Economists Debate Real Effect of Aerospace Jobs Loss

A MAJOR new report showing that loss of aerospace jobs in California could far exceed most previous estimates is drawing fire from key independent economists. At the same time, it lays down a thorough agenda to minimize economic damage to the state.

The projection of between 210,000 and 420,000 aerospace jobs lost by 1995 in Los Angeles County alone, the nation's most defense-dependent region, is far higher than previous estimates for the entire state. That amounts to $84.6 billion in personal income over the next nine years, the report says, and $23.8 billion in retail trade.

The report, prepared jointly by the Los Angeles County Aerospace Task Force, the Economic Development Corporation (EDC) of Los Angeles County, and the Community Development Commission Economic Roundtable, was released Tuesday.

It also concluded that the fall in defense expenditures within the county to $4.9 billion (from $8.8 billion) in 1995 would increase unemployment-insurance costs by $362.8 million and increase public-assistance costs by $147 million. The construction of 122,000 fewer houses and $6.3 billion less in commercial construction would also result.

"If Los Angeles County were beset with a natural disaster affecting the livelihood of hundreds of thousands of its citizens, a coordinated relief effort would be immediately initiated involving private industry and government at all levels," the report said. "The impact of defense downsizing upon [the] county is of no less magnitude and requires an equivalent response."

Among the recommendations by the Task Force are:

* That the county create new strategies for promoting high technology, developing an electric-vehicle industry and demanding that foreign suppliers to the state government purchase California products to offset their sales.

* That the state improve its business climate by reforming the workers' compensation system, improving public education, and streamlining cumbersome environmental regulations.

* That federal job training funds be increased fivefold.

"This conversion to the post cold war is going to be a major problem that resonates far beyond defense and aerospace," says Jack Kyser, chief economist for the EDC. "This is a plan so that we don't get overwhelmed."

The task force also wants to authorize the EDC to establish a county aerospace/high technology council; request President Bush to appoint representatives to the council from the Departments of Defense, Commerce, Transportation, Labor, and Energy; and request Gov. Pete Wilson to establish a state interagency task force.

But several economists have already questioned the analytical integrity of the findings. "The huge variance in possible jobs lost to aerospace - 210,000 to 420,000 - suggests this is a political rather than analytical exercise," notes David Friedman, a RAND Corporation economist. "It is part of an ongoing strategy by the companies in this region who are unable to respond to major changes to terrorize state leaders into bailing them out."

Mr. Friedman questions both the unemployment figures and those of dollar amounts lost to the economy. "When people and industries shift to other manufacturing sectors - machinery, auto parts, textiles, computers, medical equipment - the economy can actually benefit," he says. "It boggles the mind to think we have to continue a state and federal-supported feeding mechanism for a dinosaur industry."

"Why should we be propping up decaying mammoths like Lockheed when they have already indicated they want to move out of the state?" asks Joel Kotkin, an economist at Pepperdine University.

"There is a lot happening with smaller, and medium-sized companies that is outside the scope of this report," says Mr. Kotkin. "We need to make sure we are tough on the big guys and give the little ones a chance."