What is it about California?
It’s a beautiful state, has the biggest population in the US and is home some of the most innovative tech companies in the world.
Yet, for some reason, California politicians seem to hate manufacturing.
Take a look at this map from the National Association of Manufacturers.
Measured as the percentage of the state’s workforce that is involved in manufacturing, California is below average despite excellent engineering schools and a sizable aerospace sector.
Is it a statistical quirk? Unfortunately, no.
This graph from the California Manufacturers and Technology Association and Conway Site Selection Magazine shows the number of manufacturing investments per capita.
By that measure, California’s performance is dismal, ahead of only Maryland and Hawaii at one-tenth the national average.
This means that manufacturers are avoiding California when it comes to new plant investments. Even Oregon and Utah attract more investment per capita. And it’s not just about California failing to attract new investment; businesses are also leaving the state in droves.
This chart ranks businesses by type as they leave or downsize their California operations. Manufacturing is number one in this dishonorable role, by a wide margin, with over three times as many disinvestments as the next on the list, Pharmaceuticals.
A typical example is General Magnaplate Corporation. Last week, the company announced that it will be closing its Ventura facility after 36 years in operation and will serve West Coast customers directly from its Arlington, Texas and Linden, New Jersey plants.
That’s a long drive to the coast, but the engineering coatings company reported two compelling reasons for the facility closure: difficult business conditions created by the State of California and the settlement of a potential lawsuit threatened by the Environmental Defense Center (EDC) of Santa Barbara. The EDC claimed that General Magnaplate Corp. had violated the Clean Water Act, which the company vigorously denies.
General Magnaplate CEO Candida Aversenti cited increases in worker’s compensation costs and government regulation, as well as predatory citizen’s groups and law firms that “make their living entirely by preying on small businesses.” Aversenti notes that the firm’s Texas and New Jersey operations are flourishing because of business-friendly state and local environments.
So, does California hate manufacturing?
In my opinion, the answer is “no,” but that’s not to say the Golden State isn’t culpable here. California is famously left wing, evolving a strangely hybrid form of politics where advanced, high level assembly businesses like airplane making and electric car building are welcome, as long as companies source the hard, dirty and necessary parts of the manufacturing equation from elsewhere.
California wants the parts, the semi-finished steel, aluminum, plastics and glass; just don’t smelt, refine or plate anything inside the state. It’s the ultimate “not-in-my-backyard” policy, where California cherry-picks the high profile, end user part of the manufacturing system and drives the true enablers of the high technology east or across the Pacific.
This situation also points out the insanity of differing environmental laws across the 50 states. You would think that the air and water should be equally clean for every American but, EPA or not, California operates by her own rules.
Maybe the future for California is in cellphone apps, computer operating systems and Cloud computing, but someone’s going to make fortunes in advanced manufacturing and employ a lot of people doing it. Too bad it won’t be the Golden State.