Confronted with an impending hike to $15 in the California minimum wage, businesses, labor advocates and political analysts have all begun to shift strategies and tactics. Given current trends, the combined impact could be a smaller, more unionized workforce — that doesn’t always see the benefits wage activists have promised.

The consequences will be quick and could be dramatic. “Most state raises over the past decade, when there have been any, ranged from 1 percent to 3 percent annually. The law Gov. Jerry Brown signed will increase bottom-rung pay roughly 10 percent per year starting in January,” as the Sacramento Bee reported.

Manufacturing flight

One immediate result of the hikes has already appeared in Southern California, where the garment industry faces an especially rough road. Sung Won Sohn, former director of apparel company Forever 21 and economist at Cal State Channel Islands, told the Los Angeles Times a veritable “exodus has begun,” with manufacturers already tempted to shift garment production overseas to retreat from the Golden State still further. “The garment industry is gradually shrinking and that trend will likely continue.”

“In the 1990s, as borders opened up, foreign competitors began snatching up business from Southland garment factories. Eventually, many big brands opted to leave the region in favor of cheaper locales. Guess Jeans, which epitomized a sexy California look, moved production to Mexico and South America. Just a few years ago, premium denim maker Hudson Jeans began shifting manufacturing to Mexico. Jeff Mirvis, owner of MGT Industries in Los Angeles, said outsourcing was necessary to keep up with low-cost rivals.”

The problem, particularly acute for business owners who can’t automate jobs as readily as, say, fast food restauranteurs, was encapsulated by Gov. Jerry Brown himself, who signed the $15 wage into law despite clear reservations about its economic wisdom. “Economically, minimum wages may not make sense,” he said, defending the law on moral and sociopolitical grounds. A high minimum wage, Brown claimed, “binds the community together and makes sure that parents can take care of their kids in a much more satisfactory way.”

Incentives in tension

According to critics of the change, the tension involved in using poor economic choices to encourage good moral ones has driven labor unions themselves toward a predictable, if hypocritical, shift in their own policy objectives. Many of the same unions that agitated for a higher wage “have been quietly — and often successfully — lobbying cities to let employers who hire union workers pay them less than the mandated minimum,” as Quartz observed. “Unions say it gives them the flexibility to negotiate packages for their workers that supplant wages with health insurance and other benefits.

“Critics say that it’s a shrewd move by unions to drive up membership dues and ensure that their workers are the cheapest in town. The exemption gives cost-conscious employers little choice but to hire union, and workers who want jobs little choice but to join their local.”

At the same time, however, workers who have been rallied to the $15 cause have been swiftly pressed into service for pro-unionization demonstrations. “The demand from the original strikes in 2012 was $15 and a union,” said Mary Kay Henry, international president of the SEIU, according to the Times. “Underpaid workers in California are now on a path to $15, but we think the way we can make these jobs good jobs […] is through a union.”

In an added twist, some economists defending the wage hikes have raised the question of whether subsequent job losses are a price worth paying. Gov. Brown, in fact, has referred favorably to that view. “We understand that this can be difficult,” he said, as the Washington Post recalled. “But the fact is that there’s a principle called the living family wage, which is a doctrine that has been around for a long time, since probably before the 1900s, which is that you can’t expect someone to work if the wages for that work can’t support a family.”

Supporters said the new law, passed as Senate Bill 633, merely loosens the legal standards in-state manufacturers must adhere to when presenting their goods as American-made. With Brown’s signature, “makers of California goods can use ‘Made in U.S.A.’ if at least 95 percent of the parts are manufactured domestically,” the Sacramento Business Journal noted. “The threshold approved Tuesday replaces a 1961 state law,” which the bill’s author, state Sen. Jerry Hill, D-San Mateo, said “was approved in a pre-globalization era to protect American producers from foreign competitors with misleading labeling.”

Conforming regulations

The new standards kick in on the first of next year. In addition to the 95 percent rule, they also allow American-made labeling if “all of the articles, units, or parts of the merchandise obtained from outside the United States cannot be produced or obtained in the U.S., and all such articles, units, or parts constitute up to, but no more than, 10 percent of the final wholesale value of the manufactured product,” the National Law Review reported.

In justifying the change, Hill and Brown have had the rest of America on their side. “Country-wide, companies are allowed to fib about their products because the FTC doesn’t require them to elaborate on exactly what percentage of each product was made in America,” according to IJ Review. “So, something that is, at least in part, made in China, can still be labeled as being manufactured in this country.”

In fact, the Review observed, “California was the one state in the union that demanded stricter regulations for their manufacturers. If a product sold in California claimed to be made in this country, every single component had to meet that standard.”

Virtually American

States have taken advantage of the peculiarity of the federal standard, which seems stringent but offers a substantial loophole. The law mandates that “‘all or virtually all’ of a product’s parts be manufactured domestically and that its final assembly must occur within the U.S.,” the Business Journal reported. “The federal government does not specify how much must come from the U.S.; products are evaluated case by case.” According to the National Law Review, relevant factors have included “value, the remoteness of foreign content, the proportion of U.S. manufacturing costs, the site of assembly or final processing, and potentially other aspects that would affect consumer understanding of what a U.S.-origin claim means on a particular product.”

So far, opposition to the new law has been muted. “Is it a relatively modest deception reflecting the realities of a global economy? Perhaps. But it’s still a lie, one that favors the interests of business over those of consumers,” wrote David Lazarus of the Los Angeles Times. “Manufacturers have been given a green light to lie to people,” he added. “There’s no other way to put it.” But a significant set of products that are otherwise entirely American-made require parts that are only available overseas, he conceded.

Homegrown change

In fact, Hill was moved to craft SB633 after hearing from one young Californian businessman frustrated with the consequences of limited foreign sourcing. About five years ago, then-17-year-old Dylan Sievers started Bulldog Lighting, an automotive LED fixture provider. “Although Sievers opted to keep as much of the production stateside, he eventually discovered not all of the product could be produced in America,” the San Mateo Daily Journal reported. “Disappointed that he couldn’t market his lights as ‘Made in the USA,’ Sievers contacted Hill.”

Hill told the Daily Journal Sievers “was proud to be an American and proud that his product came from the United States. But because he could not get this one little piece that was made in China anywhere in the U.S., he couldn’t, in California, say this was ‘Made in the USA.’ And that I felt was wrong.”

The Pentagon announced a sizable new investment anchored by a new Manufacturing Innovation Institute for Flexible Hybrid Electronics, a program to be established in San Jose. “The Institute falls under the aegis of the National Network for Manufacturing Innovation, a network of manufacturing research centers set up by the White House in 2013,” according to Defense News, which noted that the institute will be California’s first of its kind.

Politics and productivity

Officials played up the size and sweep of the initiative, which brings together more than a hundred of Silicon Valley’s bold-faced names. “The institute will be led by FlexTech Alliance, a consortium of more than 162 companies, nonprofits, labs and universities,” reported the International Business Times. “The consortium includes the likes of Apple, Hewlett Packard, Qualcomm, Boeing and Lockheed Martin as well as Stanford, Harvard and the University of California, Berkeley.”

“The San Jose-based institute will focus on developing wearable technologies that could be used to assist wounded soldiers, automobiles and aircrafts in harsh environments and light-weight robotics, among others applications, the department said. Additionally, the institute will be focused on coming up with new ways to lower the cost of manufacturing these technologies so that private American businesses can innovate with them.”

The Obama administration touted the news in a press release. “With a total investment of over $171 million — $75 million in federal funds, and more than $96 million in non-federal contributions — the announcement marks the first manufacturing institute launched that will be headquartered on the West Coast,” it said, using the occasion to challenge Congress to spend even more on manufacturing. “We can make critical bipartisan investments to strengthen manufacturing across the United States, laying a strong foundation for good jobs and economic growth — or we can pull back, letting other countries and their workers take the lead,” the administration argued.

Industry blowback

The effort followed the Defense Department’s April announcement of a Silicon Valley office — dubbed Defense Innovation Unit Experimental — timed to debut with an infusion of venture capital into the region, as the Wall Street Journal reported. Though the political reception was not unfavorable, that initiative quickly attracted the ire of the private-sector security establishment, including big corporations like Boeing and Northrup Grumman. “Defense industry leaders aren’t just offended by the implication that small hardware startups and tech giants such as Facebook and Google are outpacing them in ingenuity,” Politico observed. “More important, they argue, those companies don’t have the slightest idea about military needs or understand how to navigate the Pentagon’s acquisition system — in short, to make their ideas reality.”

This May, Politico added, Northrop Grumman chief Wes Bush suggested that, because Silicon Valley tech attracting Pentagon interest was “inherently broadly available,” supplied “no national security advantages by definition.”

But security and war fighting experts have already envisioned applications with much narrower and more powerful uses. “For the Pentagon, the benefits could be myriad. Imagine a thin plastic computer worn around the wrist that could provide live biometric data on a solider in the field, or a laptop that could be rolled up into a mat and moved from operating centers with ease,” Defense News suggested. “Such technology could also cut the weight aboard ships or planes, providing more space for cargo, while the ability to mold sensors to the outside of a fighter jet could reduce its radar signature and wind resistance.”

Whatever the objections from established players, Defense officials have adopted a full-steam-ahead approach. The Air Force has opened a Silicon Valley outreach office of its own; as NBC San Diego reported, in his first visit to Camp Pendleton at the end of August, Defense Secretary Ash Carter boasted that the Defense Innovation Unit Experimental would help “connect the Department of Defense to the innovative community of California and around the world.”

After that, from 2011 to 2014, “manufacturing employment has hovered around 12.5 million,” reported the Sacramento Bee.

“There certainly are pockets of success,” Gino DiCaro told CalWatchdog.com; he’s vice president of communications at the California Manufacturers & Technology Association.

A big contributing factor, he said, was the sales tax exemption for purchasing manufacturing equipment passed by the Legislature and signed by Gov. Jerry Brown in 2013. “Until then, we were one of the few states that taxed it,” DiCaro said.

It’s too early to see just how much that tax cut will help manufacturing. But DiCaro cited figures that the state has a lot of catching up to do. Since Jan. 2010, California manufacturing has increased just 1 percent. That’s much less than the 7 percent for the United States as a whole — and a whopping 18 percent for Indiana, a Rust Belt state currently inundated by the record cold and massive blizzard hitting the Northeast.

Toyota’s website boasts it employs “4,500 people here at Toyota Motor Manufacturing, Indiana, Inc. (TMMI), and our local suppliers employ thousands more across Indiana. Our $4.1 billion investment in the state of Indiana gives us the capacity to build nearly 300,000 vehicles a year here, including the Sequoia full-size SUV, the Highlander midsize SUV and the Sienna minivan.”

Toyota shut its California NUMMI plant in Fremont in 2010. And last year it announced its U.S. headquarters was moving from Torrance to Texas, costing 3,000 jobs. However, those are office jobs, not manufacturing.

On the positive, the NUMMI plant now builds Teslas. But even there, Tesla chose Nevada over California to build batteries, albeit because California wouldn’t match Nevada’s $1.3 billion in tax breaks — effective subsidies paid by the rest of the state’s taxpayers.

DiCaro also pointed out that, in 2013, the Golden State enjoyed “only 1.5 percent of new or expanded facilities in the United States,” even though our population is 12 percent of the country.

Energy problem

DiCaro said a big problem with California is that manufacturing paid 70 percent higher electricity rates than the rest of the country for electricity before AB32, the Global Warming Solutions Act of 2006 began to be implemented in recent years.

Currently, he said, “overall energy rates are increasing” due to AB32’s implementation of the cap-and-trade program, which charges companies, such as electricity utilities, for greenhouse-gas emissions that are too high. Also aiding the energy-rate increase is a separate mandate that 33 percent of California electricity must come from renewables by 2020. In his Inaugural Address last month, Gov. Jerry Brown called for an even higher goal of 50 percent renewables by 2030.

The exact cost is unknown. As CalWatchdog.com reported, “Brown recently was rebuked by the Little Hoover Commission for failing to disclose to Californians how much the price tag will be for renewable power in California.”

DiCaro fingered a particular problem. California still is the home for venture capital that funds amazing startups. But when such companies succeed “and want to scale up big time, the overall high energy rates become a significant impediment for a large manufacturer.”

The good, the bad and the weather

DiCaro urged that the manufacturing picture in California has its positive points:

• A fantastic climate — unlike, say, Indiana;
• Great quality of life;
• An excellent university system that produces engineers and others needed by high-tech companies.

The bad points that need to be worked on:

• A high cost of living that has produced the country’s highest poverty rate;
• High electricity costs;
• Environmental quality permitting that can delay projects for years;
• The country’s highest workers’ compensation costs.

On the latter, Greg Jones, western bureau chief of the Work Comp Central news site, reported on Feb. 19, “A flurry of legislative activity next week is expected to present California lawmakers with questions about the state workers’ compensation system that are bigger than whether sports teams should be required to provide coverage for cheerleaders.”

The 2004 reforms signed into law by Gov. Arnold Schwarzenegger since have been eroded, again putting California at a disadvantage for other states.

Along with the 2013 sales tax cut for manufacturers, serious work comp reform could indicate the state at least is trying to move its business climate in the direction of its balmy weather climate.

Ostensibly, the tax break will help the automaker build more cars and help create jobs in California. Business groups (that like tax breaks) and environmentalists (who like electric cars) have both praised the move. But a larger question remains, and it’s about the tax that Tesla was able to avoid.

California is one of the few states that enforces a tax on the purchase of manufacturing equipment. While most taxes affect companies’ abilities to expand and grow, few do so as directly as the manufacturing equipment tax does.

Whenever a company wants to expand its manufacturing operations, it has to automatically add a 4.1875 percent tax to the cost of equipment. In the case of Tesla, the company was more easily able to afford purchasing hundreds of millions of dollars in new equipment because it got a $34.7 million tax break.

The manufacturing tax has had demonstrably negative effects on California’s economy. After massive shrinkage during the recession, manufacturing began to regrow as an industry. Nationally, according to the U.S. Bureau of Labor Statistics, the number of manufacturing jobs has increased 4.59 percent since bottoming out in 2010. But in California, that number is around half a percent. Many pointed to the manufacturing equipment tax as a reason for that anemic rebound.

Californians may be used to hearing stories like this without any action to resolve the problem. But Assembly Bill 93 —which passed both houses of the state Legislature in June — created tax exemptions for many businesses beginning in July 2014. The bill’s sponsor was the Assembly Budget Committee.

Although the legislation included tax exemptions, it also included changes to various economic development areas in the state. This led most Republicans to reject the bill. Republicans also pointed out that AB93 was presented to them “only hours before a hearing,” according to the Sacramento Bee.

“It is the intent of the Legislature to exempt manufacturing equipment from state sales and use taxes in order to make California more competitive in attracting new businesses to the state,” the bill reads, continuing, “and to bring California in line with the 48 other states that exempt manufacturing equipment from sales and use tax.”

Application

So how can a business apply for this manufacturing tax exemption? The business simply needs to belong to someone engaging in manufacturing or research and development in biotech, engineering and biological or physical sciences. And companies can qualify for up to $200 million in exemptions for machinery and equipment, the equipment used to operate that machinery or equipment, and special purpose buildings needed for manufacturing.

And, according to the state, the property must be used for “manufacturing, processing, refining, fabricating, or recycling of tangible personal property,” or research and development.

Dorothy Rothrock of the California Manufacturers and Technology Association told Bloomberg Businessweek the law “should help California be a little more nimble and responsive when companies come and say: ‘Hey, we’d be here except for this problem or that problem.’”

She added, “It’s not a bad idea for state leaders to have some flexibility to make a deal with people.”

“We are reorganizing and realigning our research-and-technology operations to better meet the needs of our Commercial Airplanes and Defense, Space & Security business units, as well as our government R&D customers,” Greg Hyslop, general manager of Boeing Research & Technology, said in a press release. “With these changes, we are enhancing our ability to provide effective, efficient and innovative technology solutions.”

This will also be a relatively permanent change. According to the press release, “The new research centers will consolidate technology development of strategic importance to Boeing over the long-term — up to 30 years into the future.”

While it may appear to be good news that California will have a new research and development site for decades to come, the true impact of the restructuring is less heartening.

Missouri, Alabama and South Carolina are expected to gain between 300 and 400 jobs from the realignment. Washington state will lose between 800 and 1,200, and California will see somewhere between 200 and 300 research and development jobs leave. This follows news from September that Boeing planned to shutter a manufacturing plant in Long Beach and lay off some 2,000 workers.

The trend is clear: Boeing is moving jobs away from the old epicenters of manufacturing and design in Washington and California. Now, more and more jobs are moving toward states throughout the South. The closure of the manufacturing plant, and the more recent loss of hundreds of white collar jobs, display California’s vulnerabilities with retaining talent in both high- and low-paying fields.

Positive sign

However, in a positive sign for Californians who would like to see more manufacturing jobs brought back to the state, Gov. Jerry Brown and local politicians in Long Beach are currently lobbying Boeing to build a manufacturing plant for its 777x jetliner in Southern California. Bringing the new manufacturing plant to Southern California would be huge for the local economy. Boeing will need to create more than 4 million square feet of manufacturing space, and thousands of workers will be needed.

However, it is unclear whether or not California will end up being chosen as the site (or if the Golden State even has a chance). California hasn’t disclosed what it is offering Boeing, but at least two states have disclosed their incentives.

Washington state originally offered a $9 billion tax incentive package to Boeing, but a machinist union shot down the proposal and Boeing moved on to evaluate other offers. The Missouri state legislature offered its own $1.7 billion tax incentive package.

Given California’s pro-union climate and its less-than-friendly business climate, it’s unlikely that the state could win the contract when competing against the likes of Missouri, Alabama, Utah, Texas and other states with laws not as friendly to labor unions.

However, California’s major advantage is its workforce. People have been making airplanes for decades in Southern California, and the institutional knowledge is considered valuable. Whether or not California can lean on some of its natural advantages, in the face of impediments to business development, remains to be seen. But if it succeeds, it could be a turning point for a state that has shed thousands of manufacturing jobs in recent years.

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.

By Katy Grimes

When Anthony Maglica founded his machine shop in 1955 as a one-man operation, he never dreamed of the success he would have, nor would he ever imagine that the state in which he lived would slowly kill off his business one day.

Maglica, the creator of the wildly popular and reliable Maglite flashlight, started his machine shop in his garage. He turned that business into an empire, and has sold 420 million hard aluminum-encased flashlights since 1979. And he has not raised the price of the best selling flashlight since.

But California lawyers have fought Maglica over his claim that his flashlights are “Made in America.”

Born in the USA

Maglica, born in New York, moved with his mother to her native Croatia during the Depression and lived there through World War II, and the ravages of war. He returned to the United States at age 22, where after working different jobs, he saved $125 to purchase a metal lathe and start his own machining business.

“I didn’t build this business by myself,” Maglica told me during a tour of his magnificent plant in Ontario, CA. “The employees built it with me.” Against all odds in California’s business-killing climate, according to Maglica, his employees are the primary reason he remains in business.

But Maglica said, that since the last Presidential election, his business hasn’t been profitable. He attributes the business downturn to politics, the sputtering economy, and cheap facsimiles of his product allowed into the country without the stringent regulations he is faced with.

There was a time Maglica could proudly state “Made in America” on his product labels. But he says that California has an unattainable, absurdly strict law requiring that 100 percent of the product be manufactured in America, in order to state this on the product label.

“I have always tried to make all product parts in my own U.S. factory,” Maglica said. “But globalization and the emergence of new manufacturing centers have changed the cost and availability of some components I now have to import.” Maglica said that some parts are just not available from any other American manufacturer, or are cost prohibitive for his company to produce.

California Law

Because the Maglite company has to import a very small percentage of its parts, California state law requires that the company omit the label that states that the product is “Made in the U.S.A.,” despite the fact that Mag Instrument is a U.S. company.

“Unless 100 percent of a product is made in the United States, California’s ridiculous Business and Professions Code provision prohibits my company from using ‘Made in the U.S.A.’ on the packaging,” Maglica explained.

When touring Maglica’s immense facility, it became abundantly clear that he not only manufacturers the many components of more than 20 different flashlights, Maglica has purchased, and turned around, several financially distressed component parts companies in order to keep components available for his line of flashlights. He has brought all of this additional work to his plant in Ontario.

But even this has not helped him in California.

Federal Law

Federal law only requires that a product be “substantially” made domestically to bear the “Made in the U.S.A.” or “Made in America” mark. Maglica said that in all 49 other states, Maglite could make flashlights with even fewer U.S. manufactured parts than it currently does, and still call them American made… but this cannot be done in California.

Maglica said that because of California’s laws, Maglite, which is the only major flashlight company still manufacturing in the U.S., can never be advertised as an American product. “Consumers will never know that I employ hundreds of U.S. workers and that my company provides millions of dollars in economic benefit to the city of Ontario, the Inland Empire and the state of California,” Maglica said.

AB 858 – the easy cure

Assembly Bill 858, by Assemblyman Brian Jones, R-Santee, would change California’s law so that it aligns with the other 49 states, and would adopt the federal policies set by the Federal Trade Commission.

While AB 858 appeared to have no opposition early on, recently the state’s Consumer Attorney’s of California have taken up fighting the bill. “Made in America” claims have been a favored target of consumer attorneys for several years.

Maglica said that he has spent far too much money in court protecting his product from illegal copycats, and has been victimized by lawyers in a snafu over the “Made In America” label, accidentally shipped to California from Canada.

While AB 858 will be heard in the Senate Judiciary Committee Tuesday, some have speculated that powerful Capitol staff, opposed to changing the California law, could also be fueling the recent opposition. The Judiciary Committee only released its legislative analysis Monday, less than 24 hours before the hearing, and left out crucial information about California’s existing “Made In America” code requirements.

California’s code was enacted in 1961, more than 50 years ago, long before the global economy was the reality, and before American-manufactured components were shipped overseas where cheaper labor is the norm.

The California statute, which may have been a good idea in 1961, has only added to interstate chaos, putting California businesses at yet another disadvantage, together with stricter labor laws, wage and hour laws, workers compensation insurance laws, and higher state and corporate taxes.

The newly-released Senate Judiciary Committee Analysis failed to even list the Made in USA Brand Certification Mark organization among the supporters of AB 858, even though that organization sent a letter to the committee making abundantly clear that California’s go-it-alone approach means that California has effectively excluded itself from the Made in USA Brand Certification Mark program, which adopts the FTC Guidelines as its labeling standard.

The Judiciary Committee analysis also confused much of the significant differences between the state and federal standards, making them sound nearly identical.  But the differences actually are quite notable, particularly because the federal standard focuses on the foreign content of the completed product as a whole, but the California standard looks at each and every part of the product, regardless of how minuscule or available. The California code requires that each part, even down to the tiniest pins and screws, be produced domestically.

The analysis characterized Maglite’s position on the issue as inviting manufacturers to not even try to produce a 100 percent domestically produced product. But the analysis left out that 100 percent of a total product domestically produced is actually unattainable in America, according to Maglica.

Maglica said that with the incandescent light bulb ban in America, he can’t even get light bulbs for his products, which are all guaranteed for life.

The Analysis also ignored the effect that California Code §17533.7 currently has on California manufacturing jobs.  Analysis focused on making sure consumers have “the benefit of the bargain,” but totally missed what the consumer aims for by purchasing a produce made in America.

Polls have shown that if given a choice, consumers will spend more on products if they are made in America.

Maglica has worked diligently to make sure that manufacturing for his Maglite flashlights stay in Ontario, when he very well could have taken much of the work to Mexico for a fraction of the cost.

Given that the Korean-built, Euro-spec Chevy Cruze has product contributions from more than 15 different countries, California’s “Made in America” law is hypocritical at the very least.

Maglica has built an American dream with his own hands, and continues to this day to provide employment to the families of more than 700 California residents. Democrats have long complained about American businesses leaving the U.S. in search of cheaper labor overseas. AB 858 is a chance to address this, and potentially bring back more manufacturing jobs to the state.

A manufacturing business is known to support five-times more jobs than what is reflected on its payroll. Shouldn’t California lawmakers believe that  this bill is a good change for the state? After losing more than 600,000 manufacturing jobs between 2001 and 2011, California businesses could use a little ray of light on the dark uncertainty that has taken over the state.

By WAYNE LUSVARDI

California Gov. Jerry Brown may have met his moment of infamy on a Feb 1 TV show.  He said, “California is losing manufacturing jobs at a rate no faster than the rest of the country.”

Brown’s claim is not backed up by data from the U.S. Bureau of Labor Statistics.  California lost manufacturing jobs at a higher rate than competing states.  Here are the percentage and absolute number of manufacturing job losses in competing states over the last decade:

Manufacturing Job Losses in Competing States

California lost 15 percentage points more manufacturing jobs than Nevada and 10 percentage points more than Texas.  More significantly, California lost 411,300 manufacturing jobs over the decade.  That is more than the 280,100 for Nevada, Texas, Oregon and Arizona combined.

Brown continued, “This is the place where Facebook started, where Hewlett-Packard started, where Steve Jobs built Apple Computer just a few miles from where we’re sitting. This is a place of innovation.”

But Apple and Hewlett Packard are companies that have out-sourced almost all their computer component manufacturing to China. In the 1970s, Jobs and his Apple co-founder Steve Wozniak scrounged parts for their early computers from the leftovers of HP and other manufacturing giants. They couldn’t do that nowadays unless they moved to China.

And Facebook wasn’t “started” in California. It was started at Harvard University. It only moved out here later because founder Mark Zuckerberg wanted to live and work among the top companies and geniuses of his industry. Hasn’t Brown seen “The Social Network“?

Facebook IPO

Brown mentioned Facebook because its IPO is expected to net a $500 million tax windfall for California’s coffers. But to be prosperous, a state needs to produce more than high-tech jobs for people with high IQs.

The ancient Greek philosopher Socrates once said, “Nobody is qualified to become a statesman who is entirely ignorant of the problems of wheat.”

One might say that California’s politicians cannot be ignorant of the problems of manufacturing and claim to be qualified to find solutions to unemployment.

With the value of the dollar diluted by Federal Reserve policy, California could re-capture some industries from overseas.  But what is Gov. Brown doing to bring this about?

He continues to back the Bullet Train to Nowhere. And he’s implementing AB 32, the jobs-killing Global Warming Solutions Act of 2006.

Curiously, the program Brown appeared on, “The War Room,” is hosted by Jennifer Granholm, the former Michigan governor. During her time in office, her policies emptied the Great Lake State of manufacturing jobs, as Chrysler and GM went bankrupt. No wonder she didn’t press Brown on his anti-manufacturing policies.

When it comes to manufacturing, California needs leadership, not a smooth TV conversationalist who claims to model his policies on the ancient Greek ruler Aristides.

By JOHN SEILER

New reports show how both the U.S. and California governments have imposed severe anti-manufacturing regulations impeding economic recovery and growth. President Obama and Gov. Jerry Brown pay lip service to creating good middle-class jobs. But their anti-manufacturing bias belies their statements.

Ever since the Industrial Revolution began more than two centuries ago, manufacturing has been the key to middle-class prosperity. China, Vietnam, India and other countries have realized this and are promoting manufacturing. They sloughed off decades of socialist penury to embrace industrial capitalism, catapulting themselves into prosperity.

America once understood that. And the U.S. and California manufacturing sectors remain large, although declining.

The New York Times described how a decade ago Apple shifted its manufacturing from California and other states to China: “Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

“A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“’The speed and flexibility is breathtaking’,” the executive said. ‘There’s no American plant that can match that’.”

These formerly were high-paying, middle-class jobs right here in the Golden State.

‘Arsenal of Democracy’

And it was America that showed the world how to build industries that can retool so quickly. The greatest example was the retooling during World War II. A manufacturing base that was almost entirely geared toward civilian production almost overnight became the Arsenal of Democracy.

Even in the 1970s, the auto industry quickly adapted to new environmental mandates from the federal government.

Today, that fast-change capability has been hampered by literally tens of thousands of pages of preposterous regulations, absurd tax policies and policy uncertainty.

In California, this anti-manufacturing attitude is at its worst. The belief of Brown and others among the Democratic Establishment that runs the state is that desirable private-sector jobs are those performed on a laptop. That makes California a utopia for computer nerds with 180 IQs. The rest of us — the folks who once supported families on middle-class manufacturing incomes — don’t have a place here.

This was shown dramatically during the November 2010 election. Proposition 23 would have overturned the anti-jobs AB 32, the Global Warming Solutions Act of 2006. Opponents branded it the “Dirty Energy Proposition.” The opposition included then-Gov. Arnold Schwarzenegger, who signed AB32 into law. His  personal worth was $700 million, which kept him insulated from the damage his policies did to ordinary people.

“Dirty Energy” means “dirty jobs” in manufacturing. The anti-23 campaign conned voters it believing that unless the “dirty jobs” were killed, it would “Jeopardize 500,000 jobs and $10 billion in private investment in California clean energy businesses.”

Well, where are those 500,000 jobs? Instead, of course, the state suffered the Solyndra scandal. Solyndra ripped off $535 million from federal taxpayers and $25 million in tax credits from California taxpayers.

The message misled voters sent to industry was: “We don’t need your stinkin’ dirty jobs! Send them all to China! We can live on welfare.”

‘Everything Else’

Bloomberg also ran a report on why America is anti-manufacturing. The author interview a Silicon Valley businessman:

“ ‘I’d love to make this product in America. But I’m afraid I won’t be able to.’

“My host, a NASA engineer turned Silicon Valley entrepreneur, has just conducted a fascinating tour of his new clean-energy bench-scale test facility. It’s one of the Valley’s hottest clean-technology startups. And he’s already thinking of going abroad.

“ ‘Wages?’ I ask.

“His dark eyebrows arch as if I were clueless, then he explains the reality of running a fab — an electronics fabrication factory. ‘Wages have nothing to do with it. The total wage burden in a fab is 10 percent. When I move a fab to Asia, I might lose 10 percent of my product just in theft.’

“I’m startled. ‘So what is it?’

“’Everything else. Taxes, infrastructure, workforce training, permits, health care. The last company that proposed a fab on Long Island went to Taiwan because they were told that in a drought their water supply would be in the queue after the golf courses’.”

Get that: The problem isn’t high American wages. We can compete there. I remember management guru Peter Drucker pointing out in the late 1980s that, when manufacturing drops below 15 percent of cost, it doesn’t matter where you locate a manufacturing facility. That’s because shipping costs are about 15 percent.

But what matters is government attitudes toward manufacturing: pro or con.

As was noted at the beginning of this article, the Chinese are obsessed with greasing the skids of manufacturing. You need it? They’ll do it. They’re gung-ho.

In America, manufacturing is “dirty.” You need it? Forget it! You’ll just pollute the environment. Besides, giving a decent wage to middle-class families just means they’ll procreate more polluters.

Detroit on the Pacific?

Except for Silicon Valley, California’s economy still is limping along. Will it become Detroit on the Pacific, a rusted-out hulk of a formerly great industrial state?

It probably won’t get that bad. The weather here is just too good. It’s like saying Cuba will become North Korea. Both have extreme socialist systems. But North Korea has harsh winters and tree bark to eat during a famine, while Cuba has beautiful tourist beaches year-round and the world’s best cigars.

Still, elements of Detroit obviously are washing across California. Our unemployment rate, although improving to 11.1 percent in December 2011, remains worse than Michigan’s at 9.3 percent. And the “hollowing out” of the manufacturing sector continues apace in both places.

A new documentary coming out in a couple of weeks is “Detropia,” about the industrial decline of the once great Motor City. Here’s a five-minute preview:

Think it can’t happen here? The preview shows scavengers grabbing steel and copper in abandoned buildings in Detroit. In a time of soaring gold prices leading to inflation, commodities are a hot item. The scavengers explain that raw materials used to make things in Detroit factories. Now, the wreckage of the previous prosperous civilization is salvaged, shipped to China, then returned to America and stocked on Wal-Mart shelves.

That’s also happening in California. According to CreativeSecurity.com, “Over the past several years, copper theft has reached epidemic proportions both in California, and nationwide. According to the U.S. Department of Energy, copper theft is a $1 billion problem that’s only getting worse.

“Increasing worldwide demand for copper and short supply has caused copper prices to skyrocket, reaching all-time highs within the past five years. At specific locations, such as commercial buildings and construction sites, copper metal can be found in abundance and is relatively easy to steal. Once stolen, it’s virtually impossible for authorities to track or recover from recyclers, making copper theft a low-risk, high-profit crime that many thieves can’t resist.”

Where’s Our Deng?

While researching this article, I came upon a report by the government’s National Public Radio about how China transformed itself from starving Maoist socialist paradise to global capitalist economic powerhouse. In 1978, a group of farmers in the village of Xiaogang agreed to defy the socialist authorities and regulations and re-establish competition. Soon, the farmers went from starving under socialism to prospering under a nascent capitalism.

They feared reprisals, even death, from the socialist government of China. But new Chinese leader Deng Xiaoping was eager to switch to capitalism. Reported NPR, “So instead of executing the Xiaogang farmers, the Chinese leaders ultimately decided to hold them up as a model…. The government launched other economic reforms, and China’s economy started to grow like crazy. Since 1978, something like 500 million people have risen out of poverty in China.”

Something similar will have to happen in America to revive manufacturing. Small bands of producers will have to band together and defy the regulations and taxes of Brown, Schwarzenegger, Obama and others — Republicans as well as Democrats.

So far, in California there’s no Deng to grasp the importance of capitalism and lead reforms that ditch the bureaucratic model. Instead, we have Brown, first elected to state office as Secretary of State in 1970, when Mao’s Cultural Revolution still was ripping up China. His obsession is to raise taxes to pay for the pensions of government workers.

But as China’s example shows, people can put up with a lot until they finally decide they’ve had enough and insist on a return to prosperity and freedom.