Costs to manufacturers decried
The head of a manufacturers association Tuesday said California is an expensive place for manufacturers to do business due to high power costs and state laws.
With that concern, his association has commissioned a study to determine how the state’s manufacturing climate compares with others.
Jack Stewart, president of the California Manufacturers & Technology Association, a Sacramento organization that represents manufacturers, outlined $20 billion in costs that California manufacturers face.
Stewart spoke at the Economic Resource Council’s quarterly community appreciation award breakfast at the Holbrooke hotel. A Grass Valley business, JDK Controls, received the ERC’s quarterly community appreciation award.
Stewart blamed both action and inaction on the part of the state government for the costs.
The state’s business climate is the subject of a Milken Institute study commissioned by the association. The institute is a nonprofit economic think tank in Santa Monica.
Stewart said Milken will look at the value of manufacturing to the state’s economy and, come up with a report card comparing California’s manufacturing climate to other states. Milken will also analyze the possible effects if the state enacted a 5 percent reduction in sales taxes on telecommunications equipment.
Stewart outlined reasons why California is so costly for businesses, ranging from higher electricity rates levied during the state’s power crisis, to workers compensation regulations, to the state’s overtime laws.
Stewart said industrial users will pay $5.5 billion more for power in 2002 than in 2000.
“The utility crisis, I would say, by government inaction has caused a very high cost for businesses,” Stewart said.
The state’s workers compensation ratings bureau figures show the cost of workers comp has increased from $8 billion in 1996 to $15 billion, Stewart said.
Last week, the Legislature passed an increase in workers comp benefits that will add $3.5 billion to those costs, he added.
Stewart said the bill emerged on a Friday afternoon, and was voted off the California Assembly floor by Monday, along with what he described as a “sham hearing” on Monday afternoon.
Stewart said the workers comp system price tag to businesses totals $10.5 billion when the inflationary costs are added to the benefits.
An increase in unemployment benefits will add $4.5 billion in costs to businesses, Steward said.
The overtime regulations also cost businesses an estimated $1 billion, Stewart said.
With manufacturing jobs paying $20,000 more on average than service jobs, Stewart said the costs could affect the state’s economy.
“As you make it more and more difficult for businesses, especially manufacturers, to survive in California, you hurt the entire society, the entire economy,” Stewart said.
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