Business analyst Mark Lacter joins KPCC once a week for an in-depth look at economic issues in Southern California.
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Tech and media companies head to the Southland

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KPCC's business analyst Mark Lacter says tech and media companies keep expanding along the West Coast.

Steve Julian: Mark, one of those pockets is near Los Angeles?

Mark Lacter: Steve, when you do traffic reports in the morning, how often are there tie-ups on the westbound 10 headed to Santa Monica?

Julian: Only on weekdays that end with a Y…

Lacter: Well, that's a nice little barometer of economic activity in L.A, especially activity in creative businesses like software houses, Web designers, ad agencies, and videogame publishers.  All these media and technology companies form the basis of what's being called Silicon Beach.  And besides rush-hour traffic, the activity is also reflected in the office market.  The vacancy rate in Santa Monica was running at 11 percent - that's compared with 18 percent for downtown L.A.  Asking rents in Santa Monica are way more expensive, as well.  That assumes you can find what you need - businesses wanting to expand there have found it hard to find large amounts of office space, especially the creative type space that these companies say they need.

Julian: Creative space, to me, sounds like exposed ceilings, you can see the beams above you, an open layout, maybe the sound of waves lapping...

Lacter: Don’t forget the surfboard next to your desk.  Now, the obvious reason that space has gotten so tight is that workers and owners want to be close to the water, and they also want to be in an urban environment.  But, there's another important reason: they want to be close to each other.  And that's because they often work together - the software house might be developing a program for the Internet marketing company or the special effects company.

Julian: What size businesses are these?

Lacter: Not large ones, and their individual impact on the employment market in L.A. isn’t overwhelming; add up the categories and you're looking at about 100,000 jobs in all of L.A. County.  That's out of a workforce of almost 4 million.  But sometimes economic impact goes beyond raw employment numbers.  A few weeks ago, we talked about all the additional people working in hotels and restaurants last year, but how their wages are often too low to stimulate much economic activity.  But then there are these Westside companies - some of them startups, some of them L.A. outposts for major corporations like Google and Facebook - and the potential impact is a lot greater.

Julian: Doesn't this tell you a lot about the class differences in L.A.?

Lacter: It really does.  If you look at the Census tracts for the L.A. area it becomes obvious where people in different kinds of jobs are living.  The demographer Richard Florida has put together a fascinating map of Southern California that lays it all out.  First, he has areas shaded in purple along the coast, into the western San Fernando Valley, some of the San Gabriel Valley, and into Orange County – all that represents households in what he calls the "creative class,” and it includes people in science and technology, media, entertainment, business, and law.  This creative class makes up about a third of all workers in the L.A. area.

Julian: What about the working and service class?

Lacter: The service class is concentrated in the eastern San Fernando Valley, central L.A., portions of the San Gabriel Valley, and also inland Long Beach - and it's made up of folks in food service, retail sales, administrative positions, that sort of thing.  They make up nearly half of all L.A. workers.  Then comes what's maybe the most interesting grouping: the "working class," which includes people in jobs like construction and manufacturing.  And this group makes up only 19 percent of L.A. workers.

Julian: I can only imagine how many more working class people there were 40 or 50 years ago.

Lacter: True, because in those years L.A. was a factory town.  Over the years, most of that business has left town, which has made L.A. one of the most polarized regions in the nation.  It's also made it one of the least affordable.  Manhattan Beach, which is where some of those tech and media people live, had more $1 million-plus homes sold last year than any other location in California except Hillsborough up north.  That tells you a lot.

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