FUTURE OF GROWTH IN SAN DIEGO: THE ECONOMIC CASE FOR INCLUSION PRODUCED BY

FUTURE OF GROWTH IN SAN DIEGO: THE ECONOMIC CASE FOR INCLUSION PRODUCED BY

SAN DIEGO S ECONOMIC IMPERATIVE FOR INCLUSION The growth of San Diego s innovation economy has made the region better educated and more prosperous than most of its peers. However, this economic transformation presents new challenges for future growth. Changing skill requirements, a nationwide battle for talent, and a soaring cost of living are combining to form an unequivocal threat to our regional competitiveness. 85% OF HISPANICS DO NOT HOLD A BACHELOR S DEGREE 20% LOWER AVERAGE WAGES ARE PAID BY SMALL BUSINESSES 1M PEOPLE CANNOT AFFORD TO LIVE HERE Hispanics are the fastest growing population and statistically the least prepared for high-skilled, high-wage jobs. Businesses with less than 100 employees make up 98% of San Diego firms and on average pay less competitive wages. With the fourth highest cost of living in the U.S., one million San Diegans cannot make ends meet. IF UNADDRESSED, SAN DIEGO WILL NO LONGER BE AN ATTRACTIVE PLACE TO LIVE OR DO BUSINESS Talent shortages are likely to grow as demand for new skills accelerates, while demographic gaps in educational attainment persist. For the region to remain competitive, proactive measures to promote economic inclusion must be taken. CLOSE THE MINORITY ACHIEVEMENT GAP EQUIP SMALL BUSINESSES TO COMPETE ADDRESS THE AFFORDABILITY CRISIS

CLOSE THE MINORITY ACHIEVEMENT GAP San Diego s Hispanic population is the fastest growing and will become the region s largest group by 2030. However, this population is dramatically underrepresented in the region s innovation occupations and possesses the lowest rate of educational attainment by race and ethnicity - only 15% hold a bachelor s degree or higher. Preparing the region s workforce of the future means ensuring minorities are competitive. HISPANICS WILL BECOME THE LARGEST GROUP BY 2030 34% 46% 40% 39% 46% 30% THE FASTEST GROWING POPULATION IS STATISTICALLY THE LEAST PREPARED FOR HIGH-SKILLED, HIGH-WAGE JOBS 4% 11% 2016 TOTAL POP 3.3M 5% 5% 13% 2030 4% TOTAL POP 3.7M 6% 14% 2050 TOTAL POP 4.1M 4% HISPANIC WHITE ASIAN BLACK OTHER EDUCATIONAL ATTAINMENT RATES BY RACE AND ETHINCITY LESS THAN HIGH SCHOOL BACHELOR S DEGREE OR HIGHER 34% OF HISPANICS DO NOT FINISH HIGH SCHOOL 34% HISPANIC 15% 8% BLACK 25% 13% ASIAN 34% 12% WHITE 49%

EQUIP SMALL BUSINESSES TO COMPETE 59% OF WORKERS ARE EMPLOYED BY SMALL BUSINESSES Small businesses - those with fewer than 100 employees - represent 98% of firms in San Diego but struggle to compete with larger businesses for talent. Compared to the overall average, employees of these small businesses earn up to 20% lower wages, while employees of the largest firms receive up to a 45% wage premium. This disparity makes small businesses less competitive in attracting and retaining talent. 75% OF U.S. JOB GROWTH IS A RESULT OF FIRMS GROWING FROM 10 TO 30 EMPLOYEES RELATIVE COMPENSATION BY FIRM SIZE DIFFERENCE IN COMPENSATION TO REGIONAL AVERAGE 50% 40% 30% 20% 10% 0% -10% -20% -30% -20% 0-4 -19% 5-9 -20% 10-19 98% OF FIRMS ARE SMALL BUSINESSES AND PAY LOWER WAGES ON AVERAGE 16% -7% -17% 20-49 50-99 # OF EMPLOYEES 100-249 15% 250-500 27% 500-999 45% 1,000+ $73K $48K $30K DIGITAL SKILLS PROVIDE LARGE WAGE PREMIUMS The proliferation of digital technologies is rapidly changing the skills required to access economic opportunity. Workers with high digital skills are the least at-risk of automation and command the highest wages. The largest and most profitable firms are best able to adapt and invest in their workforce, putting small businesses at a further disadvantage. U.S. ANNUAL AVERAGE WAGE, 2016 DIGITAL SKILL LEVEL HIGH MEDIUM LOW

ADDRESS THE AFFORDABILITY CRISIS More than one million San Diegans cannot make ends meet. San Diego has the fourth highest overall cost of living and second highest median home price among major metros. This means that San Diegans spend a much greater proportion of their incomes on housing than the national average, leaving less income available for other necessities including food, transportation, and retirement. These pressures are already impacting the region s top employers ability to attract and retain talent. PROPORTION OF HOUSEHOLDS PAYING MORE THAN 30%* OF INCOME TOWARD HOUSING 40% U.S. AVG. 50% 57% U.S. AVG. 28% ONE MILLION SAN DIEGANS CANNOT AFFORD TO LIVE HERE OWNER (w/ mortgage) RENTER *30% of income is a standard measure for housing affordability. TOP 10 DESTINATIONS FOR SAN DIEGO STEM GRADS AND COST OF LIVING ADJUSTED EARNINGS LOS ANGELES -$2.83 SEATTLE $9.25 SAN FRANCISCO $2.30 SAN DIEGO SACRAMENTO -$0.32 RIVERSIDE -$2.65 PHOENIX -$2.95 WHEN ADJUSTED FOR COST OF LIVING, STEM TALENT CAN EARN MORE IN SAN FRANCISCO AND SEATTLE DALLAS $9.50 WASHINGTON D.C. $8.94 ATLANTA $8.76 NEW YORK -$0.71

UNDERWRITERS BROOKINGS LEARNING LAB The Brookings Institution s Metropolitan Policy Program selected San Diego in 2017 - along with Indianapolis and Nashville - to participate in a six-month learning lab focused on inclusive economic development. EDC convened a collaborative core team - including the City of San Diego, Cox Communications, Jacobs Center for Neighborhood Innovation, Sempra Energy, and UC San Diego Extension - to build a data-driven narrative of the specific challenges faced by the San Diego region, and the economic imperative for action. Some findings in this document were provided by Brookings, as well as the Center on Policy Initiatives. LEARNING LAB PARTNERS Throughout 2018, San Diego Regional EDC will be releasing additional research detailing the economic imperative for inclusive growth. Visit sandiegobusiness.org/inclusivegrowth to stay up to date. RELEASED FEBRUARY 2018