Business Update with Mark Lacter

LA's leisure and hospitality industries lead the way in jobs

Beverly Hills Hotel

Ashley Myers-Turner/KPCC

KPCC's business analyst Mark Lacter says the service industry is doing well in the Southland, but worker salaries need to improve.

Steve Julian: Last year in Los Angeles County, the leisure and hospitality sectors led the way in new jobs.  Mark, that's better than 2011, isn't it?

Mark Lacter: Indeed, Steve.  It’s up five and a half percent, which in this economy is a lot.  By comparison, manufacturing in L.A. County was down nearly 2 percent.  Now, by leisure and hospitality, we are mostly talking about restaurants, bars, hotels, and tourist attractions.  And the numbers make sense, considering that 41.4 million visitors came to L.A. last year - that's a record - and they spent more money and filled up more hotel rooms than a year earlier (hotel occupancy also set a record).  And more of them came from outside the U.S., with China becoming the top overseas market for the first time.

Julian: And when visitors spend money, they generate jobs...

Lacter: ... which, of course, is a good thing.  They also generate almost $200 million in hotel tax revenue, which is a big deal for local governments trying to bring down those large budget deficits.  So, in lots of ways this is good news.  Where it's not such good news is when you start looking at what these workers are making.  For tourism-related jobs, the average wage is about $35,000 – that’s almost $20,000 below the average county salary.  The numbers are even lower for restaurants and fast-food outlets where the average wage is more like $18,000.  (To give you some perspective, the average wage in the entertainment industry is $110,000.)

Julian: Not to state the obvious, but people who work in restaurants or hotels can't afford to buy a house -

Lacter: - or, in some cases, a car.  Chances are they don't receive any health coverage, which means they'll often come to work sick.  And, most importantly, Steve, they often have only limited skill sets because they don't have much education.  So, the chances of them moving up the income ladder are not exactly great.  And if all this sounds familiar, it's because the Los Angeles area has been struggling with this have and have-not predicament for more than two decades, both in recessions, as well as in recoveries.  That’s the much broader economic problem.

Julian: Are there jobs outside hotels and restaurants?

Lacter: Yes, there are jobs, but as we know by now this is a very uneven recovery, and a lot depends on the industry - and even the location (Northern California has tended to do a little better than Southern California and the coastal regions are especially strong).  You can see this in places like Santa Monica, El Segundo, Venice - areas that are being dubbed Silicon Beach.  These are not large technology companies like Apple or Intel up north – they’re generally a hodgepodge of advertising, marketing, and entertainment businesses.  YouTube, for example, just opened a production facility in the old Hughes Aircraft offices in Playa Vista, although a lot of what's going on involves smaller operations.  Point is there are job opportunities at these places.  But the folks who get hired for those jobs are highly-educated.  They're not the kinds of jobs that would be available to, say, a high school dropout who is struggling to make ends meet at the local McDonalds.

Julian: It always seems to get back to education.

Lacter: That’s right.  I mean, roughly one-fifth of L.A. County's workforce has not completed high school (that’s actually an improvement from what the rate had been in 2010).  You know, in the old days, folks with lower-wage jobs could typically advance to higher-paying construction and manufacturing positions, but as we all know, those jobs are disappearing.  L.A. County alone has lost hundreds of thousands of manufacturing jobs since 1990 – some of them to overseas suppliers and some of them just to more efficient production methods – and they're simply not going to come back, no matter what the politicians keep promising.

Julian: Or, no matter what happens to the overall economy.

Lacter: That’s the dirty little reality, Steve.  So, while the employment situation has clearly gotten better, with L.A. County adding about 70,000 payroll jobs in 2012, the deck is really stacked against a large portion of the workforce - and the thing is, you can't just wave a magic wand and give these folks high school and college degrees.  It's a problem that could be us for decades, and no one has any great answers.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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