Business Press Article
September, 2005

by
John Husing, Ph.D

International Trade, Blue Collar Workers & The Inland Empire's Future.

(First In a Series) Nearly everyone of us has had the terrifying experience of having an 18-wheel truck almost crash into us. Or, we have found that exiting the freeway was impossible due to the convoy-like string of trucks blocking the freeway’s inside lanes. If you live near a railroad track, your mind has either learned to block out the sound of train whistles or you look forward to old age and deafness. In a hurry to cross from the west to the eastside of Riverside, that’s iffy given the 21 railroad crossings where Burlington Northern Santa Fe (BNSF) and Union Pacific Southern Pacific (UPSP) trains cut the city’s streets in half. If you live near the ports of Los Angeles or Long Beach, the chances of acquiring lung disease or cancer from diesel fumes are the highest in Southern California.

CALLS TO STOP CARGO GROWTH. These difficulties are raising an outcry against the huge influx of international cargo moving from Asia, through the ports, through the Inland Empire and on to the rest of the United States. Activists and local officials representing their neighborhoods want the ports slowed down and the growth of cargo diverted elsewhere. People living along the I-710 and I-60 freeways and their representatives oppose expanding these routes to accommodate more trucks. Anyone within hearing distance or faced to drive across railroad tracks wants the growth of train traffic to be limited. The San Bernardino’s mayor has effectively blocked BNSF from putting a railroad intermodal expansion next to San Bernardino International Airport (SBIA). Residents of Orange Crest tried to stop the use of March Air Reserve Base (ARB) as an air cargo hub. The Redlands City Council is not alone in wanting to slow if not stop the construction of large warehousing facilities in their community.

WE NEED CARGO GROWTH. BUT … and this is a big BUT … there is another half of this story coming from three very real facts. Fact #1, 50% of the Inland Empire’s adult population in 2003 had not step foot in a college classroom for even one course. It was 47% in Los Angeles County and even 37% in Orange and San Diego counties. Fact #2, manufacturing as a growth sector is dead. In 2005, the sector has added an average of just 700 new jobs in the Inland Empire. It has added just 5,050 of California’s 240,000 new jobs (2.1%). Fact #3, the rise of Asian trade is expected to cause the growth of containerized cargo moving through Southern California’s ports to double from 2000-2010 and more than triple by 2030 (see Exhibit).

Fact #1 means that those concerned with the health of a huge swath of the Inland Empire’s families must develop an economic development strategy that will allow marginally educated workers to achieve mobility into the middle class. Fact #2 indicates that the traditional path for doing so via the manufacturing sector is now closed. Well-paid Chinese manufacturing workers made $0.670 an hour last year. Recently, the Chinese allowed the Yuan to rise 2.1% against the Dollar raising the relative rate to $0.684 an hour. In the long run, there is no way our firms can compete with that labor cost advantage. Fact #3 means that there is one blue collar sector for which Southern California has a clear cut competitive advantage vis-à-vis the rest of the U.S. … logistics. Some 44% of U.S. international containers came here in 2004. The jobs processing this cargo are ours, if we can accommodate the rising volume of trade.

A 1,000,000 JOB ECONOMIC STRATEGY. Two sets of data tells us that we must find a way to maintain our competitive advantage. First, in 2004, the California Employment Development Department found that the sector’s average 2003 Inland Empire pay was $37,161 above either manufacturing ($36,704) or construction ($35,373). The sector thus offers blue collar workers the chance to go to work and move up into the middle class.

Second, forecasts from the Southern California Association of Governments (SCAG), on which I have worked, found that by building the infrastructure to accommodate both the growth of international trade and clean up its worst environmental side-effects, we can create 1,000,000 jobs. Of these, 300,000 would come from the natural increase of logistics if its allowed to grow. Another 100,000 would be added as the system becomes more efficient. Another 250,000 would be added in the construction industry due to the need to build new transportation facilities. The balance would come from the growth of the economy due to the efficiencies that come from this investment as well as the multiplier impacts of this spending.

OUR CHALLENGES. How can we both build the infrastructure to allow these 1,000,000 jobs to be created, while stopping ourselves from drowning in a sea of trucks, trains and planes or dying from diesel inhalation? That is the challenge to this generation of local leaders. They face a five part dilemma. First, deciding what infrastructure projects to build (port expansion, separating cars and trucks, placement of new intermodal rail yards, grade separations for trains, air cargo hubs). Second, deciding what environmental strategy should be pursued and how (clean engines, reduction of idling engines, reduced congestion, off-peak use of transportation facilities). Third, finding the $40 billion or so required to fund this effort with nearly bankrupt state government and a deficit ridden federal government (tax incentives for private financer of infrastructure, user fees, container fees, access to port tariffs). Fourth, determining who will manage the collection of fees, plus the acquisition and spending of construction monies for a gigantic multi-county effort (an agency akin to the Alameda Corridor Transportation Authority). Fifth, what is the political strategy for bringing this about given the Anywhere But California attitude in Washington D.C., political parties afraid of taxes, industry lobbyists oppose to any fees on their clients and a federal government that has no idea about the land side impacts of its free trade policies.