Technology Meltdown, Shifting Demographics Shave County’s Wealth
By RAJIV VYAS
The technology meltdown and an ongoing demographic shift dented Orange County’s wealth last year.
OC’s per capita income last year declined to $36,427 from $36,666 in 2001, according to data from the Los Angeles County Economic Development Corp. The county’s per capita income last year stayed above 2000’s $36,286 level.
“The decline is related to what’s going on in tech sector,” said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp. “Orange County’s economy is dependent on technology. New jobs are being created in industries like retail, where wages are not as high as manufacturing or high-tech.”
According to the California Employment Development Department, electronics makers here let go of 2,500 people in the past three years.
Irvine-based chip designer Broadcom Corp., for one, has laid off more than 500 high paying engineering and support jobs in the past two years. Newport Beach-based Conexant Systems Inc., another chipmaker, reduced its staff by more than 1,500 people in the same period.
Retailers, meanwhile, did most of the hiring in OC last year. Store operators such as Target Corp., Wal-Mart Stores Inc. (photo), Home Depot Inc. and Costco Wholesale Corp. added nearly 1,500 jobs in 2002, according to December’s Business Journal list of employers.
OC’s per capita income also declined relative to the nation. Local income as a percentage of the national figure declined from 118% in 2000 to 115% last year according to Philadelphia-based Economy.com.
The downward move in OC’s income is more pronounced over a longer period.
In 1988, OC’s income level was more than 130% of the national average.
In the past 14 years, it has declined by an average of one percentage point every year.
The aerospace meltdown of the early 1990s is a big factor.
The county lost thousands of high-paying production jobs in the industry’s contraction a decade ago.
Technology jobs have helped offset the loss, though many don’t pay what aerospace did.
The other factor: population growth and demographic changes.
“The bigger you get in terms of population and employment, (income level) will emulate the trend in the national and state economies,” said Esmael Adibi, director of the school of business and economics at Chapman University.
From 1990 to 2000, OC’s population grew by 18%, vs. 13.6% for all of California. Nationally, the growth rate was 13.1%.
OC’s growth came from a higher birth rate as well as new arrivals. According to the county, new births made up more than 80% of OC’s population growth last year.
The county’s higher birth rate impacts per capita income since newborns and younger residents don’t start generating income right away.
The other problem is OC’s ongoing demographic shift. OC is home to more unskilled Hispanic workers (as well as skilled and affluent ones, too). Hispanics are the county’s fastest-growing group and make up 31% of OC’s population, according to Census figures.
The upside: OC’s economy has been able to absorb the influx of unskilled workers. The county’s December unemployment rate of 3.7% still is low compared with California or the nation.
But 28% of OC’s residents can’t speak English, according to the Census, limiting their earning power.
OC, which long has prided itself on doing things better than its bigger neighbor to the north, is seeing problems like those of Los Angeles, according to Kyser.
“There are three reasons for the decline in income levels,” he said. “Decline in manufacturing, growth of tourism and retail and the growth in minority population.”
Los Angeles, where the per capita income is below the national average, counts 52% of its workforce who can’t speak English properly, Kyser said. Many of them don’t have the skills for higher paying manufacturing or service jobs, he said.
Economic makeup is one key difference between OC and Los Angeles, said Keitaro Matsuda, senior vice president of economic research at Union Bank.
“I think OC is becoming more and more knowledge and technology-oriented economy,” Matsuda said. “The question is whether the population growth will offset the increase in income level.”
Economists said they believe OC’s income level will stay above that of the nation. But the gap could close further, they said.
“We are not growing as fast (as the nation), and we won’t grow at the rate we did in the 1960s and the 1970s,” Chapman’s Adibi said. “We are going to plateau every five to 10 years. But after that, we would continue the decline until we start performing more like the national economy.”
