California manufacturing jobs fall through the cracks
The shutdown of a 102-year-old California manufacturing company points to a major flaw in California’s industrial development policy:
We don’t have one.
The company is Pneumatic Scale Angelus, which turned out top-of-the-line machines for sealing lids on soda and beer cans from a factory in Vernon. That was a niche business but not a small one, since bottling companies the world over were Angelus customers.
As we reported just after Christmas, Angelus employees were told on Nov. 2 that its owner, privately held Barry-Wehmiller Cos., would shut down production at the plant Jan. 1 and move it to a factory in Ohio. That meant lost jobs for 111 members of the United Steelworkers in Vernon.
The company appears to have fulfilled its legal obligation to inform city and state officials of its plans; economic development agencies at all three levels of government got notices pursuant to the state WARN Act, which requires notifications of such layoffs 60 days in advance. Another copy went to the office of County Supervisor Gloria Molina, whose district covers Vernon. Her office didn’t get back to me to explain how they responded to it, if at all.
All these entities acknowledged receipt of the notices, according to copies of certified mail receipts the company provided to the union. None lifted a finger to try to stop the shutdown.
In fact, most say they weren’t aware of the impending plant closing until I asked about it — in late December.
There’s no guarantee that any action by government officials would have halted the closing. But we’ll never know, because no one seems to have tried. The Angelus case “raises a larger question,” says Glen Becerra, president of the Southern California Assn. of Governments: “When is it worth staying in California to do business? I don’t see the state or local governments putting an emphasis on job creation.”
Los Angeles County economic development officials say that if they had received advance warning of the Angelus decision, they would have swung into action. “I would have arranged a visit for the company with the city manager and the city development director,” Barbara Levine, a regional manager at the L.A. County Economic Development Corp., told me. Here’s a pointer: No one’s going to swing into action if responsible agencies get layoff warnings in the mail and drop them in the trash basket.
In any case, local officials say the statewide economic development arsenal is pretty much bare.
California has no organized tax credit program for companies that pledge to add jobs. Ohio, which will absorb some of the Angelus jobs lost in Vernon, does. California has no equivalent today of the “Red Teams” that swooped in to stem layoffs during Pete Wilson’s governorship during the 1990s, when the aerospace crash threatened to hollow out the state’s industrial base.
California will roll out the red carpet on occasion. But you have to be very special to get it. The state doles out $100 million a year to Hollywood, ostensibly for film productions that would otherwise shoot elsewhere. But no one has ever established that the program accurately targets at-risk productions or that it produces more in job-related tax revenue than it spends. Much of the money, if not most, has gone to producers who are almost certainly gaming the system.
And while everyone complains about construction delays caused by the anti-pollution California Environmental Quality Act, the Legislature has given relief from CEQA to two specific projects. Both are proposed NFL football stadiums.
If there’s a reason to incentivize movie makers to stay in California but not manufacturers of industrial equipment, let’s hear what it is. And if CEQA is more of a drag on economic growth than a boon to the environment, then it should be the target of comprehensive reform, not piecemeal exemptions for would-be NFL owners.
California and Los Angeles are not manufacturing deserts, despite what you’ve heard about the state’s hostility to business. While Los Angeles has lost half its factory jobs since 1991, it’s still the largest manufacturing region in the country in terms of jobs, payroll and number of plants, according to a 2012 study of green manufacturing overseen by Goetz Wolff, an urban planning expert at UCLA’s Luskin School of Public Affairs. Manufacturing jobs are the best path up the economic ladder for people from disadvantaged communities. Yet such companies “don’t have the voice of the entertainment or tourist industry,” Wolff says. “There isn’t a convention bureau for manufacturing.”
It’s not as though California has nothing to offer. The Governor’s Office of Business and Economic Development, which calls itself GO-Biz, points out that there are many reasons to invest in the state. It’s a huge market, with the nation’s leading ports and the largest high-tech workforce. It still attracts more than half of all venture investment in the country.
Ohio job development officials told me they attract business by emphasizing their state’s virtually nonexistent corporate tax, but when you put all state and local taxes together Ohio’s taxes haven’t been that far behind California’s — for fiscal 2009, the nonprofit Tax Foundation ranked California eighth in per capita taxation, Ohio 10th. (This was before our Proposition 30 raised income taxes on the wealthy and sales taxes on everyone.) Meanwhile, critics of Ohio Gov. John Kasich, who took office in 2011, say that his high-profile state tax cuts have been paid for by just shifting stringent budget cuts on local governments and schools.
But Ohio does have a tax-abatement fund for companies adding jobs, even if it’s moving them from another state, as Barry-Wehmiller is doing with Angelus. It established an aggressive one-stop agency to field complaints about permits and regulations.
California does offer businesses some tax credits, employee training programs and low-cost financing of manufacturing facilities through low-interest industrial development bonds. But the tax credits are typically aimed at special situations such as research and development spending or limited to disadvantaged workers.
The worst thing about the state’s economic development programs is that they’re fragmented. Some state economic agencies seem barely aware that others exist, so they can’t refer potential clients to the right programs. Gov. Brown probably did the right thing by abolishing local redevelopment agencies, which often poached jobs from neighboring communities. But those agencies often were the home of local job development programs. In many communities, including Vernon, the redevelopment and job-development programs disappeared together.
California agencies apparently were caught sleeping when Barry-Wehmiller’s WARN Act notices went out to the state’s Employment Development Department, the L.A. County Board of Supervisors and the city of Vernon. The EDD to this day hasn’t posted the WARN Act notice on its website, where other public agencies might have seen it.
Such disorganization only makes it easier for employers to move jobs out of the state by stealth.
California has big markets, great ports and a well-trained workforce. Yes, there are high costs here and lots of regulations, though the latter often contribute to its high quality of life. But the biggest reason California loses jobs to other states may be that it’s getting outsoldiered on the battlefield.
Michael Hiltzik’s column appears Sundays and Wednesdays. Reach him at email@example.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.
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