San Diego Housing Bubble News and Analysis

Well, the Union-Tribune ran that article the other day on the relocation of Buck Knives. In it, they quoted some economist as saying that the number of jobs leaving the state were somewhere below 1% of the employment, which obviously isn't going to be a biggie. How San Diego's employment stacks up might be another thing, though.

One thing that I keep wondering about is how the mix of jobs will trend. I mean, I don't think that simply counting heads in terms of employment is all that meaningful when it comes to forecasting the number of wage earners who make enough to buy San Diego property. If only 10% of the households in the county earn enough to pay the mortgage (at a fixed rate) on a median priced home then in a way it almost doesn't matter what's happening with the other 90%.

Take Buck Knives, for instance. I think it was 85 out of 225 jobs that relocated, and they were talking about average wages on the factory floor at $15/hour. Okay, some are making more and some are making less but I'll bet that there weren't many of the 225 (non-family) employees who were making in excess of $50k.

When the economists and politicians talk about job growth, I'm more interested to see what type of jobs are being created than how many the total is. I wanna know how many $70k+ jobs are being created - my suspicion is that it's nowhere close to the 10% of the total new jobs coming online.

Another thing to consider is the stability of employment at those salaries. I don't think an MD would have a problem replacing an employment situation, but there are a lot of incumbant job holders in those salary ranges that wouldn't be replaced at the same salary range right now. When one of those employees leaves town and their job gets replaced there is no loss of the job but there is a loss of a home buyer's salary. There are so many variations of the employment vs. homeowner game it makes my head swim.

I have not read of any trend of companies leaving San Diego or California.

The Buck Knives story was interesting. In it, I found this:
"A 2005 report by the Public Policy Institute of California, a nonprofit research organization based in San Francisco, found that job losses from company relocations have never been more than a tenth of 1 percent of all of the state's jobs.

“There has been no substantial business exodus from California, and there has been little if any change in the rate at which businesses are leaving California or avoiding California,” the study said. END QUOTE

During the power shortages a few years ago, I remember Buck Knives talk about leaving, to reduce electricity costs. The main reasons for them leaving cited in the article are high workers' comp and utilities. No mention of housing cost. Workers' comp insurance is 10X higher in CA than in Idaho, so for 200 employees they've saved $400 million. Idaho has no minimum wage law, so only the federal min. wage applies.

Did anyone see the U-T article (12/15/05) about the economy and loss of manufacturing jobs? They mentioned Qualcomm - they can't fill about 500 positions, since the high cost of housing is keeping employees from moving here. Yet, there is not talk of Qualcomm leaving San Diego.

There has been a loss of manufacturing jobs (U-T article) due to plant closings, not relocation. For example, Sony just closed its Rancho Bernardo TV plant, since consumers are more interested in purchasing plasma TVs made in China.

I work for a nameless large banking corporation in California with branches across our state. Corporate is planning on moving all employees that aren't customer-facing (IT, corporate, research, etc.) to Arizona to save costs. The senior VP of our department fought the move and we are staying put. None of us have any desire to live in the desert. Apparently corporate is still planning on moving all behind the scenes employees to Arizona. There are rumors that customer support may be outsourced to a call center in Idaho to save costs.

$400,000,000 / 200 employees = $2,000,000 per employee for workers' comp.

Seems just a tad high.

The U-T article had a chart

Workers Compensation
Rate per 200 employees, in millions
Idaho $42.1
California $419.1

Yeah, the numbers seem high.

Is your bank thinking of leaving because of high workers comp costs? This is interesting, and many companies may have considered a move to a cheaper location (to save on workers comp, taxes, labor costs), but how many actually follow through?

As a IT worker for many years, I saw design, redesign, many times, some projects require hiring consultants to provide new skill, most were done through in-house training.

The last 5 years has been very very dramatic in the IT world, mainly the off-shore hiring has become the main stream and trend, I am sitting among Indians who come from India, 12 of them! They are all hired by agencies directly from India, their hourly fee is $20 but my company is paying their agencies with a rate of $45-$60, they are young and knowledgable, they live together in a rental house, drive in with 1 car, they send almost all of their earnings back to India, there is only 1 white American works as a consultant among
20+ others.

My questions are:
(1) Companies may still log the hirings as regular hiring because they are paying the agencies with headcounts, but these jobs are not USA jobs, so when we see employment figures every Friday, they might not reflect the true picture.
(2) Companies do not have to move to other states, they just send more business to off shores to save big money, in the meantime, they cut local people to save big, the employment figure of a particular company may not be different.
(3) I don't think illegal immigrants is a big problem because they only take jobs that locals won't do, but the high-tech jobs are disappearing daily
(4) I had my kids change majoring in their colleges due to this major job-shifting

DDDDDDDDDDDDDDDDDDDDDDDDDDDaxx.

I was told it was due to cost savings, but I'm not aware of the specifics driving the move. Our corporate HQ are located in a place that's costlier than San Diego, so workers comp may be one factor. Labor cost is certainly one factor.

Interesting, there's a U.S. News and World Report (3/27/06) cover story entitled "Can America Keep Up?"

They could have interviewed you for the article, seniormoment. "Nearly half of IBM's engineers and technical specialists work outside the United States. Hiring trends are similar: While big U.S. firms like Microsoft, Accenture, and EDS are taking on modest numbers of American workers, their payrolls are mushrooming in places like India. Corporations closely guard the details of patent and employment data, but this much is obvious: American companies are becoming less American." (Go to the Invest in Corporate America link). The offshoring trend, while causing a loss of jobs to American workers, has kept the competitiveness of American companies. It's better to be a stockholder than an employee of an American company, according to the article.

The main article is about the offshoring of high tech, telecom, and biotech jobs, and our complacency. "We had more sports-exercise majors graduate than electrical-engineering grads last year," lamented General Electric Chief Executive Jeffrey Immelt in a January speech.

How will this affect our economy, nationally and locally? How do we best prepare our youth for the global marketplace?

I've come to believe that keeping our youth in structured activities most afternoons and weekends is going to hinder them in the new economy, but that is a whole different topic. I was one of those parents spending $1K/month on my kids' activities, driving them all over, and had done that for over 10 years. It was expensive, time-consuming, and restrictive. I now believe that this new way of raising kids is not doing them any good, so a few months ago, I cut back on the activities. A modern kid's life is a huge social experiment, and what are the benefits of being constantly in an environment where adults tell you what to do? How can you create, socialize, structure your time, make up your own games? What skills do people really need to be productive and make a living in the new economy?

As the article said, while the American college student is drinking beers and watching football, the Chinese student is on his fourth book. And that's the person that our kids will be competing against.

Hello there, to stretch a bit more on the offshore hiring, not only the high tech jobs are taken away by
'smart but work cheap' people from the far east, but as my wife's firm moving all their account receivable and reporting functions to India and laid off the entire department (but 1), I know the trend is not just
IT jobs.

One day, my wife needed some information, she had to wait till 3 PM to call India, the guy over there was sleeping, he was awaken and required 20 minutes so he could ride his bike to his office to check the computer, ain't that amazing?

I also read news about the big law firms, they charge their clients big hourly fee but their research work is actually done by offshore firms !!!

WOW! I am done with my so-called career, but if you are in a position that the internet can simply acts as
the shipping and handling for your boss or your company then you are not save if you are a young person because the offshore hiring is just begining.

If you are very very skilled in certain areas of software or electrical engineering, this outsourcing can work to your benefit, believe it or not. Many companies have laid off so many workers and moved so much overseas that they now have only a skeleton crew here in the states. I quit my day gig recently and am now operating as a contractor at a very high rate helping some of these companies out. They are rapidly learning that the quality they get from some of the Indian shops is not quite up to par and that communications and time differences really do make a difference, especially on projects with tight schedules. And, as someone pointed out earlier, US companies are already paying $50-60/hr for Indian contract workers here in the US, so the cost savings aren't what they were 7 or 8 years ago. Also, most of these Indian kids are only a couple of years out of school but are filling positions that require more experience; this means more projects in trouble, more bugs, which means more $$$ for yours truly. While guys like me are probably okay for the next few years, the people that are really screwed are the American kids graduating with engineering degrees now. They've got no choice but to go to Lockheed or Raytheon and polish bombs. Death is pretty much the last growth industry left here in the US.

Hello, this is still going around me, my projects:

Last year, we used PeopleSoft software to develop an
semi in-house product, before it became production, the
total maintainence work for that application had been
bid over by an Indian company, they are now maintain the project from India with a supposed lower fee.

This year and now, we are converting a legacy system into something modern, guess what? The entire software
design is led by an Indian team, they are here as consultants but because of their initial involvement and expertise, the end product will also be maintain by them!

What a xxxxxxxxxxx..., no fun no more, no save no more.

You are right about staying up front at the technology
but they are catching up fast, the Indian universities
have majoring in every software we are using here according to the offshoring consultants' confession!

Well, the good USA people is going to let Mexican to farm the land, to let Indian to develop the software,
to let Chinese to produce all Wal-Mart goods, pretty soon, you'll see traffic cops with green faces...
well, what are AMerican doing everyday? Just sitting
back and relax looking out the beautiful ocean ...
geeee, life is good ...

While American companies are prospering with offshoring by increasing their profits, American workers are not.

Job security requires flexibility, and selecting positions which require interaction with other people, whether they are employees or customers. Certain market segments will stay in demand: entertainment, finance, professional and other services.

Personal skills needed: blend of high creativity and intelligence, coupled with motivation, ambition, and good teamwork and communication skills.

I have a friend who is a s/w manager, and she has worried for years about being outsourced to India. She has a high mortgage. I can't imagine living like that every day. She works from home late at night, so she can call Indian coworkers, who are just arriving at work.

Any other thoughts on how to navigate the new economy?

Just one - maybe we need to lower our expectations to more realistically fit in with the global economy. Migrate to India, expect to work 10 hours a day, get a bike and learn to be happy with having less. Okay, that's over the top, but I do think we need to take stock of our current expecations and see how reasonable they are in relation to the world we live in.

Maybe we really don't need the 4,000 SqFt tract home or the Beemer in the driveway.

A rule of thumb:

Don't relocate where your company moves!

That story about SD residents move to Idho? Bad decision.

I read an article not long ago, the onion or ginger producers up in the north CA are now importing the produce from China, why? because it is cheaper to import them than to grow here, well, same labels, can't tell where exactly they are from.

Now, if you move with your company, what happens when your company sends the order to offshore? Are you stuck at Idho? Bad decision to move near your company because it is more convenient to commute, what happens if you are let go? Passing the company who fired you everyday? Bad to your health.

It is not how well you perform on your job alone to assure your job anymore, it is how much your company wants to save nowaday, so, it is a geese chasing game...

Notice that all of the sectors you mentioned (with the arguable exception of entertainment) are non-tradable across national boundaries, meaning they're not going to help the US trade deficit one bit. And our entertainment is probably going to lose its lustre overseas over the coming years as India and China develop and produce their own. If we lose our ability to produce REAL products for export (things like aircraft, electronics, and heavy equipment), those high-paid attorneys and financial professionals you mention will eventually be joining their laid-off engineer neighbors in the soup lines. The only hope for the US is to regain our position as a world leader in technology. If I were in charge, I'd start pouring R&D money into alternative sources of energy and new engine technologies. That's unlikely to happen, though, so in the meantime you might learn Mandarin Chinese and pursue a career as a liason to help Chinese companies get their products to American markets. Or learn Portugese and start a software contracting business in Brazil that can work even cheaper than the Indians. Think internationally.

I agree with you. My comments about the industries that can prosper was just what the USNews article stated. My own opinion, which I stated this morning to my son's math teacher, is that math and writing are the most important skills our youth need, because those abilities will help us compete in the new economy. We need to invent new products for export, and that requires a great comfort in math. When I was in college, a loooong time ago, I was one of the only women in the engineering courses. I'm glad that has changed.

I've heard too many adults tell me they didn't choose a certain major because they didn't like math, or they'd have to take too many math catch-up classes. Kids who don't take enough math end up eliminating about half the majors available to them in college. They say, "I don't want to study Chemistry because I'd need Calculus", or "I can't study Computer Science because I would need to start with Algebra 1".

The best favor any of us with kids can do, is to make sure our kids take the toughest math classes they can handle, all the way through high school, and get tutoring if needed. They must also write well, and since teachers have too many students to spend adequate time to edit reports, parents have to fill that void. Kids also need time to free play, make up games, ride bikes, and learn how to fill their time. They need to pursue their own interests, and not just ours. That means less time in structured activities, more time in their own creations. And of course, forget the game boy, game cube, TV, or minimize its involvement to a couple hours per week. (My oldest wasn't allowed to have a game cube until age 12, so he may not be adept at moving his thumb, but you should hear him play the piano and the sax!). Poway High School does not offer Chinese, but I agree this is a language well worth learning. This is my view of preparing youth, and I so much would like to hear more opinions.

Does anyone reading this have any advice on keeping flexible in today's job market and preparing our youth for the new economy?

A few years back the Fox Network's MadTV used to run a series of visual gags called "Lowered Expectations". They depicted singles who would normally sit on the bench, but could play as long as they were willing to settle for (much) less in the way of their expectations. As it relates to the singles scene it was pretty funny. I'm guessing the concept as applied to standards of living isn't going to be so funny for a lot of our kids.

The term "Global Economy" doesn't mean raising everyone's standard of living to equal ours' any more than welfare programs can equalize everyone into the middle class. In order for 'social justice' to prevail we will all have to suffer equally.

Luckily, girls wouldn't have anything to do with me in High School. I got into computers instead. When I choose a major Comp Sci was it. The point is its not so important that your kids do well in math or science per se as that they are exposed to it by their parents. Couple that with the expectation that they will not take the easiest major, or the one with the most hot chicks and they are well on their way to making good choices. You can't force your kids into engineering or technical fields, but if you give them exposure to it early enough and make them take a few steps in that direction it will seem a whole lot less mysterious when they have to make their own choices. I for one never got past algebra 2 in high school and I had to take calc 2 and linear algebra twice in college.

Playing video games neither helps nor hinders your childs exposure to computers and science. Its a non issue. Getting them to build a PC, install an operating system or make a web page or even build a better mouse trap that gives them the sort of knowledge that leads to good choices.

Oh and it doesn't hurt to talk about such people in a positive light either. Too often engineers and scientists are seen as nerds, even still.

Josh

Hi Powayseller,

I have been reading this blog for awhile and think you are a very smart and farsighted lady.

I asked for some advice regarding buying or renting a house awhile ago and you recommended to rent. In the end, my hubby and I took your advice and we are continuing to rent now.
Regarding the Chinese language, I totally agree with you. Mandarin will be one of the most useful languages in the future.
I wonder if your kids are interested in learning Chinese. I am Chinese myself.(came to the US in my 20's)If they are interested in learning Mandarin, I will be happy to teach them as I am teaching my daughter now.(She is in second grade.) I live in Scripps Ranch. If your kids are interested, you are welcome to keep in touch with me by email at: hstein64 [at] yahoo [dot] com

I look forward to working with you, and my kids are excited too. Why do you think Mandarin is more useful than the other Chinese dialects? I'm sorry to be so ignorant about this.

Yes, there are lots of different dialects in China, such as Cantonese, Fujanese,..., but Mandarin, also called "Pu Tong Hua" is the official language in China. Whatever dialect you speak, you are required to learn Mandarin in school.

I am glad your kids are interested in learning. I am looking forward to meeting them.