Empowering Manufacturersto Lead the Way

California Manufacturers & Technology AssociationPresentation

Source: California Employment Development Department

-372,400

Government

Finance and Insurance

Accomodation and Food Services

Health Care & Social Services

Retail Trade

Manufacturing

Management of Companies & Enterprise

Professional & Technical Services

Information

Other Services

Construction

Educational Services

Arts, Entertainment & Recreation

Real Estate

Mining

Wholesale Trade

Administrative & Waste Services

Farm

Transportation and Warehousing

California employment snapshot:Low-wage sectors expanding, High-wage sectors declining

$42,225

$23,875

$43,913

$16,566

$80,074

$28,900

$39,862

$40,644

$42,781

$56,669

$88,556

$54,289

$29,626

$20,752

$44,145

$78,682

$70,832

$75,452

$56,524

Average pay ofgrowing sectors:

Average pay ofdeclining sectors:

-400,000 -300,000 -200,000 -100,000 0 100,000 200,000

Jobs lost Jobs gained

Employment changeJan. 2001- Jan. 2006

Average 2005 salary

1990 20061995 20008

10

12

M anufactur ing as a percent o f overall em ploym ent in statehas declined steadily since 1990

20069% of overall employment1,504,200 mnfg. jobs

199014% of overall employment1,970,200 mnfg. jobs

14 %

Source:LaborM arketInform ationDepartm ent‘01 ‘02 ‘03 ‘04 ‘05

1.9 million

1.8

1.7

1.6

1.5

Jan. 2001:1.878 million

March 2006:1.504 million

California lost 374,000 manufacturing jobssince January 2001

1.4‘06

Why Manufacturing Matters

•High Paying Jobs

•Creates Wealth

•Most Export Intensive Sector

•High Investments in R&D

•Ripple Effect

Based on large multiplier effect, manufacturing supports

almost 30% of California’s labor force

4.5 million jobs

SanMateo

SantaCruz

Monterey

SolanoSacramento

Contra CostaAlameda

SantaClara

Santa Barbara

VenturaLos Angeles

San Bernardino

RiversideOrange

San Diego

Tulare

SanBenito

El Dorado

PlacerSutter

SanJoaquin

Merced

NUMMIFremontStanislaus

Fresno

1-19

20-99

100 or more

NUMMIsuppliersby county

Shasta

MendocinoNevada

Calaveras

Amador

Madera

NapaSonoma

Tuolumne

Yolo

Marin

San Francisco

More than

1,000California suppliers

Nearly

20,000jobs created in state

$60 billion

$50

$40

$30

$20

$10

Manufacturing$41.8 billion

Federal govt.$11.8 billion

Manufacturersfund 60%

of California’sR & D Investment

0

State & Local govt.

Universities$821 Million

$236 million

Non- profits$366 million

Source:AmericanAssociationfor theAdvancementof Science

Knowledge:Patents

MachineryManufacturing

Skilledworkforce

Why Manufacturing is an integral partof the capacity to innovate

Revolves around the combinationof knowledge, labor, and production

GROWTH:

More than 115

100 to 114

85 to 99

Less than 85

Cost average = 100

Source:Milken Institute

High cost of doing business for California manufacturers

California:124

Overall cost Wage Tax Industrial space Office space Electricity

California 124.2 112.5 111.1 136.8 136.3 168.0

Nevada 103.8 96.5 99.0 107.5 131.5 122.7

New Mexico 95.6 82.0 130.8 103.1 80.5 93.8Arizona 94.0 93.5 95.8 85.4 105.8 95.1Texas 92.8 98.0 73.7 93.0 95.7 100.0Oregon 92.6 91.1 92.3 106.4 107.7 84.0

Utah 86.8 83.0 107.4 80.2 101.3 71.5

Washington 103.5 105.7 103.4 110.2 130.5 82.6

Western states cost indexOne of only four states with a sales taxon manufacturing equipment

Electricity 80% more expensivethan western states

So urce: M ilken Institu te

DevelopmentCounsellorsInternationalsurvey

California

New York

Massachussetts

New Jersey

34%

36%

22%

21%

saidCaliforniawas one ofthe worst

three statesto do

business in2005

66%

57%

25%

34%

29%

22%

18%

19%

15%

14%

California

New York

Massachussetts

New Jersey

California

New York

Massachussetts

New Jersey

21%

2005

2002

1999

0 10% 20% 30% 40% 50% 60%

Survey: What state has least favorable business climate

Changing Face of Manufacturing

• Aging of Baby Boom Generation

• More Productive Workers

• Different entry-level skill

requirements

– Basic computer skills

– Business application knowledge

– Critical thinking skills

Californiamanufacturing is

especially productive:its value added perworker in 2001 was

$191,000,16% higher

than national average

Change in labor productivity (output per hour),manufacturing vs. all nonfarm workersPercentage changein output per hour

Manufacturing

All other sectors

1986

8%

7

6

5

4

3

2

1

0

-11980 1992 1998 2004

Source: U.S. Dept. of Commerce, Bureau of Economic Analysis

90

100

110

120

$130 billio n

‘01 ‘02 ‘03 ‘04 ‘05

California:$117 billionin exports

9% growthsince 2001

Texas:$129 billionin exports

36% growthsince 2001

California no longer top exporter

So urces: Expo r t.go v,O ffice o f Trade & Eco no mic A nalysis

10% CA

TX

US

NV

AZ

0

50%

9%

36%

24%19%

177%

40%

30%

20%

-10%

‘02 ‘03 ‘04 ‘05

2001 to 2005

change fro m 2001

‘01

State’s exportgrowth lags farbehind restof country

Skilled workersEntry level

SupervisoryAdministrative

Employees most difficultto recruit and retain*

5527215

CMTAworkforce

surveyresults

72 HR executivesrepresenting

30,000 employeescompletedthe survey

Lack of job specific skillsPoor work ethicLanguage barrier

Employees leave for better pay or benefitsCommute time

Employee dissatisfaction with work hours

Barriers faced in finding and retainingqualified employees*

483425211411

CMTAworkforce

surveyresults

72 HR executivesrepresenting

30,000 employeescompletedthe survey

58%

Sustaining and/or acquiring a skilled workforceWorkers' compensation

Energy costsHousing costs

Health insurance costsEnvironmental regulations

Tax burdenOvertime laws

Most significant business challenge24141197841

said it wasone of top3 challenges

Respondents who ranked each as their #1 business challenge

CMTAworkforce

surveyresults

72 HR executivesrepresenting

30,000 employeescompletedthe survey

Given changes in economy and business environment, which of thefollowing will be most important to your company’s business success overthe next three years? (select up to three)

High performance workforceNew product innovation

Low-cost producer status

Increasing sales outside U.S.Increased customer service orientation

Supply chain integration with suppliesSourcing products in global markets

0 10% 20% 30% 40% 50% 60% 70% 80%

74%49%

45%32%

20%19%

14%

NAMskills gapsurveyresults

What types of employees are expected to be in short supply

Skilled productionScientists and engineers

Unskilled production

Management & administrationSales & marketing

OthersCustomer service

None0 10% 20% 30% 40% 50% 60% 70% 80% 90%

80%35%

25%18%

16%8%

5%4%

NAMskills gapsurveyresults

Why do companies provide training to employees today

Must train - it’s a business necessity

Keep workers’ skills current with new technology

Attract new workers

Provision in labor contract

Required by state/local government

Raise the basic skills of entry level workers

0 10% 20% 30% 40% 50% 60% 80%70%

73%

68%

59%

59%

NAMskills gapsurveyresults

61%

60%

39%

40%

0 10% 20% 30% 40% 50% 60% 70%

Poorlyprepared

Adequatelyprepared

+500 employees

under 500

+500 employees

under 500

How prepared for typical entry level job in your companyare applicants with high school/GED qualifications

8%

19%

92%

81%

0 10% 20% 30% 40% 50% 60% 70%

Poorlyprepared

Adequatelyprepared

+500

under 500

+500

under 500

How prepared for typical entry level job in your companyare applicants with a certification from a two-year college

80% 90%

NAMskills gapsurveyresults

California career tech education enrollment declineswhile high school enrollment increases

0

.6

.8

1

1.2

1.4

1.6

1.8

2

1987 1997 2005

million

million

High school enrollment

Career tech enrollment

2005:-32% decrease since 1987

48% increase since 1987

1,915,370

644,909

Source: California Basic Educational Data Sytstem

2005:

1,289,806

952,097

Decline in number ofcareer technical education teachers

Decline in number ofcareer technical courses

7,500

7,000

6,500

6,000

5,500

5,000

4,50040,000

35,000

30,000

25,000

20,000

1988 20051997

1988 20051997

6,922

4,923 38,402

24,141

1988

2005

teachers

teachers

1988

courses

2005

courses

New Opportunities

• Bio-Tech and Pharmaceuticals

• BioMedical Devices and Instruments

• Wireless Communications

• Advanced Materials

• Nanotechnology

• Space and Communications Satellites

Good Jobs Coalition

• Commission On Industrial

Innovation

– AB 2860 (Lieu)

• Education and Workforce Training

• Level the Playing Field

Other Manufacturing Issues

• Sales Tax Exemption

– AB 2218 (Torrico)

• Global Warming

• Energy Supply and Cost

• Stay the Course on Workers’

Comp Reforms

Source: California Employment Development Department

-372,400

Government

Finance and Insurance

Accomodation and Food Services

Health Care & Social Services

Retail Trade

Manufacturing

Management of Companies & Enterprise

Professional & Technical Services

Information

Other Services

Construction

Educational Services

Arts, Entertainment & Recreation

Real Estate

Mining

Wholesale Trade

Administrative & Waste Services

Farm

Transportation and Warehousing

California employment snapshot:Low-wage sectors expanding, High-wage sectors declining

$42,225

$23,875

$43,913

$16,566

$80,074

$28,900

$39,862

$40,644

$42,781

$56,669

$88,556

$54,289

$29,626

$20,752

$44,145

$78,682

$70,832

$75,452

$56,524

Average pay ofgrowing sectors:

Average pay ofdeclining sectors:

-400,000 -300,000 -200,000 -100,000 0 100,000 200,000

Jobs lost Jobs gained

Employment changeJan. 2001- Jan. 2006

Average 2005 salary