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Economist says California at risk of losing its educational advantage


VENTURA COUNTY STAR.  FEBRUARY 5, 2013.  A senior economist with UCLA’s Anderson Forecast warned lawmakers Tuesday that California is at risk of losing what has long been one of its top economic advantages, a workforce that is better educated than those in other states.

Jerry Nickelsburg told members of an Assembly panel that UCLA forecasters expect national economic growth to slow this year as the result of developments in Washington, D.C., but regain steam next year.

“In 2014, after adjustment to the new tax structure, the U.S. starts growing faster, and California even faster,” he said.

Such a phenomenon has been the historical pattern. “Typically, California will grow faster than the U.S. when the U.S. is growing,” he said.

But Nickelsburg cautioned that risks threaten the continuation of that trend.

He said California still leads the nation in percentage of college-educated adults, calling that statistic “a reflection of our advantage in skills.” But Nickelsburg disclosed census data that shows the state’s advantage has disappeared among workers age 25 to 34.

In that age category, the percentage of Californians with college degrees equals the national average, and the percentage of Californians with some college trails the national average.

He predicted that development “could erode” California’s competitive advantage and lead to one of two results: Workers without college training will “leave California for Texas or some place where jobs are low-skilled and immigrants come in to take the skilled jobs, or we lose our educational advantage.

“The trend in education makes California’s growth engine vulnerable,” he said.

Nickelsburg said there is some indication that the first scenario is beginning to take place.

“The evidence is that in-migration to California is more highly educated than the out-migration. It’s not a big phenomenon right now, but it exists,” he said.

Nickelsburg was among several economists and business representatives to testify at an informational hearing of the Assembly Committee on Jobs, Economic Development and the Economy. The focus was on trends and challenges in the state economy.

Topics included a discussion of how California ports are preparing to respond to an expansion of the Panama Canal, which could make shipping goods from East Coast ports to Asia easier; the possibility of scaling regulatory requirements to help small businesses comply; the potential for economic growth in land-based industries such as agriculture and outdoor recreation; and a call to reduce or eliminate the state sales tax on manufacturing equipment.

A number of speakers echoed Nickelsburg’s concern about the economic effect of a shrinking share of California workers with college degrees.

“That has been a real competitive advantage for California,” said Dorothy Rothrock of the California Manufacturers and Technology Association. “We may be losing that.”

Gus Koehler, president of the Sacramento-based economics consulting firm Time Structures, said the declining percentage of younger Californians with college degrees is a “testament” to history.

“There’s been a dramatic change,” he said. “The older generation had the advantage, and that advantage is going away. From a global perspective, this is a bad thing.”

Koehler said the availability of high-skilled workers “will drive global growth” in the years to come.

Over the last generation, tuition at California public universities has more than doubled, and the state subsidy for educating college students has dropped by more than half.

The hearing came a day after Texas Gov. Rick Perry stepped up his state’s campaign to recruit California businesses to move to his state by launching radio commercials in California’s largest cities. As part of his efforts, Perry plans to visit Haas Automation Inc., an Oxnard machine tool manufacturer that is considering expanding its business out of state.

Glenda Humiston, director of California Rural Development for the Agriculture Department, suggested the recruitment strategy might not pay too many dividends. In fact, economic development groups in California often spend too much time devoted to business recruitment, she said.

About 2 percent of job growth in a given community results from recruitment, she said, while the rest comes from growth in existing companies and startups founded by homegrown entrepreneurs.

Nickelsburg was asked whether California could gain from offering tax credits or rebates to businesses.

“On an absolutely equal playing field, California is not going to compete with other states with inexpensive land and inexpensive labor,” he said. “Chasing it with taxes or tax rebates is not going to be effective, and if it works it’s going to be very expensive.”