2% of Firms Have Left State Since 1980, Report Says : Economy: The manufacturing study indicates that exodus stories are exaggerated. Utilities commissioned the analysis.

Less than 2% of California manufacturers have moved from the Golden State since 1980, according to a new study, an indication that the much-publicized exodus of business to neighboring states and to Mexico has been more a trickle than a flood.

The report, commissioned by the state’s five largest utilities, nevertheless concluded that the movement of businesses is worrisome, particularly since many of the lost jobs were in high-paying technology fields. The group called for legislative steps to make California more amenable to business, including job training and easing the regulatory process.

“California is approaching the crossroads as an economic locale,” the report said. “Industry migration is not likely to ease as the economy rebounds, so long as state business costs remain high . . . and the state’s business climate suffers from an anti-industry perception.”

Though it offers a different solution, the group’s report supports an earlier study by two economists from the Center for the Continuing Study of the Economy in Palo Alto. Stephen Levy and Robert K. Arnold had contended that a recession and defense cutbacks--not an anti-business climate--were behind the manufacturing job losses in California. The two had argued for quality of life improvements, such as investment in education and new technology, improvements in traffic congestion and pollution, and lower health care costs.

The utilities’ study found that half the 233,000 factory jobs lost since manufacturing employment peaked in 1989 were in fact due to business failures or plant closings, not competition from cheaper states or countries. The remaining half, or 5% of all factory jobs, were lost due to either relocations or decisions by companies to expand outside California. Even with the losses, California’s manufacturing base is larger than a decade ago, Sedlik said.

The group’s study was the first to quantify the manufacturing jobs lost in California, and to attempt to cite the cause.

The findings tend to soften the somewhat dire predictions made last April by the Council of California Competitiveness, a blue-ribbon panel commissioned by Gov. Pete Wilson. The panel blamed California’s business climate for the bulk of the job losses and called for a number of reforms, some of which mirror suggestions made by the utilities.

The utilities’ study warns that California stands to lose more factory jobs to places like Arizona, New Mexico, Texas and Mexico unless it takes steps to make the state more amenable to business.

Companies that left California said they did so to reduce labor and real estate costs and to escape environmental regulations, business taxes and permit restrictions.

“This is a warning signal,” said Barry Sedlik, manager of business retention for Southern California Edison, one of the utilities that prepared the study. “Unless we turn this around, the industrial sector will shrink.”

Sedlik said one of the most important findings was that seven of 10 jobs leaving the state were in high-paying fields such as computers, aerospace and other high-technology areas. That belies the notion that many firms that left were in low-technology fields, such as furniture assembly. A continued loss of high-paying jobs would hurt California’s already weakened economy, he said.

The tone of the study was somewhat pessimistic, in part because of the way it was conducted. The study focused on 1,054 businesses that had moved a factory outside California since 1980, or had chosen to expand their manufacturing outside the state since 1980.

The study didn’t look at businesses that moved or expanded here during the last 12 years. Sedlik said the utilities plan a second study focusing on that group.

The utilities commissioned the report to help predict energy demand over the next decade or so. Sedlik said that exodus of industrial jobs from California has not yet had a significant impact on SoCal Edison. If the trends continue, he said, commercial and residential customers may see their rates go up to cover the fixed costs of generating and transmitting electricity.

Other utilities involved in the study are the Los Angeles Department of Water and Power, Pacific Gas & Electric, San Diego Gas & Electric and Southern California Gas.

Looking Elsewhere Of 326 companies surveyed that said they plan to relocate or expand within three years, 91% of those relocating would do so outside California. Eight out of 10 expansions would be outside the state.

Relocations Expansions California 9% 21% Other states 71% 61% Other countries 20% 19%

Source: California Industry Migration Study. Industries on the Move Of more than 600 companies that have relocated or expanded their operations outside California since 1980, 58% fell into five major industry groups. The figures below show the percentage, by industry, of all relocations or expansions.

Relocation Expansion Fabricated metal 9% 13% Machinery 19 11 Electronics 16 20 Transportation 9 4 Instruments 8 8

Source: California Industry Migration Study