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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