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KEEPING CALIFORNIA COMPETITIVE, CREATING OPPORTUNITY 3 The Challenge Facing California California can only compete successfully in an increasingly global economy based on the strength of its people. California's competitive advantages are and must continue to be a skilled workforce, modern infrastructure, high quality public services, a dynamic mix of peoples and cultures, and effective collaboration among labor, business, government, and the communi- ty. California's leadership in each of these areas has been the foundation of our economic success and a broadly shared prosperity. Many of the nation's fastest growing and most prof- itable companies call California home. Our state's industrial innovation and productivity has consistently delivered per capita family incomes above that of the nation as a whole. A highly trained and productive workforce has been the primary competitive advantage for many California companies. The state now stands at a historic crossroads. Over the next two decades, demographic shifts already underway will change California's population, particularly that of its prime working-age population. The highly skilled baby boom generation will be retiring, and many projections indicate that California's replacement workforce will have lower levels of educa- tional attainment if current trends continue. While the world has changed, our institutions have lagged behind. Increasingly global markets and international competition, rapid technological advancement, and an aging workforce confront this state with a critical challenge. If we do not meet it, California may lose its competitive edge and the consequences will be borne by all the state's residents, in the form of fewer jobs, lower wages, and declining state revenues. California cannot build a prosperous future on the basis of a low-wage, low-cost workforce. Already, income disparities are growing; too many of California's residents are living in poverty; and even more work for wages too low to provide a quality stan- dard of living.' To support state-of-the-art industry, continued innovation, and aworld-class standard of living for all its residents, California must make invest- ment in its people the centerpiece of its economic development strategy for the 21st century. The Challenge to California's Businesses Already many California industries face critical skills shortages, including: ^ Construction Construction employers were responsible for 27 percent of all new jobs in California the two years between 2003 and 2005=, and the Association of General Contractors reports that the state needs 250,000 new construction craft workers to keep pace with steady demand and an aging workforce.' With far more skilled workers retiring than being trained, the lack of skilled crafts workers means jobs are going unfilled and projects are delayed, with opportunities lost for high wage employment and industry growth.° -l' Employers and civic leaders are excited over the prospect of much needed new infrastruc- ture investment in California, but are gravely concerned there is not a skilled workforce available to meet demand. In response to the current shortage of skilled construction workers, employers are "in-sourcing" skilled workers from other states and "outsourcing" assembly projects to Mexico. California Budget Project, Working Hard, Falling Short; Investing in California's Working Families (January 2005). Also, according to the California Budget Project (CBP),"The gap between the state's highest- and lowest-wage earners has widened and is substantially wider than that for the nation as a whole:' (California Budget Project, A Growing Divide: The State of Working California: September 2005). Finally, the CBP reports, "One out of every ten California workers earned within a dollar of the state's minimum wage in 2004:' (California Budget Project, California's Minimum Wage: March 2006). California Employment Development Department, A Labor Day Briefing for California (September 2005), down loaded from http://www.calmis.ca.gov/SpecialReports/Labor-Day-Briefing-2005. pdf Association of General Contractors of California, downloaded from http:/Jwww.agc-ca.org/publicationsJcareers.html. Association of General Contractors of California, downloaded from http://www.agc-ca.org/publications/careers.html. 19E-6