AB 32 has predicted effect on state manufacturing jobs

Jan. 19, 2013

By Chris Reed

Trying to preserve and help create manufacturing jobs should be a primary goal of a party that bills itself as being about social justice. Manufacturing jobs often offer middle-class wages, but don’t require college degrees — providing a great way up the ladder for disadvantaged minorities. Shouldn’t this be catnip for Democrats? One would think.

So what is absolutely crucial to manufacturers? The cost of energy. This is why one of the academics who peer-reviewed an air board study on the economic effects of AB 32 gave it low marks for downplaying what would happen as California forced a broad shift to cleaner-but-costlier energy. Here’s what UCLA economist Matthew Kahn had to say:

“According to page 39 of the Scoping Plan, there are 1.5 million people employed in manufacturing in California. Thus, a key issue is how this sector will be affected by AB 32 regulation. The results reported in Table II-8 claim that manufacturing employment will grow by .4% because of AB 32 regulation. Given that electricity prices are expected to rise by 14%, this is a surprising finding. The micro-econometrics literature has concluded that increased energy prices retards manufacturing employment growth. The manufacturing results reported here contradict the findings from the micro-econometric literature on firm locational and employment choice (see Carlton 1983 and Davis and Haltiwanger 2001 …). In his detailed study of the Fabricated Plastic Products Industry (SIC 3079), Communications Transmitting Equipment (SIC 3662), and Electronic Components (SIC 3679), Carlton demonstrates the importance of metropolitan area electricity prices as a factor in attracting job growth. Cities with high electricity prices lose jobs in each of these industries …”

So we are now ramping up AB 32, and surprise, surprise, guess what? Manufacturers are leaving California even as manufacturing rebounds nationally:

“Manufacturing is staging a big comeback in the United States, according to a new U.S. Commerce Department report, but a new state employment report indicates that manufacturing is continuing its years-long slide in California.

“The federal report says that between the start of 2010 and the end of 2012, manufacturing accounted for 500,000 new jobs. …

“Meanwhile, a monthly report on employment in California, also released Friday, shows that government and manufacturing are among the categories to show declines over the past year.

“Manufacturing, once a major component of the California economy, now accounts for less than 9 percent of the state’s non-agricultural payrolls. It shed 11,400 jobs between December 2011 and last month.”

That is from the Sacramento Bee.

Two questions:

1) Now will the California media finally stop buying the goofy spin that higher energy prices are somehow good for the state’s economy?

2) Do you think it bothers greens in West L.A./Brentwood/Malibu and Bay Area one bit that AB 32 is destroying a path to prosperity for the less-educated and their families?

The answer to the first is probably not. Only The New York Times, strangely enough, has reported that AB 32 is risky. The L.A. Times, Sac Bee, Mercury-News, etc.? They are in the green tank.

The answer to the second is of course not. Manufacturing, you see, creates “dirty” jobs. So greens say good riddance. The poor? Let them eat cake.