[Source: Orange County Register] Orange County’s economy is growing, but danger signs are mounting.
Jobs are expanding at a healthy clip, but many of the new positions pay poverty-level wages.
Home values are surging, but an extreme shortage of affordable residences is driving young families and working-age adults out of the county.
And as business leaders scramble to attract well-paid technology jobs, too few local workers may have the skills to fill them.
Those are among the stark conclusions in the latest comprehensive assessment of the local economy and job landscape prepared jointly by the Orange County Development Board, a government agency, and the Orange County Business Council, a trade group for 250 big companies.
“The labor market is in the midst of disruptive change like never before,” warned the Orange County Workforce Indicators Report, presented last week at a Hotel Irvine conference of business executives and government officials.
Wallace Walrod, the business council’s chief economist, told the gathering that surveys show local businesses and consumers remain optimistic about the county’s economy, which boasts a 4.4 percent unemployment rate, the lowest in Southern California.
But he also pointed to “clouds on the horizon,” as he narrated a slide show of data highlighting worrisome trends.
DEMOGRAPHICS
“They say demographics are destiny,” Walrod told the conference. “It is imperative that everyone in this room understand the consequences of pending demographic shifts.”
The national trend of aging baby boomers moving into retirement, he said, is “magnified and exacerbated” in Orange County, where the over-65 population is on track to nearly double by 2060 to “a staggering 26.2 percent.”
Unlike California as a whole, every age cohort other than seniors is shrinking in Orange County, where the median age has risen from 33 to 38 since 2000.
Most worrying, the prime working-age population – 25-to 64-year-olds – is expected to dip by 1 percent by 2060, even as overall population grows by 15 percent.
By contrast, working-age groups in Riverside and San Bernardino counties are on track to grow by 61 percent and 47 percent, respectively.
“We are losing not only our 25 to 34 year-old workforce – millennials – but also losing K-12 and the college-age cohort as well,” Walrod said.
The trend, he warned, “could devastate O.C.’s pool of workers, creating talent gaps as large swaths of the workforce retires, leaving open positions that will likely go unfilled.”
A DIRE HOUSING SHORTAGE
The principal cause of the demographic disconnect isn’t a mystery.
A severe housing shortage has turned Orange County into one of the most expensive markets in the nation, with median home prices exceeding $650,000 and average monthly rents at about $1,900. Higher-density developments that could alleviate the shortfall are often opposed by current homeowners.
Rising values are “good news for current homeowners, but bad news for those looking to afford to relocate to O.C. or to buy a house and stay here, especially millennials,” Walrod said.
As a result, he added, “domestic outmigration has been accelerating.”
The report projects that “new job creation will significantly outpace projected new housing units over the next two and half decades, resulting in a housing shortfall that will grow from a current reading of 50,000-62,000 units to a staggering 100,000 units by 2040.
“Many workers are being forced into neighboring counties to find more affordable housing, increasing their commute and complicating their work-life balance.”
Robert Bunyan, chairman of the Orange County Development Board, cited the example of his daughter, who graduated from college in 2010. She moved to Texas after failing to find a job in Orange County that paid enough to afford local rents, he said.
“If workers with skills can’t find housing, they’ll go to other places like Texas and Arizona,” he added.
Low-income families are doubling up in units designed for one family, Bunyan said, while entry-level workers can’t afford to move out of their parents’ homes.
According to the report, it takes an hourly wage of $32.15 to afford a two-bedroom apartment in Orange County, putting it out of reach for minimum-wage workers in the county’s fast-growing service sector, given the current California wage floor of $10 an hour.
SKILLS GAP?
College degrees in science, technology, engineering and mathematics awarded in Orange County have been growing by about 7 percent a year, according to the report, reaching an all-time high last year of 1,204, a jump of 22.5 percent over 2014.
And technology companies such as Microsemi, Edwards Lifesciences, Masimo Corp. and Universal Electronics are among Orange County’s fastest growing businesses.
Nonetheless, the report contends that the county’s prosperity is threatened by “a growing and persistent skills gap … Even as unemployment rates continue to drop, employers face rising difficulties in filling positions with skilled, educated workers.”
According to the report, applicants lack skills in health care IT, IT security, coding and programming, mobile app development, cybersecurity, robotics, data analytics and quality control.
Moreover, it adds, “many applicants that do have technical skills lack soft skills – skills such as project management, teamwork and team management, and critical thinking skills such as process improvement and problem solving.”
However, the report’s evidence is anecdotal, based on focus groups of anonymous employers brought together by the business council.
In recent years, such skills gap reports have been questioned as companies such as Southern California Edison and Disney have laid off U.S. technology workers, replacing them with lower-paid immigrants from India and other foreign nations on temporary visas. Businesses say they need the flexibility to hire specialists from around the world.
Moreover, since the 1990s, employment at computer and electronic firms has dropped by more than 40 percent, according to the U.S. Labor Department. And technology companies have come under fire for discriminating against older workers, with more than 200 complaints lodged with the California Department of Fair Employment and Housing and a class action lawsuit pending against Google.
The report does not address the contention of some economists that companies can resolve perceived skills gaps by raising salaries to recruit the workers they need and –as Applied Medical, a Rancho Santa Margarita surgical device company, has successfully shown – by ramping up employee- training programs.
LOW-WAGE JOB BOOM
What the report’s data do reveal is that the largest categories of jobs that Orange County is creating are not sophisticated programming or engineering positions, but low-wage, low-skill jobs – jobs filled by workers who can no longer afford to live in the county.
“Employers may have to increase their compensation packages,” the report suggests, but it falls short of recommending any local hike in the minimum wage, as cities such as Los Angeles, San Francisco, San Jose and San Diego have enacted.
According to Wanted Analytics, a data firm that tracks real-time employment information, Orange County recently had some 42,500 job openings.
The largest categories of openings? Customer service representatives, who earn an average of $40,000 a year, and administrative assistants, who are paid an average of $33,000.
None of the top 10 occupations with the most job openings include technology positions, although several, such as project manager and senior accountant, require traditional professional skills.
In the past three years, categories adding the most positions in Orange County have been food preparation and serving workers, personal-care aides, laborers and movers, general managers and waiters and waitresses.
“Many of the occupations with the most number of job openings are entry-level positions which do not require significant training or educational backgrounds,” the report noted.
“Excluding General and Operations Managers, the majority of these occupations pay near the $20,000 level, well below the average Orange County salary.”
According to the Public Policy Institute of California, which uses census data to calculate poverty at the county level, the poverty threshold for a family of one adult and one child renting a home in Orange County is $23,097. For a family of two adults and two children, it is $33,025.
California’s Employment Development Department, however, predicts that two technology jobs will be among the fastest growing categories by 2022. Biomedical engineers, with average salaries of $125,000, are in third place after brick masons ($51,440) and personal- care aides ($22,000). And information analysts ($97,520) are in fifth place, following skin-care specialists ($34,490).
AN AUTOMATED FUTURE
The jobs picture is further complicated by the growing automation of some of Orange County’s largest employment sectors, such as retail sales and customer service.
“Businesses are using automated message services instead of actual people to handle customer questions and complaints,” the report notes. And retail sales employment has contracted as online shopping has exploded.
“We are in a structural change like we have never seen before,” Walrod told the conference, showing a slide titled “The Demise of the Routine, The Rise of the Non-Routine Work.” “Routine” jobs have plummeted since 2001.
“Machine learning, miniaturization, computers are fundamentally changing the nature of work,” he said. “The looming threat of automation hangs over lower skilled workers.
“It really is a brave new world.”
Source: Orange County Register
October 13, 2016
