Orange County’s economy has clear strengths: low unemployment (4.2 percent in August), rising per capita income and job growth in several stand-out industries, from tourism to medical device manufacturing.

But disruptive new forces — along with some longstanding weaknesses — pose serious threats, as outlined in a 100-page Workforce Indicators Report, issued this week by the Orange County Development Board, a government agency, and the Orange County Business Council, a trade group of large companies.

“It is a time of change,” economist Wallace Walrod, the report’s chief author, told a gathering of 200 business executives, nonprofit representatives and government officials at an Irvine gathering last week. “Orange County faces some persistent, long-term problems.”

Here are some of the more worrisome trends.

Brain drain

Between now and 2060 — that’s 43 years! — Orange County’s working-age population will grow by just 2 percent, and the proportion of children will shrink significantly.

So how will businesses find enough workers?

“Orange County’s high cost of living and lack of affordable workforce housing often price young workforce talent out of the area, potentially leading to a ‘brain drain,’” according to the report, which noted that employers already have a hard time finding enough skilled job candidates.

“A less robust workforce talent pool could make Orange County a less attractive destination for businesses.”

Schools will be forced to adjust. In the next decade, K-12 enrollment will shrink by 10 percent, according to the California Department of Finance.

Meanwhile, Riverside County’s working population is forecast to grow by 56 percent by 2060, including many who are likely to be commuting to Orange County.

English learners

More than ever, businesses need workers with good communications skills. But in Orange County, nearly 25 percent of students are classified as “English learners,” officially defined as students who are unable to communicate fluently or learn effectively in English.

That’s a higher percentage than neighboring counties or the state as a whole.

In 2016, whites, Latinos, and Asians made up 41.1 percent, 34.3 percent, and 19.9 percent, respectively, of the county’s population.

But given the county’s negative net domestic migration, if it weren’t for immigrants, the county’s population growth would be close to stagnant.

In 2016, 15,000 more people moved out of Orange County than arrived, Walrod said.

Meanwhile, Latin American immigration is slowing, he added, while Asian immigration is rising. Irvine, a magnet for Asians, is the county’s fastest growing city, with a 25 percent rise in population since 2010.

Inequality

The county has the lowest high school dropout rate in California — 5.4 percent. But a vast gulf separates the county’s poor and heavily Latino cities from prosperous enclaves such as Los Alamitos, San Juan Capistrano and Laguna Beach.

Students in the Anaheim Union High School district live cheek-by-jowl with Disneyland, Orange County’s largest employer and self-branded as “the happiest place on earth.” But they are eight times more likely to drop out of high school than, for instance, students in the Los Alamitos School District.

More than 15 percent of Orange County residents lack a high school diploma. And dropouts are “more likely to be single parents, unemployed, and incarcerated,” the report notes.

Sixty percent of students in the Anaheim City School District are classified as “English learners,” as compared to under 5 percent in the Los Alamitos Unified and Laguna Beach Unified school Districts.

Nonetheless, the county’s Latino students have made remarkable progress by one significant metric. Since 2001, the percentage of Latino high school graduates qualifying for the University of California or California State Universities rose to more than 37 percent from 14 percent, Walrod said.

A workforce housing crisis

As a severe shortage of new homes forces up prices, 43 percent of county residents remain renters, higher than the national average. That percentage has grown every year since 2006.

Meanwhile, average Orange County rents have risen by 34 percent since 2011, reaching a high of $2,114 in 2017. A county resident would need a gross annual income of $57,440 to afford a one-bedroom unit and $72,520 for a two-bedroom unit.

How does that translate for the average worker? A resident making Orange County’s mean renter wage of $19.89 would have to work 70 hours a week to afford a two-bedroom apartment.

In California, only San Francisco and Santa Clara counties are more expensive.

“If this situation is not addressed,” the report notes, “Orange County could lose much of its young talent to surrounding areas and other states.

The elderly dependent

As millenials flee, the elderly are by and large staying put. Today, the over-65 cohort represents about 15 percent of Orange County’s population. That is expected to double by 2060.

“An increasing share of older residents will likely require additional healthcare and other governmental services, placing strains on the county’s healthcare, senior housing, and social services,” the report notes.

“Orange County’s shrinking working-age population, however, may not be enough to support this older population.” Today, the county has just under two working-age adults for every dependent resident – those over 65 and under 18. That will fall to a little over one by 2040, Walrod said.

The fallout of an aging baby boomer population is already apparent. The data analytics firm, Burning Glass, found the single largest source of Orange County job openings in the past year was for registered nurses.

E-tail revolution

Orange County’s luxury shopping centers — South Coast Plaza, Fashion Island and Irvine Spectrum — attract visitors from around the world. But retail employment in the county has yet to recover from the recession…and perhaps never will.

Retail remains one of the county’s largest sectors, but between 2007 and 2016 the number of jobs dropped by nearly 10 percent, to 152,000.

Some pundits predict the Amazon tsunami will lead to a “retail apocalypse” nationwide. And in Orange County, the report foresees, “e-commerce and other new business models have already taken significant market share from traditional “brick-and-mortar” retailers. …this trend of retail disruption has shown no signs of slowing down.”

Low-wage jobs

As surging housing costs create an urgent need for high paid jobs, business and government officials tout local progress in training for jobs in STEM — science, technology, engineering and math.

The county’s median per capita income rose 7.3 percent last year. “We are nearing full employment, so companies are having to pay more,” Walrod said.

But Orange County, despite some strength in biotechnology and medical devices, offers little competition to Silicon Valley or even to Los Angeles’ Silicon Beach.

As of the latest figures, the county added only 900 jobs overall year-over-year, a growth rate of 0.1 percent.

And many of the fastest growing jobs are in the generally low-paying tourist industry: hotels, restaurants and theme parks where workers often average poverty-level wages below $25,000 a year.

The county’s leisure and hospitality companies employed 219,100 workers in August 2017, a 3.4 percent increase over the previous year. Disneyland is the county’s largest employer with more than 30,000 workers.

Other growth sectors included construction, with a mix of well-paid trade specialists and low-wage laborers; professional and business services with a mix of high-earning managers and poorly-paid clerks and customer service representatives; and healthcare, with a mix of well-paid registered nurses, and minimum-wage home care workers.

Going forward, California’s Employment Development Department has projected the four occupations to add the most jobs in Orange County between 2014 and 2024 will be food preparation and serving workers (8,490), personal care aides (7,560), waiters and waitresses (4,660) and retail salespersons (4,520).

Positions in these four categories pay on average under $25,000 a year, less than workers would need to rent a median-priced one-bedroom apartment in the county.

Automation

The threat of automation looms over Orange County, as it does the nation. Economists at Oxford University estimate 47 percent of U.S. occupations have the potential to be automated in the next two decades due to computers, robots, artificial intelligence, and other emerging technologies.

A study by the Institute for Spatial Economic Analysis at the University of Redlands analyzed the mix of jobs in 100 U.S. metropolitan areas. In Orange County, it suggests, 58.6 percent of jobs are “automatable.” In the Inland Empire, it estimates the share would be 62.6 percent.

“Lower-skilled jobs will generally be the first to be replaced by machines,” the Orange County workforce indicators report notes. Think: disappearing freeway toll takers; bank tellers replaced by ATMs; robot pickers in warehouses and iPad-ordering at fast food joints.

Automation, the report predicts, “will create new jobs and change existing jobs — in addition to making some jobs obsolete. A future service industry worker might be able to perform as much work as five current workers, using critical thinking and computer/technology skills.”

Industries can be measured differently according to various statistical models. But the report cites one estimate by EconoVue, a data visualization platform, which pegs the largest Orange County sectors as manufacturing with 258,196 jobs, followed by healthcare with 191,217 jobs.

County manufacturers make everything from aerospace parts to nutritional supplements to artificial heart valves. But the sector is slowly shrinking and the report notes “most of the jobs that would have been created 10 or 20 years ago are now filled by robots or other machines/automated processes.”

Community colleges are offering certificates in “advanced manufacturing” where skilled machinists use computerized hardware to make parts. But fewer assembly-line workers will be needed.

Citing Burning Glass projections for the next two decades, the report pegs the top 10 occupations with the lowest risk of automation as registered nurses, software developers, retail supervisors, managers (all other), human resources specialists, sales managers, medical and health services managers, web developers, management analysts and marketing managers.

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