A Prescription for the Blue-Collar Blues

Expanding the number of quality blue collar jobs in Los Angeles will be Mayor-elect Antonio Villaraigosa's most difficult economic challenge. Since 2001, our region's manufacturing employment has declined by nearly 20%, mirroring the loss of 2.6 million goods-producing positions in the nation as a whole. That's very bad news for cities like L.A. that are home to enormous numbers of working and middle class families.

As Villaraigosa prepares to take charge of a city about the size of Singapore or Ireland, what can he do to reverse the manufacturing sector's decline? Despite years of debate, our national leaders can't decide if the huge trade imbalances that are wiping out America's industrial base merit serious concern, let alone repair. It's highly unlikely that Washington can suddenly be induced to act in ways that would foster local production jobs anytime soon.

What L.A. needs is a new, locally led approach. I think our best bet may be to stimulate new companies that provide specialized products for the millions of goods that are shipped through our region's ports, airports, railyards and warehouses each year.

Los Angeles may never again have an automobile factory. But there's no reason why local firms can't supply sophisticated, add-on products for the imported cars offloaded in Los Angeles on their way to the rest of the continent. If our region can stimulate value-added manufacturing for even a fraction of the trans-shipments through our region, it may be possible to stem the blue collar economy's decline.

Value-added manufacturing plays a key role in many industrial nations' success. Places like China or Japan often require that U.S. or other foreign, big-ticket producers procure important components from domestic firms. That's why Japanese aerospace companies grew so rapidly in the 1990s while U.S. suppliers went bankrupt, and why China recently announced that it will build the rudder, doors and fairing panels for Boeing's new 787 "dreamliner."

Our country's trade laws don't allow Americans to demand reciprocal investment and employment offsets from overseas competitors. Nevertheless, there are several possible approaches that Los Angeles can utilize to help build a local, value-added production network.

First, Villaraigosa and other city leaders should greatly expand existing free-trade zone and similar state and national programs that provide customs and tax breaks for companies that invest in trade-related activities. Value-added production zones should be identified and promoted around each of the region's major trade distribution hubs. Each should be qualified to provide all of the incentives that current law allows.

Next, potential traffic, noise and related concerns must be proactively addressed. During the 1990s, blue collar parcel-delivery job growth around Los Angeles International airport was stymied by local, anti-growth moratoria. To reduce the risk of crippling delays and legal uncertainty, Los Angeles should immediately complete all environmental and planning steps required to fully entitle future production zone construction, manufacturing and transportation activities.

Finally, an offset strategy can be pursued by linking value-added job creation with the fulfillment of environmental and other stringent regulatory requirements. After years of neglect, for example, port area ships and trucks are the worst air polluters in Southern California. Port operators, shippers and trucking firms will spend hundreds of millions of dollars to comply with new standards.

Rather than retrofit engines or redesign transshipment technology solely to meet local environmental needs, however, international companies may prefer to invest in regional value-added manufacturing that enhances the value of the products they handle. Job growth around distribution hubs, in fact, reduces air pollution by bringing goods, workers and suppliers together in a single location. If ports and shippers can offset some of their environmental requirements by investing in value-added employment, the region's manufacturing base can be strengthened at the same time that our air quality is protected.

Even modest industrial growth would generate surprisingly large economic benefits. Just 5,000 new value-added production jobs, for instance, would create at least 15,000 related positions throughout the economy. The new business activity would likely boost additional demand for building and infrastructure improvements. Overall, a significant chunk of the 100,000 manufacturing jobs our region has lost over the past four years alone could well be recaptured by a successful value-added production development strategy.

That would be a remarkable achievement. None of America's major cities has figured out how to revive manufacturing in the face of overwhelmingly adverse global economic conditions. If the new Villaraigosa administration can identify options that help reverse our urban blue-collar blues, it will not only have served Los Angeles, but the nation as a whole.