Economics Of Southern Californias Logistics Industry John Husing

Economics Of Southern California’s Logistics Industry John Husing, Ph. D. Economics & Politics, Inc.

So. California’s Falling Economic Status Vs. Other U. S. Multi-County Areas

Key Labor Force Issue: Adults Without A Single College Class

Path to Prosperity: The Right Kind of Jobs Tech Dependent On the Job Learning Defined Career Ladder Good Entry Level Pay Blue Collar Southern California Based

Sectors With Few Training Barriers To Beginning Employment Mining ($90, 491) Manufacturing ($48, 397) Logistics ($47, 411) Construction ($42, 714) Gaming ($29, 785) Retail Trade ($28, 108) Hotel/Motel ($24, 108) Agriculture ($23, 474) Eating & Drinking ($15, 132) Blue Collar

Total Payroll Growth: Main Blue Collar Sectors

Manufacturing Jobs, 1990 -2005 Lost: 361, 300 of 1, 279, 600 in 1990 = 28% China & India Now Allowing Their Entrepreneurs To Compete

Manufacturing May Grow Slowing … BUT Training Will Still Be In Great Demand • Semi-Skilled Replace Retiring Skilled Baby Boomers • Entry Level Replace Semi-Skilled Moving Up • New Entry Level Workers • Specific Niches (Green)

Logistics Sector Characteristics

Logistics Sub-Sector Pay Exhibit 12. -Mean Average Pay Per Worker By Logistics Sector Southern California (7 -Counties), 2005 Rail transportation $71, 871 Wholesale trade $50, 703 Support activities for transportation $49, 011 $48, 259 Air transportation LOGISTICS GROUP Water transportation Warehousing and storage Couriers Truck transportation $47, 411 $41, 797 $39, 802 $37, 136 $36, 317 Sources: CA Employment Development Department, U. S. Railroad Retirement Board, U. S. Bureau of Economic Analysis, 2002 Economic Census, U. S. Census Bureau

Logistics Sub-Sector Payroll Growth

Good Pay Due To Use Of Technology Computerized Order Receiving Personal Digital Assistants Robotic Goods Handling Random Product Testing & Measurement Equipment Geographic Information Systems Truck Routing Laser Scanners Global Positioning System Tracking of Vehicles Internet Communications Manufacturing Inside Warehouses

Median Pay By Education Wholesale Trade Moderate Experience $44, 637 Entry Level $24, 232

What Drives Demand: International 1. Port Container Volume (2000 -2005): +8. 5% per year 2. Port Breakbulk Tonnage (1995 -2005): +2. 5% per year 3. Air Cargo Tonnage Forecast (2005 -2030): +4. 6% per year

Exactly What Shippers Want Transported on Trains To Arrive at. Containers Retailers To Distribution Centers Unloaded our Ports And by Trucks Goods Made in Asia Shipped in. Supply International Chain Management

Soaring International Containers Thru So. Calif. Exhibit 6. -Port Container Traffic Ports of Los Angeles & Long Beach, 1990 -2006 & 2030 e (million TEUs) 2005 41. 5% U. S. Imported Containers 24. 1% U. S. Exported Containers 4. 4 5. 1 5. 4 5. 8 6. 5 8. 2 9. 5 6 20 0 05 20 4 20 0 3 20 0 02 20 1 20 0 00 20 99 19 8 19 9 97 19 6 19 9 5 19 9 94 19 3 19 9 92 19 91 2007 YTD LA up 11. 2% LB up 1. 1% TEU=20 foot equivalent container units Source: Port Import Export Reporting Service; forecast: Moffatt & Nichol Engineers e 4. 1 7. 5 14. 2 15. 8 13. 1 11. 8 9. 6 10. 6 20 30 3. 8 19 19 9 0 3. 7 42. 5

So. California Has Strong Competitive Advantages For Logistics • West Coast Location • Deep Water Ports • Only Competitors: Seattle, Vancouver • Better Land Side Infrastructure • Come To Southern California First • Retailers save 18 -20% of inventory cost managing goods from So. Calif. Not Asia.

Over 70% of imports pass through to other markets Ports handle 1/3 of all U. S. containers 2/3 of Asian containers 1. West Coast Location

2. Ports On West Coast Nearest Asia Los Angeles Long Beach Ships Bump Into Us First

3. Deep Water Ports As Ships Need Over 50 feet of Water 8000 -Container Panamax Ships

4. Competitors Much Smaller Port Region Imports Exports LA-Long Beach 60. 5% 39. 7% Other US West Coast 16. 1% 30. 8% US Gulf + East Coasts 23. 4% 29. 5% Note: Shares measured on a TEU basis Source: PIERS, courtesy of MARAD

5. Best Land Side Infrastructure At Ports

6. Best Land Side Infrastructure State-of-the-Art On-Dock Facilities

7. Best Landside Infrastructure So. California’s Goods Handling Complex

8. Huge Internal Population

9. Non-So. CA Handling = Slow Deliveries Nation-wide order placed with Asian Factory En Route to Destination Port Depart Destination. Arrive at Destination Port Retail Stores ORDER DAYS OUT: 75 - 100 25 - 40 1 - 5 Committed 27 - 55 Days 1 - 10

10. So. CA Gives Faster Deliveries Nation-wide order placed with Asian Factory En Route to Trans-Loading Destination Ports Depart Destination Port Arrive at Destination Retail Stores ORDER Allocate goods just before vessel arrives DAYS OUT: 75 - 100 25 - 37 5 -9 1 - 9 Committed 6 - 18 Days Average of one month advantage

What Drives Demand? Domestic 1. Inventory: Sales Ratio 2. E-Commerce 3. Population Growth 4. So. Calif. Retail Per Capita after inflation 5. Local Manufacturing

1. Just In Time Inventory Trend

2. Long Term Sector Strength: Domestic E-Commerce Soaring

3. So. California’s Population Growth

4. Retail Trade Per Capita After Inflation Means More Goods Moving Person Per Capita Taxable Retail Sales (constant dollar) Southern California, 1994 -2004 (1984 -1986=100) $5, 608 $5, 696 $5, 861 $6, 037 $6, 201 $6, 589 $6, 988 $6, 770 $6, 604 $6, 700 $6, 984 24. 5% $1, 375 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Sources: CA Board of Equalization, CA Department of Finance, U. S. Bureau of Labor Statistics 1994 -2004 Percent

5. Local Manufacturing Only Driver Declining Lost: 361, 300 of 1, 279, 600 in 1990 = -

Job Growth If Trade Grows Exhibit 4. -Logistics Investment, Job Creation, 2005 -2030 Activity Logistics Natural Growth Multiplier Impacts: Logistics Construction: Rail Capacity, Grade Separation, Truckway Multiplier Impacts: Construction TOTAL 1, 000 Job Strategy Job Creation 559, 000 334, 000 894, 000 277, 000 258, 000 535, 000 1, 429, 000

What’s Left To Do …

1. Agreement On What To Build • Dedicated Truck Lanes • Expanded Rail Capacity • Electrified Dedicated Short Haul Rail • New Intermodal Facilities • Vetted Projects From Agencies • Inland Port

2. Agreement On Environmental Mitigation Program • $10 Billion • SCAG Study • Cold Ironing, Buy/Retire Trucks, Green Goats, Tier III Engines, Clean Fuels, Retrofits, Carl Moyer … Diesel

3. Industry Peer Review of Research • Husing: Job Creation Capability & Pay Levels • Leachman: 18%-20% Cost Savings From West Coast Handling • Leachman: $200 Fees Not Divert Transloaded Cargo • SCAG: Clear Time & Reliability Savings Justify Costs $$$

4. Institution(s) To Manage a Multi-County Process • Caltrans • LA Metro Transit, OCTA, RCTC, SANBAG, VCTC • Multi-County ACTA • Gubernatorial Appointed Multi-County Board

5. Federal & State Legislation on Funding Tools to Lower Costs • Design Build To Lower Cost & Increase Construction Speed • Public: Private Infrastructure Legal • Tax Credits For Private Investment In Infrastructure • Voluntary Container Fees & Road Tolls

6. Infrastructure Bond Program to Jump Start Process They. Governor Did … As Can & Did The Voters! Legislature Agree?

7. Federal Funding of Trade Related Infrastructure • Tariffs Collected at Ports Go to General Fund • Need Federal Goods Movement Infrastructure Fund • Use Growth of Tariffs For National Program

8. Private Sector & Union Leadership Support Agenda SCAG LAEDC IETC SCLC LA C of C Unions ILWU

9. Health, Community, Environmental Leaders Support Agenda • Consensus on How to Address Issues Diesel

10. Elected Official Understand & Move Agenda Forward • Governor • State Senate • Assembly • House • Senate

Leaders Have Changed The Economy Inter-State Freeway System President Eisenhower State Water Project Governor Pat Brown

Logistics Gives Us The Chance Do It Again & … We Owe It To Our Blue Collar Workers To Make It Happen!

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