Depressed region of California needs more dynamic thinking to recover, economists say

Behind the scenic roads and vibrant economies of the ocean-side southern California areas of Los Angeles, Orange County and San Diego, lies a patchwork expanse of big-box stores and under-water mortgages called the Inland Empire.

Once viewed as a viable economic frontier filling the citrus tree basin of high winds launching from snowcapped mountains, the Inland Empire has struggled more than most regions in the U.S. since the great recession.

Going by Bureau of Labor Statistics numbers for the federally-defined Riverside-San Bernardino-Ontario area, unemployment is at 13.9 percent — two points higher than the rest of the state. Fifty percent of all homes in the region are valued at less than the mortgages taken out to purchase them, tying an albatross around the finances of home owners — many of them first time buyers. And though the Inland Empire has 244,000 people formally unemployed, the region’s senior economist, John Husing, announced on Thursday he projects job growth for the year to be a very paltry 5,200 new additions to pay rolls.

Perhaps most sobering is Husing’s prediction another five years are necessary before the region recovers all the jobs it lost during the recession.

But where there is a shortage of jobs, education opportunities and social benefits that encourage the acquisition of contemporary skills can offset the long-term projections of stagnant economic growth. For leading economists, that underdeveloped nexus of jobs and education is dampening the fortunes of the region. Husing told the Inland News Today, “If we do not wake up…and start to undertake major efforts to change, particularly, the education level of our population and our young people, we’re going to be stuck with a difficult situation for a very long time.”

Brad Kemp, an economist at Beacon Economics and a close follower of California’s hamstrung macroeconomic fortunes, says part of the problem is that not enough federal programs finance job-specific education courses.

“Politicians want a shiny bauble,” Kemp said in an interview with TAI, but “paying for the short-term pain that leads to a better economic future” is not in their agenda.

He cautions nothing guarantees a return to good fortunes without essential upgrades in education and how communities seek out new engines of growth.

“We need a curriculum shift to the core subjects plus the arts,” he says, calling his version STEAM for Science, Technology, Engineering, Arts, and Math. “Investments in mid-level education opportunities like community colleges and associates degrees” encourage expanding firms to take advantage of cheaper prices and set up their production facilities in these otherwise depressed areas, he argues.

He points to quick-fix tax incentives to large retail stores as an example of short term thinking that will not help a local economy.

“Retail doesn’t increase quality of life,” Kemp says. “You cannot improve the standard of living if you don not improve the wealth of your consumer base,” adding a community employed only by big-box stores means few can purchase the goods they are selling.

Recent examples of successful economic development in the region include the city of Moreno Valley building a 1.8 million square foot warehouse and distribution center for Skechers footwear. The company’s headquarters are based in the much more expensive and congested coastal town of Manhattan Beach. Thus, choosing Moreno Valley meant expanding operations cheaply but domestically.

Kemp’s other recommendations for the region include shifting away from transportation projects that are exclusively highways. While the capital that such undertakings inject into the economy is significant at first, “you’re effectively building something that lets people drive past the region,” he said. High-speed rail, on the other hand, creates local inflow and makes a region as large as the Inland Empire more manageable to entrepreneurs tired of “being stuck in commute for two hours because they work” in more dynamic economic zones closer to the water.

And on the green economy? “Focusing on just green products is missing the point,” Kemp said. “You cannot incentivize green creation, only its demand.”

Greening isn’t the product, but the process, he concludes. Firms that help companies operate more efficiently not only keep costs down, but diminish carbon footprint as well.

The solution, Kemp says, must include specific updates to education curriculum: “In the third and fourth grade when students are solving word problems, it’s time they start determining the costs” associated with more streamlined logistics.