Steady Work: Chelm and California

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

Chelm was the mythical village of East European Jews, the subject of Jewish folklore and humor. Irving Howe drew on one of the Chelm tales for the epigraph to his collection of essays published in 1966, Steady Work .

Once in Chelm, the mythical village of the East European Jews, a man was appointed to sit at the village gate and wait for the coming of the Messiah. He complained to the village elders that his pay was too low. ‘You are right’, they said to him, ‘The pay is low. But consider: the work is steady.’

Today, with nearly 2.3 million Californians unemployed, any work is attractive—steady or not. However, even today, the California labor market remains highly volatile, with workers moving in and out of jobs with surprising frequency. In previous posts I have discussed the amazing job creation and destruction numbers for California—even in a month that the unemployment rate moves only slightly, over 200,000 jobs are being created and another 200,000 jobs are being destroyed. Almost equally amazing are the numbers regarding the movement among workers in existing jobs.

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Where is the Insolvent California Unemployment Insurance Fund Headed?

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

Lost in the avalanche of bad news this Fall about the state budget is the recent fund estimate for California’s Unemployment Insurance (UI) Fund. In its October report, EDD projected the fund to have a deficit of $7.4 billion by the end of 2009, growing to $18.4 billion by the end of 2010, and an amazing $27 billion deficit by the end of 2011.

What does this mean? Should employers, employees or current UI recipients be worried? What options does the state have?

The condition of the fund is shown in the chart compiled by EDD below, and contained in EDD’s October UI Fund Balance report. The full report can be accessed at EDD’s website, www.edd.ca.gov.

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A Firebell in the Night

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

“A firebell in the night”: that’s how Ken Auletta described the growing class of persons on welfare in America’s inner cities in his 1982 book, The Underclass.

Auletta’s view, held by many policymakers in California at the time, was that a new class of poor people was emerging, different from the poor of the past. This new group, which Auletta termed the underclass, was becoming more and more entrenched in antisocial behaviors—crime, teen pregnancy, drug addition, and most of all welfare dependency. Auletta saw the underclass as “the most momentous story in America”, and quoted Thomas Jefferson’s description of the Missouri Compromise (“like a firebell in the night”).

In a post two months ago on the San Francisco Renaissance Center, I discussed the job training and antipoverty world of the 1980s in California, and briefly mentioned the ways that conditions have improved since 1979. Among these is the work-orientation of the welfare system and drop in the state’s welfare rolls. It is worth saying a word more on this change, and what its meaning for state government.

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When Jobs Were Plentiful in 1950s California

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

In
the current debates over joblessness in California,  reference is made to California of previous decades when jobs
were plentiful. In particular, the 1950s California is singled out as a golden
age of employment, when jobs were available and workers in a wide range of  blue collar and manufacturing jobs as
well as white collar jobs could make a decent living.

Is
this accurate? What does it mean for California employment strategies going forward?.

As
indicated in job data provided by Ms. Bonnie Graybill and Mr. Spencer Wong of
the Employment Development Department, 1950s California was a period in which
jobs sought workers. Unemployment 
was consistently under 5%  In January 1951, the state unemployment rate was 5%. Over the
next nearly seven years, through November 1957, the rate did not go over 5%,
and was under 4% for much of the time

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What We’ve Learned So Far From the Federal Stimulus in California

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

The continued high unemployment
rates announced in the past few weeks for the nation (9.8%) and the state
(12.2%) have increased the calls for additional targeted job creation measures.
A range of strategies are being put forward this week– tax credits for private
sector job creation, another round of infrastructure investments, even
government as the employer of last resort.

I’ve been engaged since earlier
this year in tracking the job impacts of the Stimulus in California. In
crafting any further employment initiatives, it is important to examine
California’s Stimulus activities. Chief among these lessons are the following
five:

1. The job numbers announced for
Stimulus job creation in California are meaningless
: Last week, Governor Schwarzenegger  reported  100,000 jobs saved or created in California from the $5.3
billion in federal stimulus funds that state agencies have spent.

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In Pasadena on the Employment Front Lines

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

No one has better real-time information on California job markets than the administrators of the fifty local Workforce Investment Boards (WIBs), and the administrators of the local One-Stop Centers. Thus when I was in Pasadena last week, I took the opportunity to meet with Michael Dolphin and Ellen Greer, the regional Employment Development Department (EDD) administrators, along with Phillip Dunn, the thoughtful executive director of the Foothill Workforce Investment Board, and quiz them on the current job situation.

Michael and Ellen both have been with EDD over thirty years. This longevity is not uncommon (Al Dave, Michael’s predecessor, known as “Mr. EDD” in Los Angeles, was with the Department for nearly 40 years), and means that they were at EDD during the previous major California recessions of the early 1980s and the early 1990s. They made the following points about what EDD is seeing today at the One-Stop centers in Pasadena and throughout the region.

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The future of Bay Area employment

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

The latest numbers show unemployment in California at 12.2 percent, its highest level since World War II. Bay Area counties are only slightly lower, in the range of 9 to 12 percent, and way above their rates of around 5 percent in December 2007.

To be sure, since 1970 state unemployment has soared near or over double digits several times, and each time the economy came back. In the early 1980s, amid a downturn in heavy manufacturing, state unemployment reached 11 percent in February 1983, only to come back down to near 8 percent within a year. In 1993, with major cuts in defense and aerospace jobs, state unemployment reached 9.9 percent in January, but the figure came down to near 8 percent by November 1994.

During those recessions, unemployment seemed endless, but employer and consumer confidence returned, and hiring commenced in significant numbers.

The current California recession differs from those in the past in at least two major ways.

One is its severity. The 12.2 percent rate (affecting more than 2.2 million workers) is not only the highest, but it does not cover the roughly 1.3 percent of the California workforce (more than 200,000 workers) classified as discouraged workers or marginally attached or the roughly 5.8 percent (nearly 1 million workers) employed less than full time for economic reasons.

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SF Renaissance Job Center: 1982-Present

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

In early 1982, I left a law firm and went to work full time on a fledging job training group in San Francisco, the San Francisco Renaissance Center. Renaissance had been started a few years earlier by labor leader Walter Johnson, then the head of Retail Clerks Union Local 1100, and he soon recruited Bill Russell-Shapiro, a prominent local businessman. Renaissance was a labor/business collaboration, aimed at innovative approaches to both job training and job creation

Over the next five years, Renaissance launched a series of job training programs, small businesses, and a Renaissance Entrepreneurship Center. The training programs were a mix of vocational programs (business machine repair, computer repair), literacy/job preparation for young women on welfare, and direct placement of older workers. The businesses, intended to generate jobs and work experience, totaled five at one time: carpet cleaning, cable assembly, business machine repair, messenger service, and a convenience store in the financial district. Renaissance spanned ethnic groups and ages. A photo of part of the Renaissance staff from 1985 is below.

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Post Labor Day 2009: The Jobs Lost Forever in California…And Those That Might Emerge

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

I do employment commentary for several of our California radio and television stations, and this Labor Day 2009, the main story was the national unemployment rate of 9.7% announced last Friday (including the more than 25% teen unemployment rate—the highest since this rate was first tracked in 1948). But the longer term story of Labor Day 2009 is the California jobs lost that will not return, and the future of employment in California.

Over the past year, California has lost over 700,000 jobs, and many of these jobs are not coming back, even when the recession is over. The twin forces of globalization and technology are impacting a range of employment sectors, particularly employment in retail, financial services, and professional and business services. Retail employment has fallen in California from 1,631,500 jobs in July 2008 through July 2009 from 1,631,500 jobs to 1,521,100 jobs–a loss of over 110,000 retail jobs. As sales move to the internet, auto dealerships, electronics stores, clothing stores, and other retail outlets no longer have the need for salespersons in a shop or dealership.

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The Fate of the NUMMI Workers

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

What will be the employment futures of the approximately 4800 workers at the New United Motors Company (NUMMI) in Fremont that is now scheduled to close in March 2010?

The recent history of large scale layoffs in California suggests that these futures may not be as bleak as initial reports are suggesting. Over the past two decades, workers of mass layoffs have taken a variety of paths in new job placement and/or retraining in their region, as well as movement to jobs in other regions of California and other states.

In the early 1990s, the aerospace industry in California went through enormous downsizing, shedding over 200,000 jobs. The conventional wisdom then was that aerospace engineers and production workers would become either the long term unemployed or hourly McDonald’s employees.

In the mid 1990s, a group of researchers at the RAND Corporation decided to test this conventional wisdom. They gathered wage data for 517,148 workers employed in the aerospace industry at the beginning of 1989, and tracked their earnings from 1989 to the third quarter of 1994. As set out in Life After Cutbacks: Tracking California’s Aerospace Workers (1996, RAND Corporation), the researchers found around a quarter of the laid-off workers experienced a significant reduction in wages (15% or more) by the end of the period. However, the remaining three-quarters were employed, and at wages comparable to or higher than their 1989 wages.

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