Major San Diego Employers Worried About Area's Deteriorating Quality of Life

San Diego’s deteriorating quality of life continues to be a source of grave concern in many quarters. One group that has a particular stake in this issue is the major employers in the San Diego region, who have traditionally used quality of life as a source of advantage when seeking to recruit and retain valued employees. Quality of life issues – particularly housing costs, traffic congestion and the availability of open space and recreational opportunities – impact firms’ ability to sustain a satisfied and productive workforce.

Recently San Diego Dialogue and the San Diego Regional Economic Development Corporation launched a project to sample opinion from our region’s major employers on growth, quality of life and their impact on San Diego’s workforce. During the winter and spring of 2002 researchers from the Dialogue interviewed senior executives – typically the Chief Executive Officer – from over 30 major employers in our region. In this issue of San Diego Dialogue Report we share some of the findings, comments and reflections that came out of these interviews. A full report on the project will be published in the late spring of this year.

Among the project’s major findings were the following:

# 1 - Quality of Life Matters to San Diego Employers

Almost all of the interviewees indicated that quality of life was a crucial factor in recruiting and retaining a high quality workforce. The majority of those interviewed expressed concern about the negative impacts of San Diego’s deteriorating quality of life on their employees and business operations. As the CEO of one of the region’s largest health care systems commented, “We find that the attraction of the climate alone does not pay the grocery bills…”

# 2 – The High Cost of Housing in San Diego is Hurting Local Employers

Employers most frequently cited the high cost of housing as their number one quality of life concern, especially for employees who come from outside of California. “Sticker shock” and “house-poor” were two terms often heard in relation to San Diego’s housing situation. Workers who come from out of state, particularly the Midwest, often must pay a substantial amount of money for a smaller home than they previously possessed. Many of the interviewees cited examples of employees who have been forced to look to the north towards Temecula, and to the east, to find affordable housing. Most employers felt that the housing market in San Diego was “broken.”

The high cost of housing is felt among all levels of employees in San Diego. At the senior and executive levels, their compensation allows greater flexibility in selecting a home. However, many end up with a home that is smaller than what they would expect to receive for the price. Noted one interviewee, “… there’s somewhat of a shock when you try to pull a senior management employee from the Midwest who’s used to buying an unbelievable home for $300,000, and you transplant that person… (they’re) coming out here thinking, ‘Well, I’ll buy a 4,500 square foot home and I’ll pay $300,000.’ Welcome to the real world. It doesn’t happen. And to be honest, although the challenges may be here… it puts it on a different scale, because a person literally moves down to move to California and to the San Diego region.”

Mid-level managers and workers with a few years’ experience, who are looking for either a starter home or a home in a good school district, are faced with a housing market that fails to offer them much flexibility. A second source of income is usually required even to purchase a home in an outlying area of the region. As the Vice-President of Human Resources for a local pharmaceutical firm commented, “… people who are trying to start families are looking for something in the $200,000 to $300,000 range so that the kids are safe – (with a) nice little yard they can play in… that’s hard to find in San Diego. Yet they’ve got zillions of $750,000 houses going up…”

The employers noted that lower-level employees, particularly hourly workers and entry-level professionals, are simply not able to afford a home close to where their job is located and therefore must commute long distances (e.g. from Temecula or Tijuana). Some take second jobs or even have to share a home or apartment with another family. This is an especially salient issue with companies in the manufacturing sector, tourism and the healthcare industry.

The rising cost of housing has a particularly powerful impact on lower-skill employees who are hourly workers. As the head of one of our region’s largest tourist attractions noted, “There are people that work for us that if you were to take away, say, one day a week from them, they will become homeless. In other words, they live on the edge... they’re sharing an apartment and suddenly losing one day a week means I can’t pay rent. Or they’re single moms working here, and they have a child and they can barely afford to work and feed them and they pay somebody to take care of their child. You take away a day and they can’t either feed their child or they can’t pay the childcare…”

# 3 – Increased Traffic Congestion is Impacting Employee Morale

Nearly every interviewee voiced concern about his or her employees’ decreasing mobility in the region because of traffic congestion. There was a strong sense that commute times are increasing for employees, and therefore less time is available for other activities outside of work. Further, some companies felt that there has been a negative impact on work performance and productivity as a result of traffic congestion and lengthening commutes.

One interviewee stated, “I think clearly when you spend more time commuting that has negative effects. (It’s) not the most productive way to spend time. Quality lifestyle means you’re spending time with your family, in the community or at work, not sitting in your car or on a bus or some other means of transportation.”

Traffic congestion was frequently cited as the number one quality of life concern among employees who were recruited locally (i.e. those already living in the area). In most cases, these employees have already adjusted to the high cost of living in San Diego and do not rate this issue as much of a problem when compared with the traffic congestion they experience every day.

Another CEO noted, “I met with a group of employees… and almost to a person… traffic seemed to be the single biggest quality of life issue, because of the time involved in getting to and from work… it has become a major stumbling block for me to keep people happy…”

CEOs worried about the impact of traffic congestion on the mental health and well being of their employees. The head of a regional electronics manufacturer stated, “There’s got to be an impact. Between frustration and stress and… all the levels of road rage that creep up on you when you don’t want it to… then you come to work with that. And on the other end, it’s got to be an issue with getting home … when you walk into your house at night and how you react with everybody. If you’re tired and fatigued and stressed and angry and just frustrated, it’s got to impact somehow. We’ve never measured it, but I’m sure it has to...”

The COO of a regional software firm agreed, “I think the road system is a huge issue… transportation is probably the number one issue from the employee standpoint that employers struggle with in deciding where expansion occurs and how you build your business.”

Several companies spoke of consciously dispersing their facilities in different parts of the County in order to minimize the impact of traffic congestion on their employees.

# 4 – Regional CEOs Recognize that Transportation and Housing Are Linked

The interviewees recognized that the transportation issue is directly linked to the regional housing issue. However, many felt that new housing developments in San Diego are often approved without corresponding improvements in the transportation infrastructure to adjust for increased traffic volumes. At the company level, this results in employees having to move farther away from their job sites to find affordable housing, creating longer commuting distances to get to work.

Some of the interviewees questioned whether policy-makers understood the relationship between housing and transportation. As the President and CEO of another of the region’s largest health care systems asked, “I just wonder sometimes how coordinated are all the planning efforts? The large number of people that are moving into this area doesn’t help traffic. So at times one solution actually creates a problem for the other side of it. Are we really coordinating the community growth, the housing, the building of new homes, with the freeway expansion, etc.? It seems to me the development of homes is certainly growing much faster than the infrastructure to support the homes.”

Another interviewee stressed the importance of making proactive investments in infrastructure. She stated, “… the growth is necessary, yet at the same time it doesn’t seem to be as well-planned as it may need to be… the infrastructure should be in place before you add the houses, in my opinion...”

One regional executive, who had moved to our region from Los Angeles, expressed surprise at the parochialism in San Diego when it comes to planning:

“If you don’t keep focused on your basic infrastructure, the economy can go into the tank… (but) I don’t see how we’re going to get from here to there, especially with the reluctance of policy makers down here to look at things on a regional basis. I thought L.A. was bad when it came to fiefdoms. It pales in comparison to San Diego. I mean talk about municipally controlled; it’s unbelievable… every time you try to tie transportation issues in with land use, (you get) ‘it’s gonna happen over my dead body…’”

# 5 – San Diego’s Deteriorating Quality of Life is Reducing Employers’ Ability to Recruit New Employees

Most employers stated that the high cost of living in San Diego (essentially the high cost of housing), combined with the region’s transportation problems, has either already become, or will become in the near future, a barrier to recruitment and retention of employees. The interviewees cited numerous examples of job candidates who chose not to accept a position in San Diego because of housing and transportation concerns. For example, the head of one of San Diego’s large remaining shipbuilders noted,

“If we want to hire experienced shipbuilders, we have to go out of the area, far out of the area. And obviously you don’t go to Kansas or Nebraska to find a shipbuilder. You’re going to the Gulf Coast or New England. Anybody we bring from those areas – anybody we attempt to bring from those areas – typically are shocked by the cost of living here and very often choose not to come because of it… …the sticker shock is usually lethal…”

Some companies find they have to provide extra financial incentives, or financial assistance, to recruit highly valued employees. The head of one of the region’s cable television systems commented, “… invariably we have to pay substantial amounts of mortgage differential for five years to get people to move into this market. Otherwise I couldn’t bring the people that have the expertise into the market for leadership positions. And these are high paying jobs too, so that’s tough.”

For firms that need to recruit high value-added employees from other parts of the country, San Diego’s quality of life, even its vaunted climate, is not as strong a selling point as it has been in the past. Employees and job candidates are less willing to make tradeoffs in their quality of life (e.g. housing costs, traffic congestion, an overall high cost of living) to come to San Diego. The President of one of the region’s major universities offered a specific example, “We had a person who we were trying to hire out of Pittsburgh. He didn’t come to San Diego because of quality of life issues… from Pittsburgh! From that person’s vantage point, San Diego is simply not attractive. Forget the beaches, forget it…not attractive… that’s the sort of thing we hit…”

# 6 – Firms Are Experiencing New Difficulties in Retaining Employees

The interviewed firms cited many examples of employees who have had to leave the area because a quality of life concerns. Again, this phenomenon seems to span all classes of employees and income levels. The CEO of a regional shipbuilding firm offered a poignant example:

“It’s always painful when it happens, but one comes to my mind. It was very explicitly said; he had a family and kids and he said, ‘I can never get ahead here. I’ll never be able to get a decent home,’ and so he went down to Alabama…”

The issue becomes particularly salient for national or multinational firms who have substantial operations, with comparable positions, in other places. One CEO provided a blunt comment on this fact, “They want to move out of here. To be just blunt, they want out. They came here – an incredible job opportunity – and then after they’re here a few months, and they’ve been to the grocery store, and they’ve paid that mortgage payment on a house that’s smaller than they had before, but more expensive than they had before… there’s a high level of frustration…”

A regional biotechnology firm offered a similar case study:

“… we have actually lost employees who said, ‘I have to move because of traffic, because of the cost of living,’ especially if they’re trying to start a family, buying a house. I remember one that was a very important scientist to us, who was going to start a family, and said, ‘I can go to Utah and have five times what I can have here. I have land, my children can grow up in a free, safe environment’… being able to raise a family, start a family, afford a family, and not be house poor is important.”

# 7 – Many Employers Are Unfamiliar with Public Policy Measures Designed to Address Quality of Life Issues in San Diego

Perhaps the most troubling finding from this exercise is that many of San Diego’s largest employers are unfamiliar with strategies being undertaken by local government to address San Diego’s declining quality of life. For example, many of the interviewed executives were not familiar with the City of San Diego’s “City of Villages” strategy to update its master plan. Most of the employers had never heard of Transit First – the comprehensive transit development plan being pursued by the Metropolitan Transit Development Board (MTDB).

However, most of the interviewees expressed an interest in participating in some form of a collective solution to San Diego’s quality of life challenges. Almost every participant voiced willingness on the part of their company to attend an initial organizing and briefing meeting to discuss the results of the project and explore potential next steps. The San Diego Regional Economic Development Corporation and San Diego Dialogue will be pursuing this opportunity in the coming months. One executive, who represents a Fortune 500 company, stressed the need for private sector leadership to become more involved in these issues:

“I think the issues that large communities have are too complicated not to be solved through collaborative work… the challenge is for public/private partnerships to be sponsored and born with the future in mind, but in reasonable time periods…”