It has been noted that a “manufacturing renaissance” is underway in the US. National manufacturing employment has been gathering steam since the final months of 2010. During the first eight months of 2012, manufacturing employment was up 1.9 percent from the same months of 2011—outpacing overall 1.4 percent employment growth. Unfortunately, California hasn’t shared in this—manufacturing employment over the same period actually dropped slightly. The Golden State did, though, outdistance the nation by a healthy margin in the lucrative information and professional services industries.
According to a variety of surveys and studies, California faces many challenges in attracting manufacturing enterprises. Recently Andrew Chang & Company, LLC at the behest of the California Manufacturers and Technology Association conducted a national survey of key decision makers at 100 manufacturing companies across the U.S., such as CEOs, CFOs, and COOs who were involved in site selection processes. The 2012 Business Expansion and New Site Survey sought insights into the criteria used to make expansion decisions and to learn why some choose to invest in California and why others went elsewhere.
This study focused exclusively on manufacturers. It would be nice to couple these findings with a similar survey of service providing firms, particularly those in high value-added professional service industries that California specializes in. More information about the industries and facilities the respondents represented would also provide more insights. Is California more or less attractive to all manufacturers? With high population concentrations in key regions and high land costs, California is at a fundamental disadvantage when competing for businesses that need abundant space and low cost labor. When space needs are limited and high value labor skills are needed, the Golden State typically fares better.
Some of the key findings include;
- California accounted for only 2.2 percent of national manufacturing expansions and new sites in 2011.
- 82 percent of the companies surveyed did not consider California when expanding or opening a new facility. Many of the reasons companies gave for not considering California … included a costly and complicated tax system, a poor regulatory environment, high labor costs and a lack of incentives and credits.
- The most mentioned factors that influenced decisions of where to expand were proximity to customers, amount of incentives/credits offered by the state, the cost of labor, proximity to suppliers and the tax system.
- Many of the companies that decided to stay in California were small businesses that chose to stay because of strategic drivers (i.e. proximity to existing facilities, geographic location or personal preference).
- In order for companies to stay and/or consider California the next time they expand, respondents stated that policy makers need to increase incentives and credits, improve the regulatory environment and make the tax system less costly and complicated.