S A N D A G

INFOM A Y - J U N E 1 9 9 8 T H R E E D O L L A R S

SANSAN DIEGODIEGO REGIONALREGIONAL EMPLOYMENTEMPLOYMENT CLUSTERSCLUSTERS Engines of the Modern Economy

✦ Biomedical Products

✦ Biotechnology & Pharmaceuticals

✦ Business Services

✦ Communications

✦ Computer & Electronics Manufacturing

✦ Defense & Transportation Manufacturing

✦ Entertainment & Amusement

✦ Environmental Technology

✦ Financial Services

✦ Fruits & Vegetables

✦ Horticulture

✦ Medical Services

✦ Recreational Goods Manufacturing

✦ Software & Computer Services

✦ Uniformed Military

✦ Visitor Industry Services INTRODUCTION After nearly two decades of economic stability, the San Diego region experienced a recession that deeply impacted the structure of the local After decades of rapid job economy. The recession that began in 1990 turned out to be, for this region growth and economic stability, and for California, the worst recession in the last 50 years. As a result of in 1990 the San Diego region defense industry cutbacks, the loss of numerous major financial institutions, was hit hard by the worst and the real estate downturn, the San Diego region experienced a significant recession in the last 50 years. loss of employment opportunities and witnessed the departure of many long- time residents once employed in these industries.

At the root of the local recession is the basic restructuring of the San Diego The San Diego region must area’s economy. The restructuring, which cost the region thousands of high- now assess the fundamental paying jobs and many of the businesses that created them, continues, even as structure of its economy and the economy recovers. The San Diego region is transitioning into what can be determine what direction to referred to as a modern, export-driven economy. This transition makes it take into in the 21st century. clear that the San Diego region must now look deeply at the fundamental structure of its economy and determine what direction it will take into the 21st century.

THE SAN DIEGO REGION’S MODERN EXPORT-DRIVEN ECONOMY The productivity of regional economies, including ours, depends on the Globally competitive, export- sophistication and efficiency of all its industries. Each industry contributes to oriented industries drive the determining the output per worker of the economy. However, it is important regional economy. to distinguish between those industries that are primarily local and those that are export-oriented, selling their products and services nationally or internationally. These two types of industries have very different roles in economic growth.

Industries that compete nationally and internationally drive the regional economy and have far greater long-term growth potential. Because they compete at a global level, opportunities for growth in these industries are not constrained by the size of the local market, and they can expand far beyond Today, clusters serve as the it. In addition, export-oriented businesses bring outside dollars into our driving force of the local region. These dollars drive the regional economy as firms buy products and economy . . . services from other sectors in the area. Their employees also spend their paychecks at local stores and restaurants, and buy local homes. Our ability to create wealth and high-quality jobs—to create prosperity—throughout our entire economy is dependent on the health of these industries.

Today, new industries like biotechnology, software, environmental technology, and communications do not fit the classic industry sector definitions. It has become difficult to answer the question, “how is the local biotechnology . . . and allow us to better industry doing?” Businesses broadly labeled “biotech” straddle industries, describe regional economic refusing to fall neatly into traditionally defined categories. When basic dynamics. questions about employment growth in our region become complex issues, something is wrong with the way we are looking at our economy. The use of clusters as a descriptive tool for regional economic relationships provides a

2 INFO SANDAG / SourcePoint May - June 1998 richer and more meaningful representation of local industry drivers and regional dynamics than the one provided by the traditional system.1 The traditional system tells us where we have been, clusters show us where we are headed.

Clusters are a different way of looking at existing relationships that are Industrial clusters are part of already present in the local economy. Cluster industries can be thought of as a dynamic environment in part of a two-way ladder based on regional economic inter-relationships, which each sector plays an providing opportunity for movement up and down. Money and products important role in the region’s move up and down the ladder every day, creating a dynamic environment economic efficiency and dependent upon the efficiency of the entire region. It is this emphasis on prosperity. movement between clusters and non-cluster industries that creates opportunity.

At the core of a cluster are concentrations of interdependent, internationally Clusters are groups of competitive firms in related industries. The cluster’s core firms can include complementary, competing, companies that make or help make a final product, as well as specialized and inter-dependent industries suppliers and service providers. Focusing on the entire range of an industry, that drive wealth creation in a from the initial stages of production to the time that the product or service is region, primarily through the completed, has become an increasingly important and often utilized tool in export of goods and services. regional development strategies. Clusters include large companies and small companies, and provide both low- and high-paying job opportunities.

Intense competition and close cooperation spur innovation across cluster A competitive advantage today industries, often spawning the development of entirely new companies and is driven by the ability of firms industries. Clusters are dynamic and over time may evolve or change their to continuously innovate and focus. As they develop, cluster firms create demand for new types of products upgrade. and services, some of which can be supplied by existing firms while others result in the creation of new local firms. In short, the cluster dynamic gives companies and their regions a competitive leg-up against others.

In the San Diego region, 16 industry clusters serve as the engines of the local economy.2 Clusters are groups of inter-related industries that drive wealth The San Diego region creation in a region, primarily through export of goods and services. About has 16 export-oriented one-third of the region’s 1,017,000 non-military employment is in cluster industrial clusters. industries.

The San Diego region is restructuring into a “Modern Export-Driven Economy.”(See Figure 1.) The sixteen export-oriented industrial clusters play a fundamental role in the local economy and are emerging as the engines of economic activity, capable of providing a rising standard of living for the San Diego region.

1 The traditional system for describing industries is the Standard Industrial Classification (SIC) Code . The SIC system is based on a four-digit industry coding system that groups industries by sectors such as Wholesale Trade, Services, and Manufacturing. SIC codes will soon be replaced by a new industrial classification system called the North American Industry Classification System (NAICS). The NAICS will be more detailed than the current system and allow for multi-national data comparisons between the North American Free Trade Agreement (NAFTA) member countries.

2 One of the 16 clusters is a Uniformed Military cluster. It is export-oriented because it brings in significantly more tax dollars than the region pays. Because the information we have on the Uniformed Military cluster is more limited than the other clusters, it has been excluded from further analysis in this report. In 1996 there were approximately 94,000 people employed by the Uniformed Military cluster in the San Diego region.

May - June 1998 SANDAG / SourcePoint INFO 3 Figure 1 MODERN EXPORT-DRIVEN ECONOMY Cluster Industries are Emerging as the Engines of Economic Activity

Domestic & Global Markets

10

P ro S d er u v c i t N c s Final goods e e & w s and services $ Export-Oriented Clusters ✦ Biomedical Products ✦ Financial Services ✦ Biotech & Pharmaceuticals ✦ Fruits & Vegetables ✦ Business Services ✦ Horticulture ✦ Communications ✦ Medical Services ✦ Computer & Electronics Manufacturing ✦ Recreational Goods Manufacturing ✦ Defense & Transportation Manufacturing ✦ Recreational Goods Manufacturing ✦ Entertainment & Amusement ✦ Uniformed Military ✦ Environmental Technology ✦ Visitor Industry Services

P ro S d er u v c i t $ c s Inter-industry e & s transactions

Linkage Industries / Suppliers

Industries providing the factors of production for the cluster industries and serving the local market.

Income, Foundation and investment potential and taxes of local economy

Public /Private Infrastructure Support

✦ Human Resources ✦ Capital Finance ✦ Technology Research & Development ✦ Tax & Regulatory Environment ✦ Physical Infrastructure

Source: San Diego Regional Technology Alliance, compiled by SANDAG.

4 INFO SANDAG / SourcePoint May - June 1998 The clusters drive wealth creation in the region by exporting goods and services and attracting new wealth from both domestic and international markets. All employment categories, cluster and non-cluster, are responsible Industrial clusters are at the for the region’s output of goods and services and for a prosperous local center of the region’s modern, economy. However, clusters should be a primary focus of regional economic export-oriented economy. development policy because of their potential impact on the region’s standard of living.

As illustrated in Figure 1, the clusters are supported by, and rely directly on, various linkage industries. The linkage industries provide support required by the driving clusters in the form of goods or services. The most strongly related industries are included as part of the cluster. Linkage industries Clusters depend on an efficient include certain business services, distribution services, and some of the input network of buyer-supplier components of a cluster’s production process. Linkage industries also include relationships. the population support industries such as retail, construction and real estate. These industries are important for the local economy but are not part of the direct exporting chain of the Modern Export-Driven Economy. Population support industries react to and are driven by the demands of the leading industries.

The base of the economy is a reliable support foundation of public and private infrastructure. Our region’s economic infrastructure must be internationally competitive, providing top quality support to our industrial clusters. Important components of our infrastructure are a skilled labor force, advanced technological resources, strong higher education facilities, World-class businesses require and an adequate physical infrastructure that includes a reliable water supply world-class infrastructure. and a communications infrastructure capable of handling the needs of today’s high technology firms. The infrastructure support sector is funded by income, investment and tax dollars. (The infrastructure and public policy support required by our cluster industries is the subject of the San Diego Regional Economic Prosperity Strategy, a report recently completed by SANDAG).

Figure 2 OUR ECONOMIC DRIVERS ARE CHANGING

1957 30% Manufacturing

1996 30% Clusters 70% Other Jobs

70% Other Jobs

Source: SANDAG, 1997.

May - June 1998 SANDAG / SourcePoint INFO 5 HISTORY OF CLUSTERS The manufacturing sector once comprised about 30 percent of this region’s Clusters have become the employment, serving as the basic industry or main “driver” of the economy region’s basic industries, (Figure 2). Today, manufacturing employment has dropped to less than 15 driving wealth creation in the percent of total employment. With a rise in the global economy and knowledge- local economy and replacing and service-based industries, there has been a dispersal of the economic the “manufacturing engines into non-manufacturing industries. Clusters are the evolution of a industry’s” role in economic region’s basic industries, the main drivers of the economy. Cluster analysis is development. a tool that can accurately identify driver shifts in a region’s economy.

While many people locally have only recently become aware of industry clusters, the academic community worldwide has discussed cluster analysis Industrial cluster analysis is and theory for many years. The theory that groupings of similar and inter- not a new tool, and the related industries generate positive benefits and provide competitive theoretical benefits of advantages has been in circulation since the 1950s. In fact, different variations industrial clustering have of the clustering process have been applied throughout the world. Over the been known for decades. last 10 years, the use of clusters as a regional economic development tool has become increasingly more accepted and utilized in the United States.

Clusters were introduced locally in 1994 as an effort to aid in the economic recovery of a San Diego region still reeling from the recession of the early Clusters were formally 1990s. 3 As a result of the recession, the region experienced a significant loss introduced to the San Diego of high-paying, high value-added jobs. A strategy was needed to combat the region to combat the effects negative effects of the lengthy economic downturn. A local group of advisors of the recession in the helped identify eight industrial clusters that would serve as the foundation early 1990s. from which the San Diego region could regain some of the high value-added jobs that were lost during the recession.

The needs of the regional economy have adjusted as the recovery continues. Today’s cluster analysis also has changed. Clusters now include a diverse range of industries that together act as the economic engine of the region. Cluster analysis has recently SANDAG, with funding from the San Diego Regional Technology Alliance, taken a more central role in has improved upon the initial work by creating a replicable, analytical regional planning. methodology that determines the region’s clusters. Use of this tool in policy decisions will help ensure the prosperity of the region by providing economic diversification and employment opportunities for people at all skill levels.

Web Page Access to Clusters The San Diego Regional Technology Alliance (SDRTA) played a key role in the development of cluster information. Due to efforts such as these the San Information about our region’s Diego region is on the leading edge of creating, identifying and defining its clusters is available on the regional clusters. The SDRTA and SANDAG have produced a detailed San Diego Regional report about the San Diego region’s industrial clusters. The report expands Technology Alliance’s web on the many uses of cluster analysis and is posted on the SDRTA web page. page at www.sdrta.org. The web page includes interactive mapping tools with individual sections for each of the cluster groups and a list of relevant links to other sites that incorporate cluster analysis in their work. The cluster page is located on the SDRTA’s web site at www.sdrta.org under “Cluster Data”.

3 Collaborative Economics, “San Diego Economic Opportunities Overview”, 1995.

6 INFO SANDAG / SourcePoint May - June 1998 Cluster Employment and Wages During 1996, our clusters employed over 331,000 people, accounting for 32 percent of the region’s total employment (1,017,200 jobs).4 Employment in these cluster industries grew by six percent between 1990 and 1996, at the same time total employment in the region grew by four percent. The Visitor Industry Services and Business Services clusters employ the most workers During the last recession, some (See Figure 3 and Table 1). clusters were able to grow and prosper. During the recession in the early 1990s some of our emerging clusters were expanding rapidly, offering new job opportunities at a time when most of our local economy was contracting. Since 1990, for example, the number of people employed in our Recreational Goods and Biotechnology/ Pharmaceuticals clusters have doubled, and the number of new jobs created in our Communications and Software/Computer Services clusters have increased by more than 50 percent.

Many clusters pay wages significantly higher than the regional average. The average wage rates in our fastest-growing high technology clusters range Many of our fastest growing, between $37,700 and $63,500 per employee. (See Figure 4 and Table 2.) emerging technology clusters These wage rates are 30 percent to 120 percent above the average annual offer wages 30 percent above wage rate for all jobs in the region ($28,800). The average salary for all the region’s average. cluster industries ($33,200) is about 15 percent greater than the regional average for all jobs.

4 Does not include figures for the Uniformed Military cluster.

Figure 3 Figure 4 CLUSTER EMPLOYMENT BY INDUSTRY, CLUSTER AVERAGE ANNUAL WAGE RATES (‘96$), 1990 AND 1996 1990 AND 1996 San Diego Region San Diego Region

Visitor Industry Services Software & Computer Services Business Services Biotechnology & Pharmaceuticals Medical Services Computer & Electronics Mfg. Computer & Electronics Mfg. Communications Biotechnology & Pharmaceuticals Financial Services Defense & Transportation Mfg. Defense & Transportation Mfg. Entertainment & Amusement Biomedical Products Software & Computer Services Environmental Technology Recreational Goods Mfg. Communications Medical Services Financial Services San Diego Cluster Regional Average Recreational Goods Mfg. Business Services Biomedical Products Entertainment & Amusement Horticulture Horticulture Environmental Technology Visitor Industry Services Fruits & Vegetables Fruits & Vegetables 01020304050607080 $0 $10 $20 $30 $40 $50 $60 $70 Cluster Employment Cluster Wage Rates (In Thousands) (In Thousands of Dollars) 1996 1990 1996 1990

Sources: Employment Development Department; Regional Technology Alliance; SANDAG.

May - June 1998 SANDAG / SourcePoint INFO 7 Table 1 AVERAGE ANNUAL EMPLOYMENT1, 1990 AND 1996 San Diego Regional Employment Clusters Change 1990 1996 Numeric Percent

Biomedical Products 7,363 6,431 -932 -13% Biotechnology & Pharmaceuticals 11,017 21,725 10,708 97% Business Services 48,159 61,771 13,612 28% Communications 6,890 11,433 4,543 66% Computer & Electronics Manufacturing 26,531 27,658 1,127 4% Defense & Transportation Manufacturing 39,114 18,571 -20,543 -53% Entertainment & Amusement 10,958 15,823 4,865 44% Environmental Technology 3,111 4,154 1,043 33% Financial Services 15,750 10,257 -5,493 -35% Fruits & Vegetables 3,541 3,493 -48 -1% Horticulture 6,328 6,217 -111 -2% Medical Services 50,757 52,691 1,934 4% Recreational Goods Manufacturing 3,152 6,512 3,360 107% Software & Computer Services 8,804 13,643 4,839 55% Visitor Industry Services 70,266 70,656 390 1%

Total Cluster Employment 311,741 331,035 19,294 6% Total Regional Employment 977,400 1,017,200 39,800 4%

Table 2 AVERAGE ANNUAL WAGE RATES1,2, 1990 AND 1996 San Diego Regional Employment Clusters Change 1990 1996 Numeric Percent

Biomedical Products $35,233 $39,431 $4,198 12% Biotechnology & Pharmaceuticals $49,120 $49,109 -$11 0% Business Services $30,626 $30,114 -$512 -2% Communications $48,385 $48,004 -$381 -1% Computer & Electronics Manufacturing $42,313 $48,800 $6,487 15% Defense & Transportation Manufacturing $42,743 $43,120 $377 1% Entertainment & Amusement $25,388 $26,997 $1,609 6% Environmental Technology $34,928 $38,765 $3,837 11% Financial Services $35,424 $43,595 $8,171 23% Fruits & Vegetables $13,113 $13,314 $201 2% Horticulture $17,308 $17,478 $170 1% Medical Services $40,844 $36,360 -$4,484 -11% Recreational Goods Manufacturing $26,512 $37,713 $11,201 42% Software & Computer Services $45,515 $63,543 $18,028 40% Visitor Industry Services $12,692 $12,798 $106 1%

Total Cluster Employment $31,928 $33,239 $1,311 4% Total Regional Employment $27,830 $28,790 $960 3%

Sources: Employment Development Department; Regional Technology Alliance; SANDAG.

1 The San Diego region contains a Uniformed Military cluster. It is export-oriented because it brings in significantly more tax dollars than the region pays. Because the information available for the Uniformed Military cluster is more limited than the other clusters, it is excluded from further analysis.

2 Adjusted to 1996 dollars. Average annual payroll data for some clusters are affected by a significant number of part-time workers. Information on full-time equivalent jobs was not available from the California Employment Development Department.

8 INFO SANDAG / SourcePoint May - June 1998 Figure 5 shows cluster employment for the San Diego region’s seven Major Statistical Areas (MSAs). North City has the greatest amount of total employment and cluster employment, followed by the Central MSA. The The North City MSA has the rural East County MSA contains the smallest amount of both total employment highest cluster employment in and total cluster employment (1,700 cluster jobs). Much of East County’s the region. cluster employment consists of jobs in the Visitor Industry Services cluster. Figure 5 TOTAL EMPLOYMENT AND TOTAL CLUSTER EMPLOYMENT MAJOR STATISTICAL AREAS San Diego Region Major Statistical Areas (MSAs) (MSAs) 400,000 San Diego Region Total Employment Cluster Employment 300,000 4 200,000 5 Employment 100,000 6 0 1 Central North South East N. Cnty. N. Cnty. East 3 City Suburb. Suburb. West East County 0 Source: SANDAG 1995 Employment Inventory. 2

CONCENTRATIONS OF CLUSTER EMPLOYMENT 0 Central 1 North City Maps 2 through 7 (starting on page 15) highlight concentrations of employment 2 South Suburban in cluster industries. The areas shown on the maps are community planning 3 East Suburban areas (CPA) of the City and County of San Diego, and jurisdiction boundaries 4 North County West or sphere of influence areas for the other 17 jurisdictions. (Map 1 indicates 5 North County East the name of each planning area for reference purposes.) Map 2 shows the 6 East County distribution of total cluster employment for these planning areas. Carlsbad, Chula Vista, El Cajon, Escondido, and seven City of San Diego CPAs all have cluster employment totaling more than 10,000 jobs.

Clusters have strong spatial relationships and often locate near one another. Maps 3-7 show the areas with the highest concentrations of the fastest growing, highest paying cluster groups.5 Each area is shaded according to its relative concentration of cluster employment when compared to the average regional concentration of employment for that particular cluster. There are three levels of shading on the maps: below the regional average; up to three times greater than the regional average; and three times the regional average or more.

The highly concentrated employment areas for each cluster are labeled on the maps. The planning areas that are noted in this fashion contain at least one percent of total cluster employment and have a concentration of cluster employment at least three times greater than the regional average. For example, Carlsbad contains approximately 44 percent of the Recreational Goods Manufacturing cluster’s total employment and has a concentration of employment in that cluster that is ten times greater than the regional average.

5 Fast growing, high paying clusters include the following groups: Biotechnology and Pharmaceuticals; Communications; Environmental Technology; Recreational Goods Manufacturing; and Software and Computer Services. Computer and Electronics Manufacturing, Defense and Transportation Manufacturing, and other high wage clusters are not included because they are not fast growing.

May - June 1998 SANDAG / SourcePoint INFO 9 CLUSTERS CONTINUALLY RE-INVENT THEMSELVES Do clusters change and evolve over time? Yes, clusters are constantly evolving and re-inventing themselves. Clusters have a life cycle that begins with small, Companies that make up emerging growth companies that grow and prosper as they mature. Over clusters are continually time, the older companies begin to change by fading away or moving in a new evolving and reacting to direction, possibly to a newer and more modern industry grouping. The new trends in the marketplace. businesses have the potential of again becoming valuable assets to the local economy.

Some of today’s emerging and high technology clusters have evolved from earlier cluster groups. For example, in the San Diego region, the strong presence of the defense industry combined with an active research and Much of the Software and development sector produced a variety of dynamic, emerging growth clusters Computer Services cluster, for (See Figure 6). Companies that were once dependent on Department of example, evolved from the Defense (DOD) contracts now focus their products towards the global region’s defense and consumer marketplace. New material advances and acquired skills, many of aerospace industry. which originated in the aerospace and defense sectors, are impacting technology and manufacturing companies. One of the cluster of businesses that has benefited from these technology transfers is the Recreational Goods

Figure 6 REGIONAL CLUSTERS EVOLVE AND RE-INVENT THEMSELVES OVER TIME

Past Present Future

Defense & Transportation Manufacturing Advanced Transportation Technologies

Software

Defense Optics & Aerospace Lasers Recreational Goods Manufacturing

Advanced Materials Communications

10 INFO SANDAG / SourcePoint May - June 1998 Manufacturing cluster. New composite materials once used for defense- related goods such as satellites are becoming more common in goods produced for the golf, tennis, and other sporting goods industries. The businesses that have emerged or benefited from the presence of the defense industry may also evolve over time. Additional clusters, such as Advanced Transportation Technologies, are beginning to emerge from the current groups in the same way that the Software cluster developed out of the Defense industry.

Cluster businesses rely on a strong system of higher education and research. High technology, knowledge-based clusters are very dependent on local Universities provide research universities for skilled workers and new innovations. Higher education plays and development and an a critical role as a support institution to the clusters and is a necessary educated workforce that is infrastructure component for ensuring regional prosperity. In the San Diego essential for the growth and region our universities have led to the creation of a number of cluster groups. prosperity of many local As shown in Figure 7, some of the more significant offspring include the industry clusters. Communications cluster and healthcare-related industry clusters such as Biomedical Products and Biotechnology and Pharmaceuticals.

Figure 7 WORLD-CLASS UNIVERSITIES AND RESEARCH AND DEVELOPMENT INSTITUTIONS ARE THE FOUNDATION FOR HIGH TECHNOLOGY CLUSTERS

Biotechnology & Pharmaceuticals

Universities/ Research & Development Communications Facilities

Biomedical Products

May - June 1998 SANDAG / SourcePoint INFO 11 CLUSTERS DEPEND ON THE ENTIRE ECONOMY Clusters can be mapped according to the strength of their buyer-supplier Cluster industries require relationships with other sectors of the regional economy. Figure 8 is an support, in the form of goods example of the Communications cluster’s relationship with other sectors of and services, from non-cluster the local economy. A similar relationship map could be created for each of sectors of the economy. the clusters.

At the heart of the cluster is a group of “core” exporting industries. For the Communications cluster this consists of various inter-related communications manufacturers and service providers. The next ring shown in the diagram contains the primary suppliers that support the cluster’s core. These industries Our clusters and their support are essential for the cluster’s production process but are not part of the industries are dependent on cluster’s core. In addition, many of the supplier industries shown in the the capacity and capabilities diagram may also supply other cluster groups. Search and Navigation of the region’s human and Equipment, for example, which may sound like it belongs in the physical infrastructure. Communications cluster, is more strongly related to the Defense and Transportation Manufacturing cluster and is therefore included in its definition. Finally, Figure 8 shows that clusters rely on a diverse foundation of specialized infrastructure such as fiber optic networks and top quality universities.

12 INFO SANDAG / SourcePoint May - June 1998 Figure 8 THE COMMUNICATIONS CLUSTER A Single Cluster’s Relationship with the Regional Economy

Specialized Infrastructure

Wholesale & Specialized Services: Distribution ✦ Intellectual Services Property Law ✦ Market Access ✦ Finance Buyer/Supplier Linkages

Radio & TV Banking & Communications Software and Other Financial Equipment Computer Institutions Programming Services Wireless Test/Monitoring Communications Equipment & Services Services

Satellite Core of Network Communications Communications Communications Equipment Cluster Equipment

Telephone & Comm.-Related Telegraph Engineering & Comm. Research Search & Electronic Navigation Computers Equipment Personal Communications Equipment

Specialized Semiconductors & Other Electronic Components Universities/ Fiber Optic Research & Networks Development ✦ Technology

May - June 1998 SANDAG / SourcePoint INFO 13 Map 1 INDEX TO PLANNING AREAS 1 San Diego Region

IWSS IWSR

IWSQ

IWIP IWSP IWSI IWPH

IPHH IWHW IWHR IVHH

ISHH UHH IWHW IHH IWHW IWHW IRQP IWHW IWHW IWPP THH IWIS IRQI IWIR

IRSS IRVH IQHH IUHH IRRW IRPW IRHQ RHH IRVH IRPI IRTP IRHS IRTI IRRH IRRV IRHW IRVI IRIS IRTQ IRQR IRVS IWHP IWHU IRRI IRVP IRHU ITHH IRIH IWHI IRHT IRSH IRRU IRPU IRPH IRIP IRQS SHH IWHQ IRIW IRIU IRQV WHH IRPR IRPV IWIW IRPQ IRRP IRIQ IWHV IRIR IRVQ IRHI IHHH IRHV IWPI IRHR IRHP IRQU IRQH IRHP IRRR IRWI IWIV IWHT QHH IIHH

PHH

IWII IWII VHH IRPS IRPT IRQW IRQQ

City/Sphere 1406 Clairemont Mesa 1434 Scripps Miramar County of San Diego 100 Carlsbad 1407 East Elliott Ranch Community Planning Area 200 Chula Vista* 1408 Golden Hill 1435 Serra Mesa 1901 Alpine 300 Coronado 1409 Miramar Ranch 1437 Southeast San Diego 1902 Central Mountain 400 Del Mar North 1438 College Area 1903 Crest - Dehesa 500 El Cajon* 1410 La Jolla 1439 Tijuana River Valley 1904 Desert 600 Encinitas* 1412 Linda Vista 1440 Torrey Pines 1906 Jamul - Dulzura 700 Escondido* 1413 Mid-City 1441 University 1907 Lakeside 800 Imperial Beach 1414 Midway 1442 Uptown 1908 Mountain Empire 900 La Mesa 1415 Mira Mesa 1444 Skyline - Paradise Hills 1909 North County Metro 1000 Lemon Grove 1417 Mission Bay 1447 Tierrasanta 1911 Otay 1100 National City* 1418 Mission Beach 1448 Sorrento Hills 1912 Pala - Pauma 1200 Oceanside 1419 Mission Valley 1449 Fairbanks Ranch 1914 Ramona 1300 Poway* 1420 Navajo Country Club 1915 San Dieguito 1500 San Marcos* 1421 Carmel Valley 1450 Kearny Mesa 1918 Sweetwater 1600 Santee 1423 Ocean Beach 1455 Via De La Valle 1919 Valle De Oro 1700 Solana Beach 1424 Old San Diego 1461 Del Mar Mesa 1920 Valley Center 1800 Vista* 1425 Otay Mesa - Nestor 1462 Torry Highlands 1921 Spring Valley 1426 Otay Mesa 1463 Los Penasquitos 1922 Julian City of San Diego Community 1427 Pacific Beach Canyon 1923 Pepper Dr. - Bostonia Planning Area 1428 North Park 1480 North City Future 1951 North Mountain 1401 Balboa Park 1429 Rancho Penasquitos Urbanizing Area 1952 Bonsall 1402 Barrio Logan 1430 Peninsula 1481 Beeler Canyon 1953 Fallbrook 1403 Carmel Mountain 1431 Rancho Bernardo 1482 Miramar 1954 Pendleton - Deluz 1404 Centre City 1432 San Pasqual 1483 Lindbergh Field 1955 Rainbow 1405 Sabre Springs 1433 San Ysidro 1488 Flower Hill 1998 Barona 1491 Naval Station *Sphere of Influence 1 Community Planning areas of the City and County of San Diego and jurisdiction boundaries or sphere of influence areas for the other 17 jurisdictions.

14 INFO SANDAG / SourcePoint May - June 1998 w—p2I gluster2imployment fy2gommunity2€l—nning2ere—D2ƒ—n2hiego2‚egion

Map 2 ment TOTAL CLUSTER 2IHHH EMPLOYMENT By Planning Area HHI2E2SHHH San Diego Region qe—ter2th—n2SHHH

Cluster Employment 0 - 1,000 1,001 - 5,000 More than 5,000

Source: SANDAG 1995 Employment Inventory. w—p2P fiote™hnology282€h—rm—™euti™—ls2gluster gon™entr—tions2of2imployment fy2gommunity2€l—nning2ere—D2ƒ—n2hiego2‚egion

Map 3 •Torrey Pines BIOTECHNOLOGY ANDgon™entr—tion •University PHARMACEUTICALS CLUSTERow2ever—ge By Planning Area o2Q2„imes2ever—ge San Diego Region er2Q2„imes2ever—ge Cluster Employment Below Regional Average Up to 3 Times Regional Average 3 Times Regional Average or More

Source: SANDAG 1995 Employment Inventory.

May - June 1998 SANDAG / SourcePoint INFO 15 gommuni™—tions2gluster gon™entr—tions2of2imployment fy2gommunity2€l—nning2ere—D2ƒ—n2hiego2‚egion

•Mira Mesa

• Sabre Springs gon™entr—tion Map 4 ow2ever—ge COMMUNICATIONS CLUSTERo2Q2„imes2ever—ge •Tierrasanta By Planning Area San Diego Region er2Q2„imes2ever—ge

Cluster Employment •Kearny Mesa Below Regional Average

Up to 3 Times Regional Average •Otay Mesa - Nestor 3 Times Regional Average or More

Source: SANDAG 1995 Employment Inventory. ƒour™eX2ƒexheq2IWWS2imployment2snventory invironment—l2„e™hnology2gluster gon™entr—tions2of2imployment fy2gommunity2€l—nning2ere—D2ƒ—n2hiego2‚egion

•San Marcos

•Torrey Pines Map 5 gon™entr—tion •Mira Mesa ENVIRONMENTAL ow2ever—ge •Santee TECHNOLOGY CLUSTERo2Q2„imes2ever—ge By Planning Area San Diego Region er2Q2„imes2ever—ge

Cluster Employment •Southeast San Diego Below Regional Average Up to 3 Times Regional Average 3 Times Regional Average or More

Source: SANDAG 1995 Employment Inventory. ƒour™eX2ƒexheq2IWWS2imployment2snventory

16 INFO SANDAG / SourcePoint May - June 1998 •Carlsbad

•Poway

Map 6 RECREATIONAL GOODS MANUFACTURING CLUSTER By Planning Area San Diego Region •El Cajon

Cluster Employment Below Regional Average Up to 3 Times Regional Average 3 Times Regional Average or More

Source: SANDAG 1995 Employment Inventory. ƒoftw—re282gomputer2ƒervi™es2gluster gon™entr—tions2of2imployment fy2gommunity2€l—nning2ere—D2ƒ—n2hiego2‚egion

•University Map 7 gon™entr—tion •Scripps Miramar Ranch SOFTWARE AND COMPUTERow2ever—ge SERVICES CLUSTER o2Q2„imes2ever—ge By Planning Area er2Q2„imes2ever—ge San Diego Region

Cluster Employment Below Regional Average Up to 3 Times Regional Average 3 Times Regional Average or More

Source: SANDAG 1995 Employment Inventory. ƒour™eX2ƒexheq2IWWS2imployment2snventory

May - June 1998 SANDAG / SourcePoint INFO 17 DESCRIPTION OF CLUSTERS IN THE SAN DIEGO REGION Note: The percentage change in employment and real wages are discussed in this section. The data have been indexed to 1990 base year. Lines in the graphs represent the annual rate of change from the base year.

Biomedical Products The San Diego region’s Biomedical Products cluster produces instruments, BIOMEDICAL PRODUCTS Percentage Change in Employment and Wages* medical devices, equipment and other apparatus primarily for consumption 80% by the medical field. Examples of this cluster’s products include X-ray

60% machines, surgical knives, and contact lenses. Biomedical products have a wide range of uses such as delivering pharmaceuticals, monitoring patients, 40% providing therapy, and serving as artificial human organs. The Biomedical 20% Products cluster is knowledge-intensive, requiring advanced research and 0% development. The cluster is often combined with the Biotechnology and -20% Pharmaceuticals cluster and referred to as a “Bio-Sciences” cluster. Real -40% wages and employment in the Biomedical Products cluster remained fairly ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 stable from 1990 to 1994. From 1994 to 1996 real wages in the cluster began Employment Index Wage Index to increase as employment began to fall.

BIOTECHNOLOGY & PHARMACEUTICALS Biotechnology and Pharmaceuticals Percentage Change in Employment and Wages* The Biotechnology and Pharmaceuticals cluster includes industries engaged 100% in researching, manufacturing, or processing a broad range of biological, 80% chemical, and medicinal products. Medical and industrial chemicals and 60% preparations also are included in this grouping. The cluster does not include 40% instrument or equipment production. Examples of the products include 20% antibiotics, bacterial vaccines, and biological laboratories. The Biotechnology

0% and Pharmaceuticals cluster is often combined with the Biomedical Products cluster and referred to as a “Bio-Sciences” cluster. Employment in the cluster -20% has increased steadily every year since 1990. Real wages, after dropping 16 -40% ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 percent in 1991, have also risen steadily and once again equal the 1990 figure. Employment Index Wage Index

BUSINESS SERVICES Percentage Change in Employment and Wages* Business Services 80% The Business Services cluster includes industries that provide a variety of 60% professional services to local business establishments, including management,

40% legal and personnel supply services. Many of today’s business service industries, such as intellectual property law, catalog publishers, and computer facilities 20% management, are developing specialized skills to better serve the region’s 0% cluster industries. Other than a slight drop in 1992, Business Services’ -20% employment has increased steadily from 1990 to 1996. Real wages have -40% ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 remained stable over this time period. Employment Index Wage Index

* Data indexed to 1990.

18 INFO SANDAG / SourcePoint May - June 1998 Communications COMMUNICATIONS The Communications cluster includes industries primarily engaged in Percentage Change in Employment and Wages* researching and manufacturing communications-related products. The cluster 80% also includes industries that provide point-to-point communications services 60% such as cellular and digital phone and pager services. Examples of cluster 40% products include cellular and digital phones, fax machines, and encryption 20% devices. The Communications cluster was one of the region’s first large 0% emerging high technology clusters. From 1992 to 1996 employment increased dramatically for the Communications cluster despite the loss of 2,700 jobs in -20% -40% 1991 during the recession. Real wages have been relatively stable during the ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 six year period. Employment Index Wage Index

Computer and Electronics Manufacturing COMPUTER AND ELECTRONIC MANUFACTURING The Computer and Electronics Manufacturing cluster includes industries Percentage Change in Employment and Wages* that manufacture and assemble electronic components and products. The 80% emphasis of this cluster is on high technology and computer-related products 60% and their input components. Cluster products include speaker systems, 40% printed circuit boards, and computer terminals. The Computer and Electronics Manufacturing cluster plays a vital role in the regional economy because it 20% produces essential input components for numerous high-tech industries such 0% as Biomedical Products, Communications and Defense and Transportation -20%

Manufacturing. From 1990 to 1992 employment in this cluster decreased -40% rapidly, then remained stable until 1996 when it jumped back to above its ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 Employment Index Wage Index 1990 level. Real wages for the cluster have risen over the same time period.

Defense and Transportation Manufacturing DEFENSE & TRANSPORTATION MANUF. Percentage Change in Employment and Wages* The Defense and Transportation Manufacturing cluster includes industries 80% engaged in manufacturing or assembling aircraft, ships, boats, and defense related products such as guided missiles. As a result of decreased defense 60% spending, some cluster businesses have been forced to diversify their product 40% line to include commercial and high technology goods and services. Despite 20% the massive defense cutbacks, today’s Defense and Transportation 0%

Manufacturing cluster’s employment concentration is significantly higher -20% than the national average. This cluster has experienced the largest employment -40% decline of any cluster group from 1990 to 1996. Real wages have fluctuated -60% slightly and in 1996 were just over their 1990 level. ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96

Employment Index Wage Index

* Data indexed to 1990.

May - June 1998 SANDAG / SourcePoint INFO 19 ENTERTAINMENT AND AMUSEMENT Entertainment and Amusement Percentage Change in Employment and Wages* The Entertainment and Amusement cluster includes industries engaged in 80% arranging and providing amusement, recreation and entertainment services.

60% Examples of firms in this cluster include tour operators, zoos, museums, and

40% golf courses. The Entertainment and Amusement cluster, combined with the Visitor Industry Services cluster, in the past have been referred to as the 20% tourism industry. Employment and real wages in this cluster have fluctuated 0% from 1990 to 1996. A surge in employment growth starting in 1994 has -20% resulted in a 40 percent rise in jobs over the level in 1990. Wages, however, -40% were up by less than 10 percent. ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96

Employment Index Wage Index

Environmental Technology ENVIRONMENTAL TECHNOLOGY Percentage Change in Employment and Wages* The Environmental Technology cluster is an emerging cluster of industries 80% that manufacture products with environmental applications. Examples of 60% cluster specializations include environmental engineering services, laboratory

40% analysis, marine sciences, air and water filtration, environmental construction, and toxic, hazardous and radiological waste disposal and monitoring. 20% Characteristic issues facing today’s environmental marketplace include water 0% purification, pollution prevention and monitoring, waste disposal site -20% renovation, and waste treatment and storage. Employment in the

-40% Environmental Technology cluster remained fairly stable from 1990 until ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 1995, then increased rapidly. Real average wages in for the cluster have Employment Index Wage Index increased 15 percent over the six-year period.

FINANACIAL SERVICES Percentage Change in Employment and Wages* 80% Financial Services 60% The Financial Services cluster includes industries engaged primarily in 40% deposit banking, extending credit in the form of loans, and the exchange of 20% securities and commodities. A unique characteristic of this cluster is that

0% almost all of the other clusters have a significant relationship with the

-20% Financial Services cluster and, more precisely, the Banking industry. Despite a slight rebound in 1996, employment for the Financial Services cluster has -40% ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 been declining since 1990. Real average wages, however, have been increasing over the same time period. Employment Index Wage Index

* Data indexed to 1990.

20 INFO SANDAG / SourcePoint May - June 1998 Fruits and Vegetables FRUITS AND VEGETABLES The Fruits and Vegetables cluster includes industries engaged in the production Percentage Change in Employment and Wages* and maintenance of fruit, melons, tree nuts and vegetable crops. The San 80% Diego region ranks as the top avocado producer in the country. Other 60% important fruit and vegetable crops include lemons and tomatoes. While 40% employment in the Fruit and Vegetables cluster has fluctuated above and 20% below the 1990 employment amount, real average wages have remained within $300 of the 1990 figure. 0% -20%

-40% ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96

Employment Index Wage Index

HORTICULTURE Horticulture Percentage Change in Employment and Wages* The Horticulture cluster includes industries engaged in the production and 80% maintenance of ornamental plants, nursery crops and food crops grown 60% under cover. The Horticulture cluster accounts for a majority of the value of 40% the region’s agricultural products. Four of the region’s top ten agricultural crops, including the top three, are part of the horticulture cluster. In a 20% situation similar to the Fruits and Vegetables cluster, the Horticulture 0% cluster’s real average wages have remained stable while employment has -20% declined slightly. -40% ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96

Employment Index Wage Index

MEDICAL SERVICES Percentage Change in Employment and Wages* 80% Medical Services 60% The Medical Services cluster includes industries primarily offering health 40% services to the general public through hospitals, medical facilities and offices. 20% Employment in the Medical Services cluster has increased slightly from 1990 0% to 1996. The cluster experienced the largest percentage decrease in real average wages (11%) over the six-year period. -20% -40% ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96

Employment Index Wage Index

* Data indexed to 1990.

May - June 1998 SANDAG / SourcePoint INFO 21 RECREATIONAL GOODS MANUFACTURING Percentage Change in Employment and Wages* Recreational Goods Manufacturing 120% The Recreational Goods Manufacturing cluster includes companies that

100% manufacture recreational goods, sporting and athletic goods, and toys. Due to the rising demand for high performance products, new composite materials 80% are becoming more common in goods produced for the golf, tennis, biking, 60% surfing, and scuba diving industries. The San Diego region now contains the 40% nation’s largest manufacturer of golf clubs. The Recreational Goods 20% Manufacturing cluster exhibited the highest percentage increase in both

0% employment and real average wages from 1990 to 1996. Wages peaked in

-20% 1994 while employment continues to grow.

-40% ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96

Employment Index Wage Index

SOFTWARE & COMPUTER SERVICES CLUSTER Percentage Change in Employment and Wages* Software and Computer Services 80% The local software industry developed from a service to the Defense industry. 60% When defense spending decreased, the software industry adjusted its focus

40% towards the commercial market and has now linked itself to most of the other

20% high technology cluster industries. The Software and Computer Services cluster includes industries that provide services such as computer 0% programming, prepackaged software, and software development. The cluster -20% has grown very quickly and offers the highest wages of all 16 industry clusters, -40% 120 percent above the regional average wage. Both employment and real ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 average wages have consistently risen from 1990 to 1996. Employment Index Wage Index

VISITOR INDUSTRY SERVICES Percentage Change in Employment and Wages* 80% Visitor Industry Services 60% The Visitor Industry Services cluster includes industries such as Hotels and

40% Motels, which provide services to the entertainment and visitor industry. The

20% primary focus of the cluster is the hotels and other lodging places sector. Employment in the Visitor Industry Services cluster fell slightly at the 0% beginning of the 90s but has recovered to reach the 1990 level. Real average -20% wages have remained constant over the six-year period. -40% ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96

Employment Index Wage Index

* Data indexed to 1990.

22 INFO SANDAG / SourcePoint May - June 1998 Uniformed Military The Uniformed Military cluster is comprised of all enlisted, non-civilian military personnel. It is export-oriented because it brings in significantly more tax dollars than the region pays. The amount of information about the Uniformed Military cluster is limited because of the lack of data made available to the public. In 1996, there were approximately 94,000 people employed in the Uniformed Military cluster in the San Diego region.6

Clusters by Jurisdiction Table 3 shows cluster employment for each of the region’s 18 cities and the unincorporated area. The City of San Diego contains 64 percent of the region’s cluster employment and 54 percent of total employment. While a large portion of cluster employment lies within the City of San Diego’s boundaries, there are concentrations of specific clusters in other jurisdictions as well. For example, the unincorporated area contains 92 percent of the region’s Fruit and Vegetables cluster, 30 percent of the Horticulture cluster and nearly 20 percent of the Entertainment and Amusement cluster. The Recreational Goods Manufacturing cluster’s presence is felt in the North County, with 45 percent of its employment located in Carlsbad. Carlsbad also A majority of the fastest contains 12 percent of the Biotechnology and Pharmaceutical employment. growing and highest paying Chula Vista has 13 percent of Defense and Transportation Manufacturing high technology cluster cluster employment and nine percent of Biomedical Products employment. industries are located in the While El Cajon has less than four percent of total regional employment, it has City of San Diego. eight percent of both the Recreational Goods Manufacturing and Defense and Transportation Manufacturing cluster employment. The City of Encinitas contains 20 percent of the Horticulture cluster employment. Nonetheless, the City of San Diego is dominant in terms of the high technology, high paying employment clusters. The City of San Diego contains 70 percent or more of employment in the following clusters: Biomedical Products, Biotechnology and Pharmaceuticals, Business Services, Communications, Computer and Electronics Manufacturing, Defense and Transportation Manufacturing, and Software and Computer Services.

6 Source: San Diego Association of Governments, 1997

May - June 1998 SANDAG / SourcePoint INFO 23 Table 3 Summary of San Diego Regional Industry Cluster Employment 1,2 By Jurisdiction

Chula Del El Imperial La Carlsbad Vista Coronado Mar Cajon Encinitas Escondido Beach Mesa

Cluster Totals Employment 14,654 12,007 4,349 0 8,194 7,183 10,031 620 7,992 (Percent of Total % Emp. 4% 4% 1% 0% 2% 2% 3% 0% 2% Cluster Employment)

Employment Totals Employment 41,225 45,996 34,987 3,183 39,810 22,645 45,809 3,589 23,286 (Percent of Total % Emp. 3% 4% 3% 0% 3% 2% 4% 0% 2% Regional Employment)

Biomedical Products Employment 380 275 0 0 13 2 18 0 21 % Emp. 12% 9% 0% 0% 0% 0% 1% 0% 1%

Biotechnology & Employment 722 80 18 0 50 93 131 0 78 Pharmaceuticals % Emp. 6% 1% 0% 0% 0% 1% 1% 0% 1%

Business Services Employment 1,975 1,144 204 0 1,100 1,159 1,342 41 769 % Emp. 4% 2% 0% 0% 2% 2% 3% 0% 2%

Communications Employment 275 46 11 0 68 140 109 0 26 % Emp. 3% 1% 0% 0% 1% 2% 1% 0% 0%

Computer & Employment 1,647 224 0 0 280 123 653 0 64 Electronics % Emp. 7% 1% 0% 0% 1% 1% 3% 0% 0% Manufacturing

Defense & Employment 53 2,078 38 0 554 3 0 0 11 Transportation % Emp. 0% 13% 0% 0% 4% 0% 0% 0% 0% Manufacturing

Entertainment & Employment 165 270 115 0 298 155 303 31 179 Amusement % Emp. 1% 1% 1% 0% 1% 1% 1% 0% 1%

Environmental Employment 201 6 0 0 47 19 52 0 6 Technology % Emp 8% 0% 0% 0% 2% 1% 2% 0% 0%

Financial Services Employment 561 437 48 0 308 187 266 21 532 % Emp. 5% 4% 0% 0% 3% 2% 2% 0% 5%

Fruits & Vegetables Employment 0 0 0 0 0 0 0 0 0 % Emp. 0% 0% 0% 0% 0% 0% 0% 0% 0%

Horticulture Employment 642 39 5 0 15 938 140 0 7 % Emp. 14% 1% 0% 0% 0% 20% 3% 0% 0%

Medical Services Employment 1,094 3,414 551 0 1,589 2,077 3,367 51 4,043 % Emp. 2% 5% 1% 0% 3% 3% 5% 0% 6%

Recreational Employment 2,694 35 0 0 461 41 275 1 12 Goods Manufacturing % Emp. 45% 1% 0% 0% 8% 1% 5% 0% 0%

Software & Computer Employment 771 155 90 0 114 226 171 0 91 Services % Emp. 6% 1% 1% 0% 1% 2% 1% 0% 1%

Visitor Industry Employment 3,474 3,804 3,269 0 3,297 2,020 3,204 475 2,153 Service % Emp. 4% 4% 3% 0% 3% 2% 3% 1% 2%

Source: SANDAG 1995 Employment Inventory 1 Excludes Uniformed Military. 2 Except where noted, percentages shown indicate each jurisdiction’s share of total cluster employment.

24 INFO SANDAG / SourcePoint May - June 1998 Table 3 (Continued) Summary of San Diego Regional Industry Cluster Employment1,2 By Jurisdiction

Lemon National San San Solana Unincorp. Grove City Oceanside Poway Diego Marcos Beach Vista Santee Area

Cluster Totals Employment 1,058 5,138 9,632 4,212 210,136 4,390 2,419 2,950 5,039 18,101 (Percent of Total % Emp. 0% 2% 3% 1% 64% 1% 1% 1% 2% 6% Cluster Employment)

Employment Totals Employment 6,991 26,462 34,551 14,432 645,159 24,121 14,738 8,662 25,748 125,443 (Percent of Total % Emp. 1% 2% 3% 1% 54% 2% 1% 1% 2% 11% Regional Employment)

Biomedical Products Employment 0 0 21 8 2,215 127 9 7 0 61 % Emp. 0% 0% 1% 0% 70% 4% 0% 0% 0% 2%

Biotechnology & Employment 0 107 147 48 10,530 201 169 77 163 166 Pharmaceuticals % Emp. 0% 1% 1% 0% 82% 2% 1% 1% 1% 1%

Business Services Employment 101 337 1,063 860 34,720 490 198 689 1,047 2,064 % Emp. 0% 1% 2% 2% 70% 1% 0% 1% 2% 4%

Communications Employment 0 73 169 49 7,520 56 41 62 52 225 % Emp. 1% 2% 1% 84% 1% 0% 1% 1% 3%

Computer & Employment 2 179 615 313 16,717 910 119 59 376 381 Electronics % Emp. 0% 1% 3% 1% 74% 4% 1% 0% 2% 2% Manufacturing

Defense & Employment 0 391 15 0 12,217 15 123 36 36 103 Transportation % Emp. 0% 2% 0% 0% 78% 0% 1% 0% 0% 1% Manufacturing

Entertainment & Employment 34 113 364 119 13,822 160 155 86 172 3,943 Amusement % Emp. 0% 1% 2% 1% 67% 1% 1% 0% 1% 19%

Environmental Employment 0 42 41 8 1,693 123 84 67 38 92 Technology % Emp. 0% 2% 2% 0% 67% 5% 3% 3% 2% 4%

Financial Services Employment 25 167 246 39 6,927 142 40 191 255 466 % Emp. 2% 2% 0% 64% 1% 0% 2% 2% 4%

Fruits & Vegetables Employment 0 0 0 0 61 0 0 0 0 730 % Emp. 0% 0% 0% 0% 8% 0% 0% 0% 0% 92%

Horticulture Employment 26 14 393 14 765 138 6 53 60 1,405 % Emp. 1% 0% 8% 0% 16% 3% 0% 1% 1% 30%

Medical Services Employment 166 1,367 2,963 1,298 36,582 539 532 367 1,055 1,644 % Emp. 0% 2% 5% 2% 58% 1% 1% 1% 2% 3%

Recreational Employment 24 29 195 367 1,419 103 46 21 180 105 Goods Manufacturing % Emp. 0% 0% 3% 6% 24% 2% 1% 0% 3% 2%

Software & Computer Employment 16 97 120 82 10,084 65 61 89 95 346 Services % Emp. 0% 1% 1% 1% 80% 1% 0% 1% 1% 3%

Visitor Industry Employment 664 2,222 3,280 1,007 54,864 1,321 836 1,146 1,510 6,370 Service % Emp. 1% 2% 3% 1% 58% 1% 1% 1% 2% 7%

Source: SANDAG 1995 Employment Inventory 1 Excludes Uniformed Military. 2 Except where noted, percentages shown indicate each jurisdiction’s share of total cluster employment.

May - June 1998 SANDAG / SourcePoint INFO 25 SUMMARY OF CLUSTER DEFINITIONS Employment clusters are identified and defined using three criteria: export-oriented, interdependent, and wealth generating. These three criteria are applied to employment data reported at the four-digit Standard Industrial Classification (SIC) Code level. The four-digit level employment data is then grouped and aggregated into clusters based on the results of the three criteria. For a full discussion of the three criteria, please refer to the Technical Appendix on page 28.

Biomedical Products Communications SIC Industry Description SIC Industry Description 3821 Laboratory apparatus & furniture 3661 Telephone & telegraph apparatus 3827 Optical instruments & lenses 3663 Radio & TV communications 3841 Surgical & medical instruments 3669 Communications equipment, nec 3842 Surgical appliances & supplies 4812 Radio/telephone communications 3843 Dental equipment & supplies 4899 Communications services 3844 X-ray apparatus & tubes 8711 Engineering services (10%)1 3845 Electromedical equipment 8731 Commercial physical research (25%)1 3851 Ophthalmic goods Computer & Electronics Manufacturing Biotechnology and Pharmaceuticals SIC Industry Description SIC Industry Description 3571 Electronic computers 2835 Diagnostic substances 3572 Computer storage devices 2836 Biological products excluding diagnostic 3577 Computer peripheral equipment, nec 8071 Medical laboratories 3825 Instruments to measure electricity 8731 Commercial physical research (60%)1 3695 Magnetic & optical recording media 8733 Noncommercial research org. 5045 Computers, peripherals & software, wholesale 2833 Medicinals & botanicals 3651 Household audio & video equipment 2834 Pharmaceuticals preparations 3629 Electrical industrial apparatus, nec 5122 Drugs, proprietaries, & sundries 3671 Electron tubes 8734 Testing laboratories 3672 Printed circuit boards 2819 Industrial inorganic chemicals, nec 3674 Semiconductors & related devices 2869 Industrial organic chemicals, nec 3675 Electronic capacitors 2899 Chemical preparations 3676 Electronic resistors 3677 Electronic coils & transformers Business Services 3678 Electronic connectors SIC Industry Description 3679 Electronic components, nec 2741 Miscellaneous publishing 3699 Electrical equipment & supplies, nec 7311 Advertising agencies 5065 Electronic parts & equipment, wholesale 7319 Advertising, nec 7361 Employment agencies Defense and Transportation Manufacturing 7363 Help supply services SIC Industry Description 7375 Information retrieval services 3511 Steam engines & turbines 7376 Computer facilities management 3721 Aircraft 7377 Computer rental & leasing 3724 Aircraft engines & engine parts 7389 Business services, nec 3728 Aircraft parts & equipment, nec 8111 Legal services 3731 Ship building & repairing 8712 Architectural services 3732 Boat building & repairing 8720 Accounting, auditing & bookkeeping 3761 Guided missiles & space vehicles 8741 Management services 3769 Space vehicle equipment 8742 Management consulting services 3812 Search & navigation equipment 8748 Business consulting, nec

26 INFO SANDAG / SourcePoint May - June 1998 Entertainment and Amusement Medical Services SIC Industry Description SIC Industry Description 4725 Tour operators 5047 Medical & hospital equipment 4830 Radio & TV broadcasting stations 7352 Medical equipment rental 7922 Theatrical producers & services 8011 Offices & clinics of doctors of medicine 7941 Sports clubs, managers & promoters 8021 Offices & clinics of dentists 7948 Racing, including tract operations 8049 Offices of health practitioners, nec 7992 Public golf courses 8062 General medical & surgical hospitals 7996 Amusement parks 8063 Psychiatric hospitals 7999 Amusement & recreation, nec 8069 Specialty hospitals, except psychiatric 8400 Museums, art galleries, botanical, 8072 Dental laboratories zoological gardens 8092 Kidney dialysis centers 8093 Specialty outpatient facilities, nec Environmental Technology 8099 Health & allied services, nec SIC Industry Description 3564 Blowers & fans Recreational Goods Manufacturing 3569 General industrial machinery, nec SIC Industry Description 3589 Service industry machinery, nec 3940 Toys & sporting goods 3823 Process control instruments 5091 Sporting & recreational goods, wholesale 3824 Fluid meters & counting devices 3826 Analytical instruments Software and Computer Services 3829 Measuring & controlling devices, nec SIC Industry Description 7371 Computer programming services Financial Services 7372 Prepackaged software SIC Industry Description 7373 Computer integrated systems design 6035 Saving institutions, Federally chartered 7374 Computer processing & data prep. services 6036 Saving institutions, not Federally chartered 7379 Computer related services, nec 6061 Credit unions, Federally chartered 8711 Engineering services (5%)1 6062 State credit unions 8731 Commercial physical/biol. research (15%)1 6140 Personal credit institutions 6162 Mortgage bankers & loan correspondents Uniformed Military 6163 Loan brokers This cluster includes all uniformed military personnel. 6282 Investment advice There are no SIC codes to represent this cluster.

Fruit and Vegetables Visitor Industry Services SIC Industry Description SIC Industry Description 0161 Vegetables & melons 4489 Water passenger transportation, nec 0171 Berry crops 4499 Water transportation services, nec 0172 Grapes 4724 Travel agencies 0174 Citrus fruits 5800 Eating & drinking places (55%) 0175 Deciduous tree fruits 7011 Hotels & motels 0179 Fruits & tree nuts, nec 7021 Rooming & boarding houses 0762 Farm management services 7032 Sporting & recreational camps 2033 Canned fruits & vegetables 7033 Trailer parks & campsites 2449 Wood containers, nec 7041 Organization hotels & lodging house 7514 Passenger car rental Horticulture SIC Industry Description 0181 Ornamental nursery products 0182 Food crops grown under cover 0191 General farms, primarily crop 0781 Landscape counseling & planning 0783 Ornamental shrub & tree services

1 Portions of the employment in Standard Industrial Classification Industries 8711 and 8731 are included in more than one cluster group.

May - June 1998 SANDAG / SourcePoint INFO 27 TECHNICAL APPENDIX Clusters are groups of inter-related industries that drive wealth creation in a region, primarily through export of goods and services. The use of clusters as a descriptive tool for regional economic relationships provides a richer, more meaningful representation of local industry drivers and regional dynamics than do traditional methods. In order for policy makers to commit to using cluster- based data for planning and decision-making purposes, there must be an understandable, acceptable and replicable process or system in place. Thus, SANDAG, in cooperation with the San Diego Regional Technology Alliance, has created a process that rigorously examines the composition of clusters in the San Diego region.

This process is intended to set a standard for identifying and defining employment clusters, and to use the information for economic development planning and analysis. Two technical factors are important in determining which industries constitute a cluster. Locally, a third factor is important to identify employment opportunities that would raise the standard of living and assist in the restructuring of our economy. The three factors are based on characteristics common to all clusters: export-oriented, interdependent, and wealth generating. More specifically, the three factors are the Employment Concentration Factor (ECF), the Cluster Dependency Factor (CDF), and the Economic Prosperity Factor (EPF). The factors provide the quantifiable information necessary to standardize the identification of clusters and their components.

Export-Oriented . . . Employment Concentration Factor The Employment Concentration Factor (ECF) is a location quotient1 used to identify which industries export goods and services out of the region and bring wealth back into it. Essentially, ECFs are used to approximate an industry’s export-strength. By employing more workers than the national average the industry is likely producing more goods and services than the region alone can consume; thus, the industries export the surplus product out of the region.

Employment (Cluster Employment/Total Regional Employment) Concentration = Factor (ECF) (National Cluster Employment/Total National Employment)

If a cluster’s ECF is greater than 1.0, the national average, it can be assumed that some portion of its production is exported out of the region. For example, if a cluster’s Employment Concentration Factor is 4.3, as it is for the Recreational Goods Manufacturing cluster, it would mean that employment in this particular group is four times more concentrated in the region than for the nation as a whole.

Interdependent . . . Cluster Dependency Factor In order to quantify the relationships between businesses within a cluster, an Input-Output (IO) model was used. The San Diego regional I-O model’s transactions table shows both the dollar value and direction of the buyer-supplier relationships. The dollar values in the transactions table are used to determine the relative strengths of the relationships between businesses in a cluster; strong relationships (high transaction values) representing a possible cluster group.

1 A location quotient serves as a proxy calculation for identifying which industries export their goods and services out of the region. SANDAG refers to the cluster location quotient as the Employment Concentration Factor.

28 INFO SANDAG / SourcePoint May - June 1998 There are two Dependency Factors: CDF (Cluster) and CDF (Industry). Cluster Dependency Factors are calculated two ways: industry to cluster and cluster to industry. CDF (Cluster) measures the cluster’s aggregate demand on a single industry; for example, the Computer and Electronics Manufacturing cluster’s demand on the printed circuit board industry. CDF (Industry) represents a single industry’s demand on the other members of the cluster, for example, the printed circuit board industry’s demand on the Computer and Electronics Manufacturing cluster.

Cluster to Industry Sum of Cluster Demands on Single Industry Demands Factor CDF = Cluster Number of Industries in Cluster Single Industry (Cluster)

Industries within a cluster place much stronger demands on one another, that is, show higher transaction values, than they do on industries outside of the cluster group. CDF (Cluster) is determined by comparing the economy’s average demand on a single industry to the average cluster demand on that single industry. Only those industries that exhibit the highest transaction values with the cluster are included in the cluster definition. For example, the Computer and Electronics Manufacturing cluster’s relationship with the printed circuit board industry reveals a very high transaction value. Demands Industry to Cluster Sum of Single Industry Demand on Cluster Single Industry Cluster Factor CDF = Number of Industries in Cluster (Industry)

CDF (Cluster) represents only half of a cluster’s buyer-supplier relationship. CDF (Industry) is determined by comparing a single industry’s demand on a cluster to the average demand by the economy on that cluster. If the cluster displays a high transaction value, or demand, with the single industry, the industry is included in the cluster definition. The printed circuit board industry places an above average demand on the Computer and Electronics Manufacturing cluster.

Wealth Generating . . . Economic Prosperity Factor The San Diego region lost a large number of middle class jobs during the recession of the early 1990s. In order to replace these lost jobs SANDAG focuses on clusters that provide high-paying job opportunities. The high-paying industries are identified through the Economic Prosperity Factor (EPF). The EPF is a measure of a cluster’s contribution, in terms of payroll, to the local economy.

Economic (Annual Cluster Payroll / Cluster Employment) Prosperity Factor = (EPF) (Total Regional Payroll / Total Regional Employment)

If the EPF ratio is greater than one, the industry has an average wage greater than that of the region. For example, the Software and Computer Services cluster has an Economic Prosperity Factor of 2.68. This means that the cluster’s wages are more than 2.6 times higher than the regional average.

May - June 1998 SANDAG / SourcePoint INFO 29 DATA LIMITATIONS AND STATUS OF CLUSTER RESEARCH

If clusters are to be used If cluster-based employment information is to be used as a basis for regional, state and as a basis for regional, national planning, there must be an objective procedure developed to identify and state and national define them. Today, policy makers are trying to make economic development decisions planning, there must be a for employment groups for which the State of California does not provide data. State- cost effective and objective level standardization of cluster definitions would further enhance the value of this type procedure developed to of analysis in promoting the economic well-being of the entire state. identify and define them. There are two main concerns with the way that employment data is traditionally reported. The first concern is that the Standard Industrial Classification (SIC) structure does not provide enough information about relatively new employment areas such as biotechnology, software, telecommunications, and other “cluster” industries. The SIC code structure does not allow workers in some areas to be classified in the Tracking employment data industry that best reflects the type of work they do. The four-digit SIC code 8731 by cluster can be improved “Commercial Physical Research” provides an excellent example of this. SIC code 8731 with adjustments in the includes a variety of research and engineering firms that do not fall into one industry way the California cluster. Firms in this classification might be included in a Software, Communications, Employment Development Defense, Environmental Technology, or Biotechnology and Pharmaceuticals cluster. Department (EDD) collects information. A second area of concern is how temporary workers are classified. A number of our region’s larger, high technology firms have a substantial number of temporary employees. In the current reporting system these workers are in the Personnel Supply Services sector, not in the industry where they actually work. The current employment figures for the Communications cluster may be underestimated as a result of this classification problem, since firms in the Communications cluster typically employ many temporary workers.

The upcoming North Over the next few years a new and updated industrial classification system will be American Industry implemented in the North American Free Trade Agreement (NAFTA) member Classification System countries. The North American Industry Classification System (NAICS) will be more (NAICS) may make cluster detailed than the current system and will allow for more accurate comparisons of the analysis a more useful Canadian, Mexican, and United States economies. The NAICS will also enable tool, although many of the planners to do limited cluster analysis for cross-border regions such as ours. Some present concerns with definitional and analytical problems may be solved with this new system, however, employment data cluster analysis will continue to be a necessary and useful tool for analyzing data will remain. presented in the new NAICS format.

30 INFO SANDAG / SourcePoint May - June 1998 GLOSSARY OF TERMS

Backward Linkage The relationship between a business and its suppliers.

Clusters Groups of inter-related industries that drive wealth creation in a region, primarily through export of goods and services.

CDF (Industry) Cluster Dependency Factor (Industry) represents a single industry’s demand on the other members of the cluster.

CDF (Cluster) Cluster Dependency Factor (Cluster) measures the cluster’s aggregate demand on a single industry.

Employment Concentration A measure of a cluster’s export strength. Factor (ECF)

Economic Prosperity A measure or ranking of a cluster’s economic contribution to the local economy; Factor (EPF) measure of relative wage-rate strength.

Forward Linkage The relationship between wages and salaries paid to workers and the impact of their expenditures on the economy.

High Value-Added Value added is the difference between the revenue obtained by a firm for a good or service and the cost of the inputs (the labor and materials) used in producing it. This study focuses on clusters for which the labor content is high value added.

Input-Output (IO) Model An economic model that accounts for monetary transactions (or flows) from one industry to another in a region.

Location Quotient Serves as a proxy calculation for identifying which industries export their goods and services out of the region. SANDAG refers to the cluster location quotient as the Employment Concentration Factor.

Standard Industrial The Standard Industrial Classification system groups employment sectors by the type Classification System (SIC) of activity in which they are engaged. The SIC system is based on a four-digit industry coding system and groups industries by sectors such as Wholesale Trade, Services, and Manufacturing.

May - June 1998 SANDAG / SourcePoint INFO 31 Future Issues of INFO SANDAG Profiling the Region’s Jurisdictions INFO The wide array of demographic, economic and other information that is available for the region’s 19 INFO presents information produced as part of the jurisdictions will be presented in this INFO. San Diego Association of Governments’ overall planning program. The series, published every other Highlights of each jurisdiction’s unique character month, contains population, housing, employment, will be presented. Where each jurisdiction ranks in population size, land use, transportation, criminal justice and other housing characteristics, economic indicators, and other factors that data as well as occasional reports on other subjects of are used in many different types of analysis and decision making general interest. This report is financed with federal also will be shown. funds from the U.S. Department of Transportation, state funds from Caltrans, and local funds from SANDAG member jurisdictions. Solid Waste Issues San Diego Association of Governments This INFO will address issues such as the amount of 401 B Street • Suite 800 trash that is sent to landfills in the San Diego region, San Diego, CA 92101-4231 the importance of reducing the amount of trash that (619) 595-5300 • Fax 595-5305 we generate and dispose of, and the region’s waste reduction Internet: http://www.sandag.cog.ca.us programs. California’s primary waste legislation, as well as some of e-mail: [email protected] San Diego’s recent solid waste history, also will be highlighted. Maps and charts will show the location of landfills and other solid waste facilities, the prices that households pay for the collection and SourcePoint is a chartered nonprofit corporation disposal of trash across the region, and the amounts of trash sent to of SANDAG. local and out-of-county landfills.

SANDAG Member Agencies: The Cities of: On the Cover: CARLSBAD CHULA VISTA The San Diego region is transitioning into what can be referred to CORONADO as a modern, export-driven economy. This transition makes it clear DEL MAR that our region must now look deeply at the fundamental structure EL CAJON of the local economy and determine what direction it will take into the 21st century. ENCINITAS ESCONDIDO Keys to our future direction are industries that compete nationally IMPERIAL BEACH and internationally that drive the regional economy and have long- term growth potential. Because they compete at a global level, LA MESA opportunities for growth in these industries are not constrained by LEMON GROVE the size of the local market, and they can expand far beyond it. Our NATIONAL CITY ability to create wealth and high-quality jobs—to create prosperity— OCEANSIDE throughout our entire economy is dependent on the health of these POWAY industries. SAN DIEGO Today, new industries like biotechnology, software, environmental SAN MARCOS technology, and communications do not fit classic industry SANTEE definitions. The use of clusters as a descriptive tool for regional SOLANA BEACH economic relationships provides a richer and more meaningful representation of local industry drivers and regional dynamics than VISTA the one provided by the traditional system. The traditional system tells us where we have been, clusters show us where we are headed. COUNTY OF SAN DIEGO In the San Diego region, 16 industry clusters serve as the engines of the local economy. Clusters are groups of interrelated businesses STATE DEPARTMENT OF TRANSPORTATION that drive wealth creation in the region, primarily through the U.S. DEPARTMENT OF DEFENSE export of goods and services. About one-third of the region’s S.D. UNIFIED PORT DISTRICT 1,017,200 non-military employment is in cluster industries. S.D. COUNTY WATER AUTHORITY TIJUANA/BAJA CALIFORNIA/MEXICO