Just when the North Bay in a state known to endure wildfires, earthquakes and other natural and unnatural disasters thought it couldn’t be jarred into submission anymore, here’s this harsh pending reality.
California could be soon facing the economic disaster of lingering job losses among its lowest wage earners.
LaborCUBE, using Moody’s and Bureau of Labor data, stated 37% of California jobs — amounting to 6.4 million — are “at risk” of going away for good as the result of the COVID-19 crisis. Among the people who hold those jobs, 86% make under 40,000 a year.
Because many of these jobs are classified in the service industry such as leisure, hospitality and retail, the loss of those lower wage jobs could be felt particularly in the North Bay.
“That’s something we haven’t begun to reckon with,” said California Forward CEO Micah Weinberg during a June 11 webinar “Pandemic and the New Economic Abnormal in the North Bay and California,” which was put on by the North Bay Leadership Council. (The North Bay Business Journal was among the event sponsors.)
Weinberg’s California Forward, which is a statewide economic advocacy group, teamed up in the webinar with Chris Dombrowski, Gov. Gavin Newsom’s acting director of the Office of Business and Economic Development (GO-Biz).
According to a McKinsey study, 24% of this probable job loss falls into the accommodations and food service industries, with 17% in retail and 11% in health care. These types of jobs are plentiful in the North Bay, making it poised to suffer more than most regions in the Golden State in the coming years as the pandemic tightens its grip on our way of life.
“(Tourism and hospitality) are industries the North Bay is dependent upon most heavily,” Weinberg said.
Leisure, hospitality and retail comprise 10% of California’s gross national product.
With the U.S. GDP dropping 3.9% this year compared to 2019, the trouble will only be prolonged as the economy sputters into recovery, according to Weinberg’s report.
“We see a more muted recovery. This is not going to be a flash in the pan,” Weinberg said. “We’ve dug ourselves into a hole. The economic crisis is just getting going.”
Full recovery is not expected until 2023.
An inequity comes about because a disproportionate number of at-risk, low-wage earners, renters and small business owners consist of people of color.
“Minority small business owners are hit extraordinarily hard,” he said, while further explaining these companies are often passed down between generations.
Weinberg calls the economic inequity “structural discrimination.”
Other aspects of the coronavirus outbreak’s resulting turmoil lie in the educational and health care arenas. The latter may surprise some considering health care and sick people go together. But treating COVID-19 patients is not a hospital’s main revenue driver. During the shutdown, countless elective surgeries were canceled among other procedures and visits.
The path forward leads to more challenges
Wear masks and avoid people were the calls of caution from the economic gurus. “This thing ain’t over,” Weinberg said.
In declaring the crisis has wiped away much success in a few months, the state’s economic watchdogs believe California residents will worsen their recovery chances if the virus spreads.
In the meantime, opportunity to reinvent the state again abounds.
“We need regulatory reform,” he said. Commerce can’t grow if it’s stifled by red tape.
“We have arcane permitting systems,” he said.
For example, if a health club needs to install a child care center — notably with some free-standing locations going under — it shouldn’t be deterred by government paperwork and restriction, he cited.
“We need to look at this with a new lens,” he said.
Infrastructure investment is also necessary, especially in terms of handling another ongoing crisis — housing.
“The lack of housing leads to overcrowded conditions and homelessness,” Weinberg said, referencing sure-fire ways to spread the virus.
Weinberg also suggested that perhaps local governments may see a way to survive by merging. These municipalities have already struggled with the burden of pension entitlements and now face what could be astronomical losses in sales and transient occupancy tax revenue.
Looming local government debacles are sure to be joined by the state, which faces a $55 billion budget shortfall in California’s $200 billion annual financial blueprint.
“This crisis unfolded in one month. It’s an incredible amount of work for the state legislatures to take on,” Dombrowski said.
The state economic official pointed to “the telework angle” as a “fascinating” part of the crisis outcome. He expressed encouragement that many companies are toying with significant portions of their workforces making these overnight sensational trends permanent.
Telework will lead to businesses reducing their office footprints. The hope is the transformation may end up converting commercial space not needed because brick-and-mortar retail shops have closed into residential property. One notion is industrial space may be more in demand as companies beef up their shipping and receiving operations, thus reverting back to the pre-World War II manufacturing days.