Our research relating to the Chapman–UCI Innovation Indicator revealed a mystery. While we haven’t quite solved that mystery, we’re getting close.
To refresh the memories of readers of a prior OC Leader Board, with the help of the CEO Leadership Alliance of Orange County, we found that over the last 15 years, San Diego is doing a much better job than Orange County in creating innovation jobs. That finding is important since these high value-added jobs in software, semiconductors, aerospace, scientific research, and tech services command higher wages—an average wage of $208,000 in California versus $76,000 for all other jobs—and have powerful multiplier effects for the regional economy.
We found that San Diego increased the number of innovation jobs from 65,000 in 2005 to 97,000 by 2020—an increase of 32,000 high value-added jobs. In sharp contrast, OC created no net new innovation jobs remaining at 68,000 during the same 15-year period.
As a result, San Diego increased its share of innovation jobs out of all jobs from 6.2% to 7.8%, while OC’s fell from 5.2% to 4.6%. This is below the average of the 20 innovation regions around the nation that we track.
Even more disconcerting is our finding that the average wage per innovation worker in OC and SD was roughly the same at about $80,000 in 2005. By 2020, however, the average wage per worker in SD increased to $175,000 versus an increase to only $145,000 in OC.
What Happened?
We concluded our prior column on this topic by suggesting that structural differences between OC and SD account for their disparate growth rates. To investigate, we decided to focus on the individual innovation job categories rather than the total number of such jobs. For each quarterly period, we broke the total innovation jobs into the 13 component four-digit job categories. In doing so, we were able to determine that virtually all of SD’s growth margin of 32,000 jobs over OC occurred in three categories, with SD’s job growth margin over OC shown in parentheses.
Measure and Control (+15,200)
Aerospace (+7,300)
Scientific and Development (+8,600)
Figure 1 shows that jobs in Measure and Control in OC decreased from 18,100 to 12,500 over the 2005 to 2020 period. In sharp contrast, San Diego’s jobs in Measure and Control increased from 7,100 to 16,600. That’s a wide difference of 15,200 jobs, about half of SD’s and OC’s total 32,000 innovation job growth disparity. Measure and control jobs are the manufacturing of navigational and aeronautical instruments, electromedical apparatus, measuring and displaying instruments and analytical laboratory instruments. Among the top businesses in this area are Honeywell International Inc., GE Medical System Information and Northrop Grumman Corp. (The companies named here and below are examples of the type of jobs they provide and they may not necessarily have operations in OC and SD).
As shown in Figure 2, OC’s dominance in the aerospace sector over SD in 2005 was obvious. OC’s 11,200 jobs in this category were roughly double SD’s 5,500. But by 2020, SD overtook OC. The growth differential in aerospace during that 15-year period was 8,600 jobs; SD grew by 7,400 jobs while OC declined by 1,200. Jobs in aerospace include the manufacturing of guided missiles, aircraft and their engines and propulsion parts, including for space vehicles. Among the top businesses in this area are Boeing Company, General Dynamics Corp., Rockwell Collins Inc., Northrop Grumman Innovation, Gulfstream Aerospace Corp. and Triumph Group Inc.
Figure 3 shows that San Diego’s dominance in Scientific Research and Development Services was already present in 2005. That dominance, however, increased as it created an additional 10,700 jobs versus OC’s creation of only 3,400.
By 2015, SD had a total of 36,000 jobs in Scientific Research and Development Services as compared to OC’s total of 6,600. This growth disparity takes on added significance since the average wage paid in this category is the highest of all 13 four-digit innovation industry job classifications.
In 2020, for example, the average wage in Scientific Research and Development Services in San Diego was $227,000 as compared to an average of $175,000 paid in all of its four-digit innovation categories. OC’s average wage in this highest value-added sector was $194,000 versus $145,000 average for all its innovation job sectors. The category of scientific research and development services include jobs in nanotechnology, biotechnology, physical and life sciences and social sciences and humanities. Among the top businesses in this area are: General Atomic Tech Corp., Aerospace Corp., and Inventiv Health Inc.
Questions Remain
All this doesn’t tell us why SD is creating more innovation jobs than OC. But at least we now know where those jobs are. So, with all these clues, we’re getting closer to unraveling the mystery.
Now we need to peel back another layer of onion and find out why these particular businesses are locating in SD instead of OC. What does it have that we don’t? The investigation continues.
Editor’s Note: Jim Doti is president emeritus and professor of economics at Chapman University; Ken Murphy is assistant professor at Merage School of Business, University California, Irvine; Raymond Sfeir is professor of economics at Chapman University, and Marshall Toplansky is clinical assistant professor at Chapman University.
