Recession Hits Los Angeles Hard Because of ‘Informal Employment’

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Los Angeles County is getting whacked harder by the current recession than other areas of the state and country, according to a study released Friday morning by the Los Angeles Economic Roundtable.

The harder impact in Los Angeles was blamed on “informal employment,” meaning workers paid in cash and off company books, plus independent contractors. The “informal employment” job losses show up on household surveys, which is where the unemployment rate is calculated.

In 2008, Los Angeles County lost 4 percent of its employment base, compared to about 2 percent for both California and the United States, according to the study, which is entitled “Ebbing Tides in the Golden State.” And that was before most of the steepest job losses recorded during the early months of 2009.

“Many of L.A.’s industries that have lost the most jobs in the first year of the recession have high rates of informal employment, including retail trade, construction, non-durable manufacturing, wholesale trade and hotels,” said report lead author Daniel Flaming, president of the Economic Roundtable, which is a non-profit public policy research organization in downtown Los Angeles.

Flaming noted in the report that the nearly one in five Los Angeles County residents is either unemployed or underemployed, working part-time.

The report offered several recommendations to counteract the effects of unemployment and falling household income in Los Angeles and statewide.

Among the suggested policies at the state level: preserving the welfare-to-work program and the program offering health care to children in low-income families. Both of these programs are targeted for elimination in Gov. Arnold Schwarzenegger’s most recent budget proposal.

The report also recommends the state Legislature enact a host of new taxes. “Our recommendation is that we need some more money and quickly,” Flaming said.

New or increased taxes on alcohol and junk food products and on oil extracted from the ground “would raise billions of dollars in revenues” for the state, he said.

But the biggest target, Flaming said, is the state’s property tax. “I know we don’t want to look at it, but raising residential and commercial property taxes to the national average would bring in $16 billion a year.” It’s an unlikely change, given the political impossibility of attacking Proposition 13, which ties property tax to purchase price.

At the local level, the report recommends government officials steer public investment toward key industries and buy and bank land at today’s cheap prices for future affordable housing development.

“Local officials mostly sat on their hands during the 1990s recession,” Flaming said. “As a result, the county never gained back all the jobs lost. If we want to prevent that from happening again, we have to understand our industries and take prudent action to preserve and promote the ones we want.”

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Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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