Non-Hispanic White participation decreased. However Non-Hispanic Whites dominated higher-paying, higher-skill jobs, holding almost 68% of all executive, administrative and managerial positions. Minorities, representing 42% of the work force, held just 32% of those positions. Minorities also tend to be overrepresented in service sector positions. For example, minorities represent about 42% of Alameda County’s work force, they occupy almost 60% of service sector jobs. These jobs are often lower-paying and less stable, yet represent the fastest growing segment of the labor force. Location of New Jobs In the Bay Area, the area outside of the 3 largest cities is also projected to acquire the vast majority of new jobs (see Figure 4-2). For example, new jobs in the service sector will be available outside of the three largest cities by more than 3 to 1; new jobs in the manufacturing and wholesale sector (combined) will be available by more than 8 to 1; and new jobs in the retail sector will be available by more than 7 to 1. Occupations The fastest growing sector in the national, as well as Bay Area, economy is services. Between 1995 and 2015, 44% of new jobs will be in this sector. Jobs in this sector tend to be either high-paying (engineering, accounting, motion pictures, law, or health services) or low-paying (hotel, personal, and food preparation services). There are fewer middle income jobs in the service sector, and these tend to be located in suburban areas and linked to the information economy. Suburban areas dominate the region in the absolute number of new jobs across all wage categories. However, a greater variety of new low-paying jobs is concentrated in the cities, while the suburbs have a greater variety of new medium- and high-paying jobs. New Jobs in the Central Cities Service-producing industries will continue to account for most new jobs in each of the Bay Area’s three central cities (see Table 4.1 and Figure 4-4). ABAG projects that 69% of new jobs in San Francisco over the next 20 years will be in the service sector. This is indicative of San Francisco’s role as a business center and "global city." New jobs in Oakland, however, will be concentrated in such sectors as government; transportation, communication and utilities; and FIRE. This mirrors Oakland's role as a port city as well as a government and business center. New jobs in San José tend to follow the pattern identified for suburban areas. Service jobs dominate as well as manufacturing and wholesale (combined), reflecting San José’s leadership in high tech manufacturing and its position as the South Bay's business center. Conclusions While the San Francisco Bay Area is prosperous and vital, its overall economic success disguises the fact that not everyone benefits equally from global economic change. Many metropolitan areas have experienced economic decline or stagnation in part because they have been unable to adapt to the new global economy. Regions that have successfully adapted (including the Bay Area) have done so because they are concentrated in many of the functions critical to the global economy.37 Many cities (especially those closely linked to the global economy) are becoming increasingly divided along racial, economic, and geographic lines. The decline in manufacturing jobs, along with previously cited trends, led middle-income people to leave the central cities for suburban locations, leaving only higher income people, and low-income (primarily minority) people who cannot afford to move out — exacerbating the racial and class bifurcation within cities. The segregation of low-income minorities in cities, combined with the continuing decentralization of employment to the suburbs, present a strong case for constructing an economic development strategy that integrates the needs of cities and suburbs into the region as a whole. Efforts to Address Economic Development Issues Much groundbreaking work has been done recently to help regions and cities address economic development issues. The Bay Area Economic Forum (BAEF)5, for example, has assessed the Bay Area's comparative advantage for knowledge and employment-based industries. They identified eleven knowledge and employment-based industry clusters in which the Bay Area has a comparative advantage, including computers and electronics, telecommunications, multimedia, movie and TV production, biosciences, banking and finance, environmental technology, tourism, business services, retail trade, and wholesale trade. This work is an important step in formulating a strategic economic development action plan for the region. The City of San Francisco’s Planning Department, the San Francisco Urban Institute, the Bay Area Community Outreach Partnership Center, and other local actors have also done important work in helping cities and regions address this issue. Researchers (LeGates, Potepan, and Barbouri in particular) have developed an approach to help local decision makers and planners determine which jobs offer the best prospects for hard-to-employ people within the context of opportunities and obstacles presented by the global economy. They contend that city economic development resources could be better targeted to specific sectors of the private economy in which the city not only has a competitive advantage, but which are likely to grow in absolute and percentage terms, and which provide entry-level jobs where wages are high relative to educational attainment and/or job skills. Efforts such as these provide the tools to help policy makers craft an integrated economic development plan for the region — and provide for the specific needs of cities and suburbs. A more detailed discussion of potential follow-on work is presented in Chapter 7.