1998, 71 pp.

By: MARK DRAYSE AND DANIEL FLAMING, ECONOMIC ROUNDTABLE; DAVID RIGBY, UCLA DEPARTMENT OF GEOGRAPHY; AND MICHAEL BELTRAMO, BELTRAMO AND ASSOCIATES

This report analyzes the impacts of aerospace restructuring on the Gateway Cities. The analysis draws upon Department of Defense contract data bases, local industry employment data, and input-output modeling of the local economy.

The Gateways Cities region of Los Angeles County is comprised of twenty-seven cities that have formed their own Council of Governments. It is made up of: Artesia, Bell, Bell Gardens, Bellflower, Carson, Cerritos, Commerce, Compton, Cudahy, Downey, Hawaiian Gardens, Huntington Park, La Habra Heights, La Mirada, Lakewood, Long Beach, Lynwood, Maywood, Montebello, Norwalk, Paramount, Pico Rivera, Santa Fe Springs, Signal Hill, South Gate, Vernon, Whittier, and adjacent unincorporated communities.

Between 1992 and 1997, we estimate that the greatest job growth in the Gateway Cities occurred in industries paying low wages and salaries, while the greatest job losses occurred in industries paying above average wages and salaries.

• We estimate that 17,900 jobs were lost in the Gateway Cities aircraft industry between 1992 and 1997. Other industries losing at least 1,000 jobs between 1992 and 1997 were finance (-1,700), food products (-1,500), insurance (-1,300), metals (-1,300), search and navigation equipment (-1,200), and printing and publishing (-1,100). Each of these industries pay above average wages and salaries.
  
• We estimate that the greatest job growth in the Gateway Cities occurred in business services (+13,900), apparel and textiles (+4,500), and eating and drinking places (+1,200). These industries pay among the lowest wages and salaries in the Gateway Cities.
  
• In the Gateway Cities economy, the ratio of jobs in low-wage industries to jobs in high-wage industries is growing. Employment in high-wage industries fell from 111,400 to 87,400 (est.) between 1992 and 1997, a decline of 22 percent. On the other hand, employment in low-wage industries grew from 144,700 to 161,900 (est.), a 12 percent increase.
  Due to a higher concentration of employment in declining industries and a lower concentration of employment in growing industries, the Gateway Cities lost jobs between 1992 and 1997 while the rest of the county gained jobs.
  
• Total industry employment in the Gateway Cities was 672,291 in 1992. We estimate that total employment in 1997 was 660,923. This net loss of 11,368 jobs represents a 1.7 percent decline in total employment between 1992 and 1997 in the Gateway Cities. On the other hand, total employment in Los Angeles County grew from 3,813,500 in 1992 to 3,876,613 in 1997, a 1.7 percent increase. Subtracting Gateway Cities employment from total county employment yields an employment increase of 75,111 jobs in the "Rest of Los Angeles County", a 2.4 percent increase.

Since 1994, the rest of the county has out-performed the Gateway Cities in number of firms awarded contracts. Although the dollar value of defense contracts increased 57 percent between 1987 and 1996, it fell 43 percent between 1994 and 1996 in the Gateway Cities.

Between 1987 and 1996, the number of Gateway Cities firms receiving defense contracts declined by 32 percent, a significantly larger decline than in the balance of Los Angeles County.

Two firms dominate defense contracts in the Gateway Cities: McDonnell Douglas (now Boeing) in Long Beach and Northrop Grumman in Pico Rivera. The value of McDonnell Douglas defense contracts increased from $1.32 billion in 1987 to $2.74 in 1996, a 108 percent increase. However the value of this firms contracts fell from a peak of $3.33 billion in 1994 to $2.74 billion in 1996, an 18 percent decrease. The value of Northrop Grumman contracts fell from $3.07 billion in 1991 to $0.98 billion in 1996, a 68 percent decline. The peak value of Northrop Grumman defense contracts in the Gateway Cities was $4.90 billion in 1992.

The total value of all Gateway Cities defense contracts grew from $2.63 billion in 1987 to $4.12 billion in 1996, a 57 increase. However, between 1994 and 1996 the value of defense contracts fell from $7.20 billion to $4.12 billion, a 43 percent decrease. Thus, the average value of contracts fell even more rapidly than the number of firms receiving contracts, with then net result that tens of thousands of aerospace workers lost their jobs.

The negative impacts of aerospace restructuring in the Gateway Cities have reverberated throughout the regional economy. As aerospace firms cut output and employment, jobs are lost in industries that supplied inputs to aerospace manufacturers, as well as industries that benefited from the earnings spent by aerospace workers. The regional concentration of aerospace production systems and labor markets ensures that the brunt of the economic impact resulting from aerospace restructuring is felt locally.

• The aerospace industry employed 57,000 workers in the Gateway Cities in 1992. An additional 33,000 were employed in firms producing inputs for aerospace manufacturers, and 58,800 were employed in firms to meet demand generated by aerospace workers for goods and services. A total of 148,800 jobs were created by the Gateway Cities aerospace industry through input-output linkages, creating an employment multiplier of 2.61. For every aerospace job (or unit of work), 1.61 workers (or units of work) were supported throughout the economy by indirect and induced production.
  
• Based on this data, aerospace employment in the Gateway Cities fell from 76,600 in 1987 to 34,900 in 1987, a loss of 41,700 jobs. The total indirect and induced employment generated by the aerospace industry declined form 123,300 in 1987 to 56,200 in 1997, a loss of 67,100 jobs. Therefore, we estimate that total employment connected to Gateway Cities aerospace production fell form 199,900 in 1987 to 91,100 in 1997, a loss of 108,900 jobs.
  
• Based on these calculations, we estimate that the total annual earnings of workers in the Gateway Cities aerospace industry fell from $3.36 billion in 1987 to $1.53 billion in 1997. The total annual earnings of workers in jobs supported by aerospace production fell from $3.55 billion in 1987 to $1.62 billion in 1997. As a result, total annual earnings connected to Gateway Cities aerospace production declined from $6.91 billion in 1987 to $3.15 billion in 1997.

• For all occupations represented in the aerospace industry, the 1990-96 job loss was 198,697, of which 117,367, or 59 percent, was concentrated within the aerospace industry group.
  
• Los Angeles County is estimated to have over 67,000 long-term unemployed high technology workers who lost their jobs before 1994 and have not found new jobs utilizing their skills. The Gateway Cities account for at least 29% of jobs lost in Los Angeles County in the high technology sector, with approximately 20,000 long-term unemployed workers.