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For San Diego’s workforce, the future looks like more of the same: high unemployment, stagnant wages and increasing cost of living. Needless to say, San Diego’s recovery relative to other metros, thus far has been lukewarm. Yet bathing this gloomy outlook is the sunny optimism reflected in consumer confidence, rising demand and increasing employment opportunities. With every economic cycle, jobs come and go, but the fundamental question still lingers: Why do San Diegan workers continue to struggle to make ends meet?
The answer lies in wages, in particular the affordability gap between what a job pays and what it costs to live in San Diego. In terms of average annual wage per job, San Diego has still not recovered from the loss of manufacturing jobs in the 1970s. The figure below shows that when adjusted for inflation, the average wage per job in San Diego in 2010 still pays less than the average wage per job in 1972. During the past decade, real wages in San Diego have been slightly trailing real wages statewide. It should be noted that employment estimates used to compute the average wage by the Bureau of Economic Analysis are a job, not person, count. Hence, people holding multiple part-time jobs are double-counted, and this depresses employment quality indicators.
To compound the problem of lower wages, the cost of living in San Diego is quite high. The recession and subsequent downturn of housing prices has significantly lowered the relative cost of living in San Diego. Nevertheless, when adjusted for the cost of living, the average wage in San Diego is the second lowest among 20 largest metropolitan regions in the nation.
The result of lower real wages is that San Diego has one of the lowest household incomes in the nation, when adjusted for the cost of living. The recession has further exacerbated economic hardship and spread poverty in neighborhoods throughout the region. The good news is that there is a strong competitiveness of the region in attracting professional, scientific, and technical service jobs, as well as management jobs. At the same time, there is a strong counter-current of low wage jobs in tourism and retail.
The above figure shows the landscape of private employment by industry super-sectors in San Diego. The largest share in Professional and Business Services consists of a very diverse variety of subsectors that include Finance Insurance and Real Estate, Professional/Scientific/Technical Services, Management, Administrative Support, and Waste Management. The annual wages in this super-sector range from $18,000 for a video disc rental job to $180,000 for a securities brokerage job. It should be noted here, that a recent Brookings Institution report suggests that San Diego still specializes in funds and trusts, though the financial sector has been hard-hit recently. Over the past two decades, the proportional share of manufacturing jobs has been replaced by that in Professional and Business Services. This is a national trend, but some regions have done better. For example, a similarly sized region, Santa Clara, has 20 percent of jobs in the Manufacturing industry, and an average annual wage of $92,000 for all jobs in the county.
Boom or bust, the failed economic experiment that is oblivious to the quality of employment being generated in San Diego sadly continues. There are disproportionate number of jobs in lower paying industries being created, many through active public policies, development entitlements and taxpayer subsidies. Even in the industries with low-wage jobs (Food Services and Drinking Places, Retail Trade), the average wage in San Diego is lower than the average in California. The average industry wage of all the jobs lost in the past three decades is about $61,000, and the average industry wage of all the jobs added in the last three decades is about $51,000. Since the rate of jobs being added is four times the rate being lost, San Diego’s average wage will fall further, and at best stagnate during the next decade.
The problem of low wages and high costs is that San Diego slips further in attracting and retaining a skilled workforce. In a globally competitive environment where the region’s businesses are seeking a diverse employee-base domestically across different levels of education and experience, and a local consumer market with significant disposable income, San Diego is falling behind. This structural problem with the economy can only be resolved if elected officials, business and labor can together chart the path towards better wages for all San Diegans.
Murtaza Baxamusa is an adjunct lecturer with the Sol Price School of Public Policy, University of Southern California; and the Director of Planning and Development for the San Diego Building Trades Family Housing Corporation.
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