The date of March 13th is burned into my brain. That was the day state and local governments announced businesses, excluding those deemed “essential”, would need to cease operations due to the public health emergency we know as the coronavirus. At that time, no one could have imagined that a year later Marin’s restaurants, gyms and yoga studios, and business offices would still be closed in one form or another. Yet here we are, with slim prospects at the time of this writing, that the “normalcy” we enjoyed will fully return. It begs the question – what is next for our Marin economy?
Whether you have followed MEF’s numerous reports or simply the local news, you will have a good sense of the impacts of the pandemic on our economy, including the fact that small businesses have been hit the hardest, with closures and layoffs. You will have heard the sad stories of our black and brown communities being disproportionately affected with cases as they had no economic choice to opt out from work due to financial need. You will also know that there are pockets of resiliency in Marin; our residents working in the knowledge economy have successfully pivoted to remote work, some businesses, like home furnishings and sporting goods stores, benefitted from pandemic-driven lifestyles, and asset prices, like homes and stocks enjoyed greater than usual value increases. Suffice to say, the recession that was predicted at the outset of the pandemic did not materialize in a traditional way and we should consider that recovery of our Marin economy will not be traditional either.
From MEF’s perspective, recovery of the Marin economy should embrace some new approaches, starting with the creation of a first-ever economic strategy for the county. Readers may be surprised to learn that there is no current county-wide strategy for our economy. That means we don’t have any prioritization of business sectors; we don’t have an approach to workforce development that assures a pipeline of employees for our most important sectors; and we don’t have any tools to attract businesses and create jobs for our residents. Creating an “economic vision” that will guide resources and energy towards creating the economy we want in the future will be a critical piece of our recovery. Another new approach, though one which both the county and individual cities have embraced, is ensuring economic recovery puts our low-income residents upfront. All of the data MEF has presented confirms that unemployment caused by the pandemic has affected our low-income workers, and as confirmed by the Public Policy Institute of California, historically recovery from recessions takes longer for low-income households (following the Great Recession low-income families in the Bay Area took on average 11 years to recover versus just 5 years for high-income ones). Assuring jobs, via upskilling or retraining of our low-income residents, is a faster pathway to economic recovery and prosperity than simply getting them rehired for the same low-wage jobs they previously held.
Finally, Marin County should consider creating a public agency responsible for economic development to ensure proactive management of our economy. As the only Bay Area county that does not have a public agency for economic development, Marin County and its businesses may be missing opportunities to secure federal funding that will help rebuild and strengthen our economy. In addition, most regions have appointed their public economic development agencies to lead the recovery efforts, streamlining the task and clarifying for the community who is responsible and where to go to get support. As businesses and residents look to manage the fallout, as well as opportunities that may emerge from the pandemic, having a single, public agency to guide and facilitate those efforts will buoy chances for successful recovery and a strong future economy.
Coronavirus has created economic conditions like no other event, with winners and losers in our local economy. But recovery is about all our residents prospering together. To do so will require some approaches Marin County has not taken in the past. We should do so now to secure the future.
According to most economists, including MEF’s Chief Economist Dr. Robert Eyler, the nation has moved from “recession” to “recovery.” That may be the case in Marin County, where unemployment has dropped to 5.4% from a peak of 11.2% in April. But a drill-down in the data shows differing circumstances across the resident population, suggesting that our recovery will need to be targeted, rather than one size fits all.
The first and most obvious group are the small business owners. Remember that over 75% of all businesses in Marin County have 9 employees or fewer and within that group over 40% have between 1-4 employees. According to Opportunity Insights “Small Businesses Open” indicator, almost 40% of small businesses in the Bay Area have not reopened since the initial shelter in place orders. Many of these businesses are concentrated in the personal services sector, meaning they have been subject to government shutdowns and in many cases unable to operate. However, the needs of this group are well known, and they have a strong group of advocates, from Chambers of Commerce to the County’s “Marin Recovers Economic Recovery Task Force.” Supporting recovery for our small businesses must include financial support, community support (shop local!), and a productive (and empathetic) working relationship with regulators at the city and county level to adapt to a new consumer environment.
There are two other groups of residents who remain critical to our recovery. The first group are Marin’s lower-income residents. A recent publication by the Public Policy Institute of California (PPIC) showed that rates of unemployment from coronavirus in California range from 25 to 30 percent for families with incomes under $30,000, compared to 5 to 10 percent for families with incomes above $150,000. Mean income data for Marin County will always be skewed by a large concentration of high income earners, but according to the most recent Census data, almost 23% of households in Marin have incomes of $50,000 or less. What is more concerning about the findings of the PPIC report was that based on the last recession (2008), low-income families in the Bay Area took on average 11 years to recover versus just 5 years for high-income families. The report also confirms that income inequality widened following the last 4 recessions in California, suggesting the same phenomena could occur this time as well.
The second group are women. Nationally, 11.5 million women lost their jobs between February-May compared to just 9 million men. Hispanic women experienced the steepest decline in unemployment at 21%. The figures were so alarming that Federal Reserve Chairman Jerome Powell cited women’s unemployment as a concern to national economic recovery. These figures led people to label the recession of 2020 a “shecession” in acknowledgement that women were more deeply affected. Women make up a large proportion of employment in personal services jobs, and those jobs have declined 60% in Marin County since 2019. Especially hard hit were nail and hair salons, primarily owned by women residents of Marin. Getting women back to work is not simply a function of job openings; many have dropped out of the workforce to care for children or elderly parents.
Around the Bay Area counties are developing economic recovery strategies that fit the needs of their residents and economy, and Marin will do the same. As we do so, recognizing where the pain points are and WHO they affect will be an important influence of WHAT those strategies will be.
From an economic standpoint, Marin County is often envied. Our annual gross regional product (a measure of all economic activity in the county) is over $20 billion annually derived from a diverse group of sectors. Our median household income stands at $122,933, almost $50,000 more per household than the national average (2018). Our educational attainment, where 93% of residents have a high school degree and 60% have a bachelor’s degree, is superior to both the national and state average. The life expectancy of residents stands at 83.8 years, ranking Marin #1 in the State of California, an honor the county has upheld for 8 years running (by 2018). In general, and as noted by this organization many times, Marin County fares better economically relative to the State of California – which I remind you has an economy that would rank 5th largest in the world.
Despite this data, COVID-19 impacts on the Marin economy are worse than the state averages in certain categories, according to data we shared in the latest “Marin Economic Briefing.” For example:According to the Opportunity Insights Economic Tracker, a project that aggregates various data sources, small business revenues in Marin County are down a whopping 40.2% compared to just 16% at the state level from January 15, 2020.The total non-farm jobs losses since July 2019 exceed the statewide average in % terms (-11.3% in Marin County vs. -9.5% statewide). Looking further at job loss, as of the end of July 2020, over 7,700 people have left the labor force in Marin County, neither working nor collecting unemployment insurance. This works out to 5.4% of our labor force, which is almost double the 3% rate of the state. Compared to state averages, more Marin residents are losing their jobs or exiting the labor market entirely.The third area where Marin is performing worse than the state is in COVID-19 cases, specifically, who in our community is contracting the virus. It has already been well documented by the Canal Alliance that the Latino population in Marin County has been disproportionately affected by COVID-19, with 75% of the cases among just 16% our population. The case rate among Latino’s in Marin is at least 14% higher than the next county in California, which is Napa (57%), but Napa’s Latino population is more than double the proportion of residents relative to Marin County, at 35%.
So how did we get here? Once again, the data offers a potential answer. Marin County is overwhelmingly an economy of small, micro-businesses, with 40% of our 14,000+ businesses having fewer than 4 employees. Typically, such small companies are not in great positions to withstand a cash crisis and maintain payroll, so that explains some of the higher relative job loss. Further, MEF found that half of all employment in the county is in personal service sectors (retail, restaurants, construction, hotels, salons, gyms, real estate) putting those jobs at high risk from a shut-down, and that is exactly what happened when we review state unemployment data for job loss by sector.
Second, the personal services sector traditionally accounts for over 50% of total gross regional product in Marin County. So, the high proportion of those companies in our economy relative to the state explains the big difference in small business revenue declines.
Finally, the high case rate among our Latino population is in part due to the “essential” work they perform in our economy, which is concentrated in low-wage jobs that serve the resident population. Their need to continue working to keep the economy from a complete shut-down meant they were at higher risk to contract the virus.
From one perspective, Marin County’s economic impacts from COVID-19 are the result of an economy highly dependent on the local market. Once that market was disrupted, a large portion of our economy (revenues, jobs) was lost. In economic terms, one could say our economy was not organized to be “resilient”, meaning we could withstand shocks. What this means going forward for MEF is that while our short term recovery must restore the economic activity our existing businesses can achieve, longer term the county will benefit from a more diverse industry mix that provides goods and services beyond our county borders.
The COVID-19 crisis has exposed many things. First, our nation was not as well equipped to deal with a health pandemic as we may have thought. Past decisions on preparations and funding created a situation where the US health sector does not have sufficient resources to confront the virus. Second, small businesses, the backbone of our economy, do not have the liquidity to withstand several months of business closure. Finally, as with any disaster, the economically vulnerable are more acutely affected than those that have the resources to withstand or recover from shocks. Recent research by the Center for Equity, Gender and Leadership at UC Berkeley presents clear evidence of the severe negative economic impacts from COVID-19 on people of color and women.
This final point is on full display here in Marin County. The job losses resulting from government shut-downs and lack of consumer consumption are concentrated in low-wage jobs, in the leisure & hospitality sector (employment down 46% from 2019), and retail sector (employment down 16% from 2019). Meanwhile, higher wage occupations in the financial services and information technology sectors have experienced job losses of less than 4%. We also know that front-line workers in the healthcare, janitorial, and grocery sectors have experienced higher infection rates than those residents in occupations accommodating work from home. Finally, and unfortunately, the data from Marin County Health and Human Services confirms that our communities of color in Marin are disproportionately affected by the virus, registering almost 80% of positive COVID-19 cases, although these communities represent just 29% of our population.
Understanding that our economic recovery is not going to “snapback” and, in fact, may be more devastating than the Great Recession, regions are commencing the difficult task of planning for an uncertain future. The Marin Economic Forum (MEF), which has “enhancing social equity” in its mission statement, is encouraging any future plan for our economy to be “equitable.” What does that look like? Fortunately, there is a lot of discussion on the topic but MEF sees a few areas to prioritize. First and foremost, we need to ensure that any long-term planning for our economy include input from stakeholders in our most vulnerable communities, including our LatinX and African American residents, our older adults, veterans, youth, and those dealing with physical or mental illness. Second, an equitable recovery must ensure that the long-term effects from the virus do not worsen inequality, by creating further financial damage to individuals that were already on the economic margins. To do so, getting those who lost jobs back to work quickly must be a priority, including the possibility that some will need to be retrained or reskilled. We need to leverage the capacity of organizations like CareerPoint and the many non-profits that link vulnerable communities to employment opportunities.
Third, we must consider how to support individuals that want to start their own business but do not have the resources or means to obtain mainstream financing or other incentives. This means a concerted effort to link entrepreneurs to the many forms of free assistance offered through organizations like the Marin Small Business Development Center or other entrepreneurship entities that have now shifted their training online. It also means more engagement with Community Development Financial Institutions (CDFIs) like Pacific Community Ventures, which specialize in working with small business owners like female entrepreneurs, immigrant entrepreneurs, and entrepreneurs of color.
Finally, any future strategy for the economy must prioritize the attraction of companies that can bring more middle-skill jobs to Marin, the types of jobs that require skills but not necessarily a 4-year degree. Sectors like IT support, banking, and even biotech have occupations that are skills-based, not education based, and pay a suitable living wage, even by Marin standards. According to data from the Marin Promise Partnership, just 38% of students of color completed college or post-secondary education in 2019 compared to 62% of white students. While getting more students to complete college remains a priority for all Marin families, creating good employment opportunities must be a part of any economic strategy.
These are but a few of the ideas to ensure our future economic recovery is equitable. There are many more, and MEF is happy to solicit those ideas from our community.
As the world reluctantly accepts a shift from “back to normal” to the “new normal”, industry sectors are strategically considering their futures, with a strong likelihood that a new business model will be required. Organizational change is hard, so this process will be difficult and for some, perhaps even emotional.
An informative article from the MIT Sloan Management Review describes the changes in operations many name brand companies have made since COVID-19. Most of the changes show how companies were able to leverage and pivot. This will be the prevailing strategy that most businesses take in the short-to-medium term. For a large company with resources like senior executives and cash, implementing change in a rapid way is possible. While small businesses are nimble, significant changes to a business model can be difficult and often not desirable.
Marin County has long been recognized as an economy of small businesses. Almost 70% of all payroll firms in the county employ 9 people of fewer. Despite the small scale of companies, the county is host to a highly diverse number of sectors. This provides a front row seat to the coming business model changes, whether they be in restaurants, health care providers, education, or even technology.
One of the most prevalent sectors in Marin County is retail. Already facing pressure from the growth of ecommerce, retail was hit hard by the shelter-in-place order that effectively closed doors for 2 months now. This article by Forbes suggests the retail landscape is going to significantly change in response to consumer shopping preferences, which will not only prioritize convenience (through online shopping), but also safety. Many small businesses provide a more personal touch but as noted by a representative of famed Marin menswear shop Gene Hiller, “Nobody’s going to want to buy a suit or sport coat curbside.”
Restaurants are a large source of employment in Marin economy. Credit is due to the many restaurants that were able to quickly pivot operations towards delivery and take out, yet many employees in this sector lost jobs. It may be too early to understand how this sector will adapt but what is clear is the need to guarantee safety for diners. Restaurant owners will need to re-think current business processes to support improved safety over labor and production efficiency.
Is this the future of dining out? Photo credit: image by willem velthoven
Specialty food and beverage companies were also quick to pivot, producing the same product but opening new sales channels, namely direct-to-consumer (DTC). In some cases, serving the DTC channel only required adjustments to existing web-based commerce or changing packaging to enable smaller scale ordering. Producers were already pursuing methods to shrink the supply chain to the end customer-COVID-19 will surely accelerate the DTC business model.
The real estate sector (including rentals and leases) is another major sector in Marin, representing almost 20% of the GRP in 2018. Although the Marin residential real estate market is hyper local, innovations in the sector launched pre COVID-19 could eventually appear. One such innovation, referred to as “iBuying” provides an alternative to would-be sellers by providing online, cash offers. Some iBuyers, like San Francisco-based Opendoor, put operations on hold during COVID-19 with the uncertainty of home prices but are slowly coming back, relying on sophisticated data analytics to model pricing. Again, the Marin real estate market may not be the place for iBuying but business models that can expedite transactions while minimizing human contact may become more desirable.
While Marin County is not a “tech hub” by any stretch, a high number of our residents work in the tech sector and many for start-ups. Start-up growth may be delayed by a smaller pool of available venture capital, but some have used the pandemic to retool their products to respond to new demands. One such start-up is Bay Area-based Pathr, which uses artificial intelligence to predict spatial movements. In response to new social distancing requirements (which may be with us a long time) Pathr developed “Socialdistance.ai”, an AI solution created to help businesses safely reopen and protect customers and staff by evaluating foot traffic, layout, and establishing social distancing options.
Longtime Marin businesses have showed resiliency before, remaining open despite previous recessions and competition from big box retail. Doing so this time might require wholesale changes to the business model but I am confident many will rise to the challenge of a post COVID-19 market.
As the world manages the COVID-19 crisis, there is a parallel effort to defeat the disease and limit the deep economic shocks. In the U.S., the Federal government has acted with more speed than ever before to put economic assistance in place, at the institutional level, the business level, and the human level. The logic goes that providing sufficient relief will carry us through to a point where the health risk is low enough for economic activity to resume and the broader economy to get back on track, ideally in a shorter period of time than it took in past recessions. The major outstanding question now is when will we get to a phase where economic recovery can begin? That question is being debated and will almost certainly be a state-by-state decision.
I understand most businesses (including sole proprietors) are in survival mode right now. At the risk of oversimplifying their plight, businesses’ ability to survive primarily depends on operating cash. “Essential” businesses have some opportunity to sustain a revenue flow (even if greatly reduced) while others will rely on negotiations with landlords or creditors to defer expenses. Perhaps some businesses will succeed in accessing federal support that will serve as a lifeline for the next 60-90 days. Many businesses, unfortunately, will not reopen. As this fight for survival plays out, MEF is already planning for recovery, by analyzing three critical questions:
What will the “snapback” sectors be in Marin? Marin County is a service economy and mostly oriented towards its residents. We have a high concentration of restaurants, salons, dentists, gyms and yoga studios, etc. When the shelter-in-place (SIP) order is lifted, these kinds of businesses will experience immediate demand, pent-up over the last few months. Understanding which sectors will be poised for a quick “snapback” will be important so that they can be sure to be ready (in terms of supplies, workers, credit, etc.) to accommodate the consumers and get their businesses back up to speed. There would be nothing worse than to survive the short-term closure and not be prepared to service customers when the economy opens for business.How will workers get their jobs back and how will employers increase their labor force? Many businesses have had to furlough or lay-off employees. How those businesses can maintain a relationship with current employees (Paycheck Protection Plan, limited hours, etc.) is critical so once they open their doors, they can meet customer demand. Businesses that expect just a temporary closure should already be looking for staff, even if they don’t know when they will reopen. On the flip side, Marin residents who have lost their job need new opportunities immediately. Fortunately, there are some resources, such as the CareerPoint Marin “Job Leads” and the Onwardca.org website that are serving as “go to” resources during this crisis and remain current. However, MEF is looking at more strategic workforce initiatives, by sector, to enable rapid scaling when the need eventually arises. One idea is an “employee exchange” where businesses that have demand for a specific skill but only on a part-time basis, might link to other employers to “share” an employee’s time by guaranteeing 40 hours of work.What will be the consumer patterns or trends that demand adaptation by businesses? Everyone is trying to envision the “new normal” and I have heard many plausible and creative ideas. The basic need will be assuring safety for customers. As the government attempts to secure our health, what extra measures will businesses be taking? What possible measures might the government impose on certain businesses? These are critical questions now being debated and businesses must have a voice here, less the parameters of operating be developed in a vacuum by public officials (which admittedly need this input from businesses).
The shifting narrative from survival to recovery is the critical focus for MEF today. We envision a collaborative effort, including our public officials, Chambers of Commerce, and businesses themselves. Write to us here at MEF (info@marineconomicforum.org) to share your ideas of how recovery could look or if you have a business and can specify what kind of needs you anticipate, we want to hear from you. There will be more funding and assistance available but understanding how to best deploy that is the critical question we must now all be debating.
Last week I participated on a panel at the 27th Sonoma State Economic Outlook Conference, an annual event focused on the North Bay economy. My panel was titled “Future Industries” and included business leaders from the tech, wine, tourism, and food sectors among others. Of the 6 panelists, I was the only one from Marin County, which struck me as odd considering the focus was on the North Bay.
In my presentation I showed the two figures below, in order to explain to the audience what the Marin County economy really looked like. To understand what our future opportunities are, it is important to know the past and current situation. Figure 1 shows our very diverse economy, with over 20 sectors contributing to the $20+ billion gross regional product (GRP) of Marin County. This information generated a lot of interested looks and note-taking from the audience. My major point here was that we don’t have a dominant industry that will be changing over time, nor have we had new sector entrants into the economy that are going to change the nature of our economy in the future. This chart from 2018 looks almost the same as 2011, but that is a good thing from the perspective of maintaining steady economic growth.
I then showed Figure 2, which contains a breakdown of companies by size of employee. Most audience members were not aware that almost 70% of all the businesses in Marin County have 9 employees or fewer. In Sonoma County they have a lot of large companies, like my fellow panelist from Keysight Technologies, which has several hundred in Sonoma alone.
At the end of the panel discussion several audience members confirmed they did not have knowledge of the size and diversity of the Marin economy, citing that oft-mentioned characterization of Marin as a “bedroom community.”
I had a similar experience last November when I attended the California Economic Summit in Fresno, a gathering of business, government, non-profit, and academic leaders, designed to create a “Roadmap to Prosperity” of policy recommendations for the State. I participated in a breakout session for the Bay Area and interacted with several other economic development leaders, many of whom knew about Marin County but nothing of its economy. This became obvious as our group strategized on future initiatives on regional economic development and the conversation was dominated by building housing and transportation near job centers – “why would anything be developed in Marin?” they asked.
This lack of awareness about the Marin County economy by our Bay Area peers may be known and accepted to some of our residents and public officials, but in today’s hypercompetitive Bay Area economy, we cannot be an afterthought. We have a Fortune 500 company that started and remains here and we have some of the most innovative and creative companies with global reputations (BioMarin, Glassdoor). Marin County is also home to several “fast-growing” companies that might go on to be global brands themselves. Venture capital is organizing here, and our education sector is forging stronger linkages to local businesses. It could be that we are not great at marketing ourselves.
So, “yes” Bay Area, Marin County has a business sector with proven capabilities and sustained growth, and we will continue to play a role in the region’s economic dynamism.
The Phase 1 report of the Marin County Business Retention & Expansion project is now available online! Please click here to access the report on our website.
For your information, the Bay Area Council has provided this very useful information regarding the coronavirus.
As updates surrounding the coronavirus, officially named COVID-19, are made public, the Bay Area Council remains committed to the health and wellbeing of our members and their employees. We have compiled information and resources from our member companies in the healthcare industry, as well as from state and federal government agencies, that you may consider disseminating and implementing as you deem appropriate. For the latest updates, please refer to the U.S. CDC (Centers for Disease Control and Prevention).
What is the current health threat in the U.S.? According to the California Department of Public Health, while imported cases of COVID-19 have been detected in the U.S., there is no evidence of sustained person-to-person transmissions of the virus. On January 31, Health and Human Services Secretary Alex M. Azar II declared a public health emergency in the U.S. to aid the nation’s healthcare community in responding to the virus. While the CDC maintains that the potential public health threat posed by COVID-19 is high, the immediate health risk for the general public in the U.S. is considered low at this time.
What are the symptoms and who is at a higher risk? Symptoms include cough, sore throat, high temperature, and feeling tired and achy, which are symptoms similar to the flu. According to Bay Area Council member company Sutter Health, “the flu poses a much greater public health risk in the United States at this time.”
People with an increased risk of infection include people with underlying health issues, older adults and healthcare workers caring for patients with COVID-19.
How can individuals protect themselves and others? Bay Area Council member company Kaiser Permanente recommends the following practices:
Wash your hands often with soap and water for at least 20 seconds.
Avoid touching your eyes, nose, or mouth with unwashed hands.
Avoid close contact with people who are sick.
Stay home if you are sick, except to get medical care.
Cover your mouth and nose when you cough or sneeze.
Clean and disinfect objects and surfaces you touch.
How can businesses and employers respond and prepare? The CDC warns that as COVID-19 is likely to spread, workplaces and other places for mass gatherings may experience absenteeism. Local transportation, healthcare and emergency systems may also be affected. Employers are encouraged to to stay updated on the latest developments and follow certain strategies now:
Prevent stigma and discrimination in the workplace by not making determinations of risk based on race or country of origin, and maintain confidentiality of people with confirmed infections.
Actively encourage sick employees to stay home and to practice respiratory etiquette and hand hygiene. Anyone with signs of fever, a temperature of 100.4° or greater, or other symptoms for more than 24 hours should not come in to work.
Separate employees who arrive to work with acute respiratory illness symptoms from other employees and send them home immediately.
Perform routine environmental cleaning.
Advise employees to take certain steps before or during travel. The CDC provides the latest guidance and recommendations for each country. Ensure that your employees are aware of any policy for obtaining medical care outside of the U.S.
Create a plan to implement in case of increased workplace absenteeism as well as an Infectious Disease Outbreak Response Plan.
On November 7-8, I attended the California Economic Summit, a 2-day conference of public, private, and civic leaders in California. The event was hosted by California Forward with a purpose of developing key policy positions and action plans that will lead to sustainable economic development across the whole of California. This year, the event took place in Fresno, which was significant given the focus of Governor Gavin Newsom on inland California regions, which haven’t shared in the economic success of the State, especially since the Great Recession. Many senior State and local elected officials were in attendance, including newly appointed Chief Service Officer Josh Fryday (formerly on the Novato City Council) and Marin County Supervisors Damon Connelly and Dennis Rodoni.
Governor Gavin Newsom addresses Summit attendees. (Photo: David Jon Photography/CA
During the Summit, participants discussed how to approach California’s biggest problems through a set of concurrent sessions on “Housing, Mobility, and Connectivity”, “Lifelong Learning”, “Prosperous Economies, Thriving Workers”, and “Ecosystem Vitality and Working Landscapes.” As you might imagine, engaging on these issues with hundreds of peers yielded rich conversations and debate. At the end of all of it, three things stood out to me for Marin as these issues are addressed:
The State is encouraging regional collaboration in economic development. In September 2018, then Governor Jerry Brown vetoed AB 2596, which would have required a statewide economic development strategy. Fast forward to May 2019 and current Governor Gavin Newsom introduces the “Regions Rise Together” initiative, prioritizing regional solutions and strategies for more inclusive economic growth in the State. The Summit directly supported that initiative by emphasizing regional solutions and sharing examples of regional success stories. What does this mean for Marin?
First, Marin should ensure participation in regional dialogues, both in the public and private sector channels. Although our local government officials do engage regionally through entities like the Association of Bay Area Governments (ABAG) and the Metropolitan Transportation Commission (MTC), among others, businesses, as well as some of our non-profits on the front lines of difficult socio-economic issues, also need to engage regionally.
If you are anything like me, you have enough skill to do a simple job around the house thanks to lessons from mom and dad or that summer job where had to run a machine. You may have recently ventured into the world of do-it-yourself YouTube videos, where a study shows that 51% of users find the site useful for “figuring out how to do things they haven’t done before.” However, for any serious electrical, plumbing or auto repair, you probably turn to a professional. Problem is, here in Marin people with critical trade skills are diminishing. I’ll get to why this is happening but first it’s useful to consider the situation at the national level.
A 2018 news article in the Washington Post succinctly summed up the problem: “An unprecedented skilled labor shortage exists from a combination of the Great Recession’s record levels of unemployment, industry veterans leaving the workforce and the fact that many high school graduates are not interested in blue-collar jobs.” The same article cited an important finding by Manpower Group:
“Skilled trades (electricians, carpenters, welders, bricklayers, plasterers, plumbers, masons and more) have maintained the No. 1 position in vacancies from 2010 to the present.”
That is almost 10 straight years of leading the nation in vacancies.
The picture is just as grim for manufacturing jobs-which include some of the same certifiable skills demanded in the trades. According to a study by the National Association of Manufacturers and Deloitte Consulting, there are over 2 million vacant new jobs in the manufacturing sector expected by 2028. Combined with over 2 million retiring workers from the sector in that timeframe, they estimate the US economy could lose $2.5 trillion in gross domestic product (GDP).
The issue is not the result of trades jobs not compensating well. The Washington Post article included data from the Bureau of Labor Statistics (BLS) which showed the median annual wage (the wage at which half of the people make more, half make less) for an electrician is $52,720 with the top 10 percent making $90,420 (National average). These wage levels are higher relative to many other non-degree occupations and keep in mind that is nationally-not in high cost of living areas like the Bay Area. Using the First Quarter 2019 State of California Occupational Employment Statistics and Wages (OES) program, we found that in Marin County the mean average annual wage for occupations in the “construction and extraction industries” was $68,807, highest among all other non-degree occupations. Further, the same database showed wages for “managers” in construction and extraction industries and in the “transportation, storage and distribution” categories surpassed $125,000 demonstrating the longer term earning potential for individuals that can advance in those sectors.
Labor markets are highly regional but the situation in Marin County mirrors that of the national level in terms of high demand. Evidence collected by the Marin Economic Forum through interviews with companies in the electrical, plumbing, agriculture and construction sectors confirm their greatest concern is the lack of a pipeline of workers for the future. Those companies cite several reasons for this:
Industry veterans are retiring without opportunities for succession thus diminishing the volume of local tradespeople. Many electricians and plumbers are one-person operations, perhaps with a small crew, but without good options for someone to take over the business;
Workers with skills and experience have many opportunities for employment, including with public agencies that offer good job security;
Many tradespeople that currently serve the Marin market do not actually live in Marin thus may choose to accept projects or even employment closer to their actual residence;
Senior tradespersons observe a stigma about labor-based jobs and a lack of awareness of the actual wages among high school students. This information was also conveyed in a report by the North Bay Business Journal with leaders in the North Bay construction industry ; and
Other jobs that require knowledge of the trades, such as hardware equipment sales or building inspectors are also experiencing high vacancies creating even more competition for workers.
The increasing gap between available tradespeople and demand from Marin residents will surely rise leading to higher costs and longer timelines and that in itself is an economic concern. However, the fact that demand for skilled tradespeople will remain strong for the next decade is a powerful opportunity for young people that may prefer a career pathway that doesn’t include a four-year degree.
To seize this opportunity will require some changing of hearts and minds, with respect to what trades jobs look like today (hint: they are sophisticated and utilize technology) and what kind of compensation a career in the trades can provide. It should also be noted that trades jobs require continued learning.
One place to start is to make data on wages in the trades, including long term income projections, more accessible to high school students and their parents. Second, greater exposure to what trades jobs look like today, via internships and partnerships with industry, can allow young people to make informed decisions about their post-high school opportunities.
Finally, programs like “School to Career” and Regional Occupational Programs and Career Technical Education (CTE) offered through local high schools and the College of Marin, and private initiatives like the North Bay Construction Corps are great examples of the infrastructure that already exists to enable youth to pursue work in the trades.
Realizing the shortage of tradespeople is an immediate career opportunity for good paying jobs for Marin youth is important. Helping them get to those careers should they choose is our challenge.
It’s no secret the Bay Area is the place to launch your dream business – entrepreneurs flock here like actors to Hollywood. According to crunchbase.com there are 489 publicly traded companies in the San Francisco Bay Area including Marin’s own Autodesk. But it’s not limited to the technology sector; healthcare and food are also big players in this region. So, what is it that breeds these types of successful businesses? It’s not the nice weather, free-spirited attitudes or even innovation, it’s something called an “entrepreneurial ecosystem” and strengthening the one we have in Marin can be a big benefit to our residents.
An entrepreneurial ecosystem describes a set of conditions, some existing, some created, to bring people together and foster economic prosperity and wealth creation. The graphic below identifies the standard elements of any entrepreneurial ecosystem.
Source: Mazzarol 2014
Although the figure is composed of 9 elements, I would argue 4 of them are most significant: funding & finance, support systems/mentors, culture, and human capital & workforce. The strong presence of these four elements have ensured the Bay Area is a leading destination for entrepreneurs. In other regions, elements like “government policy” may have stronger influence on success.
San Francisco and Silicon Valley are responsible for a staggering 40% of all U.S. venture capital funding according to the 2018 PricewaterhouseCoopers/CB Insights MoneyTree report. If you need money to start your company, you come here. As far as human capital, the early technology companies with links to Stanford created a pool of technically skilled entrepreneurs that went on to create their own companies. Fast forward to today and you not only have a fully developed pipeline of high-skilled workers but a culture of entrepreneurship that is part of the Bay Area DNA. Finally, the support systems are excellent; regional incubators and accelerators have world class services that can carry entrepreneurs’ dreams to reality and many successful entrepreneurs have joined the investor and mentoring ranks.
So, how does Marin’s entrepreneurial ecosystem look? Applying a filter of ecosystem elements discussed above, here are some of our findings:
Marin doesn’t have recognized angel investor networks like other counties in the region do (funding piece) but we do have successful investors among our residents as well as entrepreneurs that understand the necessity of start-up capital;
We have a workforce of high-skilled residents that work in sectors like media, technology and healthcare who may desire to start or have started companies. Coincidentally these sectors rank in the top-5 for receiving venture capital;
We have coworking spaces like WeWork, VenturePad and The Hivery, but would benefit from a stronger presence of incubators and mentoring networks;
We have two higher-ed institutions (Dominican University and the College of Marin) that could serve as a talent pipeline with strategic partnerships to the business community;
We have elected officials that understand the importance of economic vitality and the need for good jobs for Marin residents; and
We do have a start-up culture in Marin, including known stars like Glassdoor and BioMarin but with fast growing companies like Waggle, Inc., AdvisoryCloud and Sorry Robots LLC. These firms were founded in Marin but are now serving global markets.
These factors confirm the foundations of an entrepreneurial ecosystem already exist in Marin but relative to other regions it could be considered “underappreciated.” Building up the ecosystem could help residents launch companies, strengthen future workforce pipelines for middle and high skill jobs and attract innovative companies with good jobs. How we build it and define what we want it to look like is a conversation we need to start.
