09/2023 Blog Topic: Marin’s labor force shortage continues to be a challenge

Written on . Posted in Blog, Recent News

September 2023

Recent articles on the U.S. economy (including those from the Marin Economic Forum) have discussed the growing concern over a labor shortage that has persisted since the pandemic. Marin’s own labor force is down over 5% (about 6,500 workers), a figure that has remained since 2020. The Bureau of Labor Statistics reports there were over 8.8 million jobs open in August 2023 across the U.S. and anyone who has strolled one of Marin’s downtowns has noticed a “We’re Hiring!” sign in windows. it seems to be a problem that won’t go away, and here is why that is a concern for the Marin economy:

Stifled Economic Growth: A prolonged labor shortage hinders economic growth by restricting the potential output of businesses. Economic growth in Marin is not about new buildings and more traffic – – it is about having a tax base of personal and business incomes that fund critical public services. The alternative to economic growth is higher costs or taxes to offset losses of traditional revenue sources. That would be even harder on our low-income residents.
 
Inflationary Pressure: The labor shortage can lead to wage inflation as employers compete for a limited pool of talent. While an argument for higher wages in the costly Bay Area can be made, many of our small, locally serving businesses are price sensitive, meaning they cannot absorb higher costs without passing on to their customers or limiting operations. This is already occurring in local food and energy sectors as well as some basic healthcare services like the dentist.
 
Skill Mismatch: As the labor market tightens, employers may struggle to find workers with the specific skills they need. This can lead to a skills gap, where available jobs and the skills of the workforce do not align. In Marin, we have many high-skilled residents that must seek employment elsewhere and a lot of demand for lower skilled jobs, which we cannot fill with the existing labor force. High skilled occupations in the trades sector do not have sufficient talent pipelines to meet demand, at a time where cities have pledged to build more homes.

All three issues are pain points for Marin residents, whether they be business owners or employees. But solving these issues is difficult because Marin has unique challenges that exacerbate our own labor shortage issue, especially our high cost of living. These unique challenges do not allow us to take the most traditional approaches to labor shortages such as:  

Investing in Training: Regions that successfully combat labor shortages invest in training programs that align with the needs of local industries. However, in Marin our largest industry sectors are those with locally serving businesses, like foodservice, real estate, and retail sales, which are not attractive investments for training entities given the relatively lower wages paid. That makes it difficult to build talent pipelines to feed those industries.
 
Attract and Retain Talent: Regions compete for talent by creating vibrant and livable communities and having a robust ecosystem of employers. Marin’s quality of life is a major draw to live or work here, but we do not possess those deep pools of firms that can motivate a young professional to locate here. With just a few companies in sectors like life science or technology, it can be a risk for an employee to relocate to Marin without multiple employer options.
 
Immigration: Labor shortages can be mitigated by providing a legal pathway for skilled immigrants to work in the U.S. For example, Silicon Valley has benefited from a diverse and highly skilled immigrant workforce that has played a crucial role in its growth. The Bay Area has long been a magnet for immigrants and our region’s economic growth will depend on this population for the foreseeable future. 

Since these traditional approaches are not widely used (or available) in Marin, we are going to have to find other methods to grow our labor force, or suffer a decline in productivity, economic growth and potentially those very important revenues for public services. Some of the approaches that should be considered include business attraction that encourages firms to locate here, investment into local entrepreneurs that can grow businesses, especially those that utilize remote or distributed workforces or that require high-skilled and well compensated employees, and deeper partnerships between public sector, academia, and private sector to determine and build talent pipelines that respond to future growth opportunities.

Our challenges are unique and require crowdsourced solutions. MEF is ready to convene leaders in Marin to collaborate in finding solutions to our labor force challenges. If you want to be part of the solution, I hope you will reach out and signal your interest (mblakeley@marineconomicforum.org).

In our effort to responsibly share data and information with our external audiences, we pay careful attention to data and other privacy rights to ensure compliance. In some cases, this means we can cite a source but we are unable to include access to the source itself as a link, attachment or otherwise, and it also requires careful attention to the reuse of that data for our own purposes.

Mike Blakeley, CEO
Marin Economic Forum

08/2023 Blog Topic: From a tax perspective, Marin’s economic recovery from COVID looks strong

Written on . Posted in Blog, Recent News

August 2023

Although COVID made a late summer cameo, it has for the most part been forgotten as a factor affecting today’s economy, as inflation, the stock market and mortgage rates dominate economic headlines. However, MEF continues to monitor the economic recovery from the pandemic times, considering it had such a significant impact in Marin in terms of business revenues, closures, and the labor market. In the “Monthly Economic Briefings” provided by MEF, we normally present a set of economic indicators that we rely on to measure the county’s economic health. Most of those indicators are routinely used by economists and policymakers while on occasion we identify alternative measures that help us understand the situation. Recently, sales tax revenues and newly available data on household tax returns, reported by the Internal Revenue Service (IRS), have been a relevant datapoint for analysis on the COVID economic recovery, including measuring Marin relative to the greater Bay Area.

Let us start with the issue of migration and household income by county during the pandemic. Recall the narrative of the “Bay Area exodus” from urban cores, like San Francisco, as individuals gained the opportunity to work remotely. The appeal of relocating to a lower cost region became a compelling offer for many Bay Area residents. Companies like U-Haul regularly reported data confirming the flows of people moving and we learned that Bay Area residents were locating to places such as Sacramento and Seattle. The departure of major local corporations, like Tesla and Charles Schwab, also occurred at the same time, suggesting the Bay Area’s days as a leading region for high paying jobs and talented workforce were numbered. According to the IRS, (and analysis by EIG), Marin County aggregated household incomes increased by $216 million during the tax period of 2020-2021. That means despite the adverse impacts such as job loss and slowing of economic activity, Marin’s aggregated household incomes increased following the height of the pandemic in 2020. For comparison, Contra Costa County experienced a loss of $131 million while Alameda, San Francisco and San Mateo counties experienced losses of household income in the billions of dollars. We also know that population loss did occur in Marin at the same time, suggesting that the households that migrated to Marin County in the period had higher reported incomes than the net value of households which left. Strictly from the perspective of economic recovery, higher household incomes are a positive indicator.

The next area of analysis is in tax revenues, specifically sales tax revenues across the county. In 2019, pre-pandemic, Marin County (all jurisdictions) collected $57 million in sales tax revenue, higher than the previous 4 years. In 2020, as expected, that figure dropped to just $52 million as business closures and other pandemic impacts affected the economy. In a sign of surging recovery, sales tax revenues jumped to $64 million in 2021 and $65 million in 2022 (Marin County Budget Overview FY 23-24). Again, from the perspective of tax revenue, or local sales of goods and services, Marin County has dramatically recovered economically to a level unseen before.

Turning again to IRS data, Marin County was recently named “the best place for small businesses” according to SmartAsset, a free online service connecting consumers to financial advisors. SmartAsset analyzed tax returns of households in Marin County and found, relative to other counties in California, that there was a higher proportion of households filing as businesses (42% compared to just 25% of all Californians). This data suggests a high proportion of our residents are business owners and have likely weathered the severest moments of the pandemic storm. At the same time, local jurisdictions have reported that business license applications have increased over 2019 levels following a nation-wide trend that has seen new business starts up over 20% since pre-pandemic times.

COVID itself is not necessarily in the rear view and MEF recognizes that not all businesses were able to survive the effects of shutdowns or even disruption to business models that may affect revenues. However, when looking at tax data as one form of measuring recovery, Marin County has performed very well, in fact better than most of its regional peers.

In our effort to responsibly share data and information with our external audiences, we pay careful attention to data and other privacy rights to ensure compliance. In some cases, this means we can cite a source but we are unable to include access to the source itself as a link, attachment or otherwise, and it also requires careful attention to the reuse of that data for our own purposes.

Mike Blakeley, CEO
Marin Economic Forum