UCI Poll Finds Business Fed Up With State Rules
Orange County’s usually upbeat business executives have finally had it, and some of them may not be willing to take it much longer, a UC Irvine research project has found.
They are frustrated by government regulation that they think is strangling the state’s economy. As a result, a sizable number of them are considering leaving California, the annual UCI Executive Survey found.
That has long been a threat, but in the past year the number of businesses making that threat has soared to 13% of the survey’s respondents, up from 7% the previous year and 9% for 1990--the year the recession began.
The opinions of those interviewed for the survey are echoed by other Orange County executives such as builder Gordon Tippell, chairman of Taylor Woodrow Homes in Newport Beach. He said he thinks that the state is in danger of regulating itself into a permanent depression.
“Being an Englishman gives me a different perspective,” he said, “because I come from a nation that almost died as an economically viable country” because of government regulation of business. “The big danger in America is that it is going in the same direction. It is sad when you get to the point that a country that once served as the bastion of capitalism is more socialistic than Russia is today.”
Builders have been battling government for years over environmental and other regulations, said Jone Pearce, a member of the UCI survey team. But in this year’s study “we started seeing the same complaints from businesses that typically have ignored the existence of state government.”
Most frequently cited by survey respondents as problems caused by state government are soaring workers’ compensation program costs and the increasing burden of regulatory programs, including those of the new Southern California Air Quality Management District.
In addition to their complaints about the business climate in California, most of the 201 companies surveyed this year said they have no plans to hire--an ominous sign in an economy that equates its health with job creation.
UCI’s 1993 employment forecast, a companion to the executive survey, says that Orange County businesses--after slashing 85,000 jobs from their payrolls since the recession began in July, 1990--are likely to drop about 9,000 more jobs from their payrolls this year and nearly 3,500 more in 1994.
Rob Valletta, the associate professor of economics who prepared the forecast, said he thinks the unemployment rate in Orange County, which averaged 6.1% for 1993, will hover around 7% for the next two years--a figure that does not account for what Valletta describes as a “large number of discouraged workers” who have simply dropped out of the job market and are no longer tallied. Many of them, he said, are members of what used to be two-job households.
Ironically, given the high level of discontent uncovered in the survey, more than half of the executives in the study said that their businesses were better off financially in 1992 than in 1991, and 76% said they expect things to be even better in 1993.
That curious note of optimism may have been grounded in a sort of economic theory of relativity: “Things are still bad, but better than last year when they were the worst ever.”
An important factor in the glum tone of the survey--and its findings are the grimmest in the seven-year history of the university study--is that Orange County is in the third year of a regional recession. Economists say the slump is the longest for the area in modern times. And while unemployment is lower and productivity is higher than in the last recession in 1981 and 1982, the miasma has sapped much of the energy from the county’s once-booming business community.
So perhaps the least surprising finding of the decade was that Orange County executives consider the state of the recession-racked economy to be the county’s biggest business problem.
What did jump out, said Pearce, an assistant professor of management, was that the study found clear evidence, for the first time in its history, that government regulation is a major factor when businesses consider relocating. And even those who plan to stick it out here are not happy with the business climate: Only 6% of the respondents said they are satisfied with state government.
“I lay awake at night and worry about whether a government entity may shut us down after years of examining our operation,” said Rick Muth, owner of Orco Block Co. in Stanton.
But Muth said he does not think the solution is to flee the state. Instead, he wants the solutions to come from those who made the laws and regulations.
“I’m hoping that our legislators and agencies will finally see the dawn . . . and realize the self-imposed problems they have created,” he said.
The study, conducted from September through December, polled executives from 160 of the county’s largest employers and 41 small manufacturing and service concerns.
The small operations--those with fewer than 100 employees--account for 97% of the county’s estimated 60,000 companies and have given Orange County a reputation as a breeding ground for aggressive, entrepreneurial businesses.
That was upheld in a special survey section on international business trends. It found that the number of small Orange County businesses conducting international trade grew to 67% from 61% last year while the number of large county-based businesses with foreign operations dropped to 71% of the respondents from 82% a year earlier.
Because the survey pool is filled with large companies, the overall trend showed a decline in Orange County’s business presence in foreign markets.
Management professor Kenneth Kraemer attributed the drop to worldwide economic troubles that have slowed purchases of U.S. goods by businesses in Europe and Asia. “These countries are going through the same economic troubles we are,” he said.
Still, there is tremendous investment potential for U.S. companies overseas, Kraemer said. The North American Free Trade Agreement alone could be a boon to Orange County companies, such as those in high technology and real estate development. Mexico, for example, has few high-tech corporations and is eager to buy U.S. computers and related equipment.
When vying for foreign business, Orange County executives reported, the keenest competitors are Asian. Among the 71% of companies that said they have foreign rivals, Japan was named as the chief competitor in 32% of the cases; companies elsewhere in Asia were identified by 10%. Those findings marked a change from last year, when European and other Western Hemisphere countries were considered the main challengers.
Issues Facing Orange County
Slow economic growth is foremost on the minds of more than 200 Orange County executives. That represents a dramatic shift from the late 1980s, when business leaders’ biggest concern was traffic congestion.
Housing and Slow Population Traffic living costs economic growth growth 1987 57.6% 4.0% 2.0% 12.1% 1988 59.7 1.1 0.5 22.0 1989 56.5 11.7 3.9 16.9 1990 58.1 12.1 0 11.0 1991 46.9 12.2 2.7 4.8 1992 27.2 18.4 17.5 7.0 1993 8.8 8.9 43.0 5.1
Note: Numbers do not add up to 100% because some responses have been left out.
Hiring Outlook More than half of the executives surveyed think that staffing at their companies will remain about the same this year. About one in four said they will reduce payrolls, and one in four said they will increase staff. Fewer: 23.8% Same: 51.3% More: 25.0%
Source: UC Irvine’s Orange County Executive Survey and Employment Forecast
