INFO. SAN DIEGO REGIONAL EMPLOYMENT CLUSTERS Engines of the Modern Economy S A N D A G. Biomedical Products. Biotechnology & Pharmaceuticals

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1 S A N D A G INFO M A Y - J U N E T H R E E D O L L A R S SAN DIEGO REGIONAL EMPLOYMENT CLUSTERS 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

2 After decades of rapid job growth and economic stability, in 1990 the San Diego region was hit hard by the worst recession in the last 50 years. The San Diego region must now assess the fundamental structure of its economy and determine what direction to take into in the 21 st century. INTRODUCTION After nearly two decades of economic stability, the San Diego region experienced a recession that deeply impacted the structure of the local economy. The recession that began in 1990 turned out to be, for this region and for California, the worst recession in the last 50 years. As a result of defense industry cutbacks, the loss of numerous major financial institutions, and the real estate downturn, the San Diego region experienced a significant loss of employment opportunities and witnessed the departure of many longtime residents once employed in these industries. At the root of the local recession is the basic restructuring of the San Diego area s economy. The restructuring, which cost the region thousands of highpaying jobs and many of the businesses that created them, continues, even as the economy recovers. The San Diego region is transitioning into what can be referred to as a modern, export-driven economy. This transition makes it 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 21 st century. Globally competitive, exportoriented industries drive the regional economy. Today, clusters serve as the driving force of the local economy and allow us to better describe regional economic dynamics. THE SAN DIEGO REGION S MODERN EXPORT-DRIVEN ECONOMY The productivity of regional economies, including ours, depends on the sophistication and efficiency of all its industries. Each industry contributes to determining the output per worker of the economy. However, it is important 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 it. In addition, export-oriented businesses bring outside dollars into our region. These dollars drive the regional economy as firms buy products and 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 industry doing? Businesses broadly labeled biotech straddle industries, refusing to fall neatly into traditionally defined categories. When basic 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

3 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 already present in the local economy. Cluster industries can be thought of as part of a two-way ladder based on regional economic inter-relationships, providing opportunity for movement up and down. Money and products move up and down the ladder every day, creating a dynamic environment dependent upon the efficiency of the entire region. It is this emphasis on movement between clusters and non-cluster industries that creates opportunity. At the core of a cluster are concentrations of interdependent, internationally competitive firms in related industries. The cluster s core firms can include companies that make or help make a final product, as well as specialized suppliers and service providers. Focusing on the entire range of an industry, from the initial stages of production to the time that the product or service is completed, has become an increasingly important and often utilized tool in 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 industries, often spawning the development of entirely new companies and industries. Clusters are dynamic and over time may evolve or change their focus. As they develop, cluster firms create demand for new types of products 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 creation in a region, primarily through export of goods and services. About one-third of the region s 1,017,000 non-military employment is in cluster industries. Industrial clusters are part of a dynamic environment in which each sector plays an important role in the region s economic efficiency and prosperity. Clusters are groups of complementary, competing, and inter-dependent industries that drive wealth creation in a region, primarily through the export of goods and services. A competitive advantage today is driven by the ability of firms to continuously innovate and upgrade. The San Diego region has 16 export-oriented industrial clusters. 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

4 Figure 1 MODERN EXPORT-DRIVEN ECONOMY Cluster Industries are Emerging as the Engines of Economic Activity Domestic & Global Markets New $ Products & Services Final goods 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 Products & Services Inter-industry transactions Linkage Industries / Suppliers Industries providing the factors of production for the cluster industries and serving the local market. Income, investment and taxes Foundation and potential of local economy Public /Private Infrastructure Support Human Resources Technology Research & Development Physical Infrastructure Capital Finance Tax & Regulatory Environment Source: San Diego Regional Technology Alliance, compiled by SANDAG. 4 INFO SANDAG / SourcePoint May - June 1998

5 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 for the region s output of goods and services and for a prosperous local economy. However, clusters should be a primary focus of regional economic 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 include certain business services, distribution services, and some of the input components of a cluster s production process. Linkage industries also include 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, and an adequate physical infrastructure that includes a reliable water supply 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). Industrial clusters are at the center of the region s modern, export-oriented economy. Clusters depend on an efficient network of buyer-supplier relationships. World-class businesses require world-class infrastructure. Figure 2 OUR ECONOMIC DRIVERS ARE CHANGING % Manufacturing 70% Other Jobs % Clusters 70% Other Jobs Source: SANDAG, May - June 1998 SANDAG / SourcePoint INFO 5

6 Clusters have become the region s basic industries, driving wealth creation in the local economy and replacing the manufacturing industry s role in economic development. Industrial cluster analysis is not a new tool, and the theoretical benefits of industrial clustering have been known for decades. Clusters were formally introduced to the San Diego region to combat the effects of the recession in the early 1990s. Cluster analysis has recently taken a more central role in regional planning. Information about our region s clusters is available on the San Diego Regional Technology Alliance s web page at HISTORY OF CLUSTERS The manufacturing sector once comprised about 30 percent of this region s employment, serving as the basic industry or main driver of the economy (Figure 2). Today, manufacturing employment has dropped to less than 15 percent of total employment. With a rise in the global economy and knowledgeand service-based industries, there has been a dispersal of the economic engines into non-manufacturing industries. Clusters are the evolution of a region s basic industries, the main drivers of the economy. Cluster analysis is 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 and theory for many years. The theory that groupings of similar and interrelated industries generate positive benefits and provide competitive advantages has been in circulation since the 1950s. In fact, different variations of the clustering process have been applied throughout the world. Over the 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 1990s. 3 As a result of the recession, the region experienced a significant loss of high-paying, high value-added jobs. A strategy was needed to combat the negative effects of the lengthy economic downturn. A local group of advisors helped identify eight industrial clusters that would serve as the foundation 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. SANDAG, with funding from the San Diego Regional Technology Alliance, has improved upon the initial work by creating a replicable, analytical 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 Diego region is on the leading edge of creating, identifying and defining its regional clusters. The SDRTA and SANDAG have produced a detailed report about the San Diego region s industrial clusters. The report expands on the many uses of cluster analysis and is posted on the SDRTA web page. 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 under Cluster Data. 3 Collaborative Economics, San Diego Economic Opportunities Overview, INFO SANDAG / SourcePoint May - June 1998

7 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 (See Figure 3 and Table 1). 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 between $37,700 and $63,500 per employee. (See Figure 4 and Table 2.) These wage rates are 30 percent to 120 percent above the average annual wage rate for all jobs in the region ($28,800). The average salary for all cluster industries ($33,200) is about 15 percent greater than the regional average for all jobs. During the last recession, some clusters were able to grow and prosper. Many of our fastest growing, emerging technology clusters offer wages 30 percent above the region s average. 4 Does not include figures for the Uniformed Military cluster. Figure 3 CLUSTER EMPLOYMENT BY INDUSTRY, 1990 AND 1996 San Diego Region Figure 4 CLUSTER AVERAGE ANNUAL WAGE RATES ( 96$), 1990 AND 1996 San Diego Region Visitor Industry Services Business Services Medical Services Computer & Electronics Mfg. Biotechnology & Pharmaceuticals Defense & Transportation Mfg. Entertainment & Amusement Software & Computer Services Communications Financial Services Recreational Goods Mfg. Biomedical Products Horticulture Environmental Technology Fruits & Vegetables Software & Computer Services Biotechnology & Pharmaceuticals Computer & Electronics Mfg. Communications Financial Services Defense & Transportation Mfg. Biomedical Products Environmental Technology Recreational Goods Mfg. Medical Services San Diego Cluster Regional Average Business Services Entertainment & Amusement Horticulture Visitor Industry Services Fruits & Vegetables $0 $10 $20 $30 $40 $50 $60 $70 Cluster Wage Rates (In Thousands of Dollars) Cluster Employment (In Thousands) Sources: Employment Development Department; Regional Technology Alliance; SANDAG. May - June 1998 SANDAG / SourcePoint INFO 7

8 Table 1 AVERAGE ANNUAL EMPLOYMENT 1, 1990 AND 1996 San Diego Regional Employment Clusters Change Numeric Percent Biomedical Products 7,363 6, % 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, % Horticulture 6,328 6, % Medical Services 50,757 52,691 1,934 4% Recreational Goods Manufacturing 3,152 6,512 3, % Software & Computer Services 8,804 13,643 4,839 55% Visitor Industry Services 70,266 70, % Total Cluster Employment 311, ,035 19,294 6% Total Regional Employment 977,400 1,017,200 39,800 4% Table 2 AVERAGE ANNUAL WAGE RATES 1,2, 1990 AND 1996 San Diego Regional Employment Clusters Change 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

9 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 rural East County MSA contains the smallest amount of both total employment and total cluster employment (1,700 cluster jobs). Much of East County s cluster employment consists of jobs in the Visitor Industry Services cluster. Employment Figure 5 TOTAL EMPLOYMENT AND TOTAL CLUSTER EMPLOYMENT San Diego Region Major Statistical Areas (MSAs) 400,000 Total Employment Cluster Employment 300, , ,000 0 Central North South East N. Cnty. N. Cnty. East City Suburb. Suburb. West East County Source: SANDAG 1995 Employment Inventory. CONCENTRATIONS OF CLUSTER EMPLOYMENT Maps 2 through 7 (starting on page 15) highlight concentrations of employment in cluster industries. The areas shown on the maps are community planning areas (CPA) of the City and County of San Diego, and jurisdiction boundaries or sphere of influence areas for the other 17 jurisdictions. (Map 1 indicates the name of each planning area for reference purposes.) Map 2 shows the 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. The North City MSA has the highest cluster employment in the region. MAJOR STATISTICAL AREAS (MSAs) San Diego Region Central 1 North City 2 South Suburban 3 East Suburban 4 North County West 5 North County East 6 East County 6 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

10 Companies that make up clusters are continually evolving and reacting to trends in the marketplace. Much of the Software and Computer Services cluster, for example, evolved from the region s defense and aerospace industry. 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, emerging growth companies that grow and prosper as they mature. Over time, the older companies begin to change by fading away or moving in a new direction, possibly to a newer and more modern industry grouping. The new 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 development sector produced a variety of dynamic, emerging growth clusters (See Figure 6). Companies that were once dependent on Department of Defense (DOD) contracts now focus their products towards the global consumer marketplace. New material advances and acquired skills, many of 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 Defense Aerospace Software Recreational Goods Manufacturing Optics & Lasers Communications Advanced Materials 10 INFO SANDAG / SourcePoint May - June 1998

11 Manufacturing cluster. New composite materials once used for defenserelated 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 for skilled workers and new innovations. Higher education plays a critical role as a support institution to the clusters and is a necessary infrastructure component for ensuring regional prosperity. In the San Diego region our universities have led to the creation of a number of cluster groups. As shown in Figure 7, some of the more significant offspring include the Communications cluster and healthcare-related industry clusters such as Biomedical Products and Biotechnology and Pharmaceuticals. Universities provide research and development and an educated workforce that is essential for the growth and prosperity of many local industry clusters. Figure 7 WORLD-CLASS UNIVERSITIES AND RESEARCH AND DEVELOPMENT INSTITUTIONS ARE THE FOUNDATION FOR HIGH TECHNOLOGY CLUSTERS Biotechnology & Pharmaceuticals Universities/ Research & Development Facilities Communications Biomedical Products May - June 1998 SANDAG / SourcePoint INFO 11

12 Cluster industries require support, in the form of goods and services, from non-cluster sectors of the economy. Our clusters and their support industries are dependent on the capacity and capabilities of the region s human and physical infrastructure. CLUSTERS DEPEND ON THE ENTIRE ECONOMY Clusters can be mapped according to the strength of their buyer-supplier relationships with other sectors of the regional economy. Figure 8 is an example of the Communications cluster s relationship with other sectors of the local economy. A similar relationship map could be created for each of 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 are essential for the cluster s production process but are not part of the cluster s core. In addition, many of the supplier industries shown in the diagram may also supply other cluster groups. Search and Navigation Equipment, for example, which may sound like it belongs in the 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

13 Figure 8 THE COMMUNICATIONS CLUSTER A Single Cluster s Relationship with the Regional Economy Wholesale & Distribution Services Market Access Specialized Infrastructure Buyer/Supplier Linkages Specialized Services: Intellectual Property Law Finance Banking & Other Financial Institutions Wireless Communications Services Radio & TV Communications Equipment Test/Monitoring Equipment & Services Software and Computer Programming Services Satellite Communications Equipment Core of Communications Cluster Network Communications Equipment Search & Navigation Equipment Telephone & Telegraph Comm. Personal Communications Equipment Comm.-Related Engineering & Research Electronic Computers Fiber Optic Networks Specialized Semiconductors & Other Electronic Components Universities/ Research & Development Technology May - June 1998 SANDAG / SourcePoint INFO 13

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

15 Map 1 Cluster Employment By Community Planning Area, San Diego Region Map 2 TOTAL CLUSTER EMPLOYMENT By Planning Area San Diego Region ment Geater than 5000 Cluster Employment 0-1,000 1,001-5,000 More than 5,000 Source: SANDAG 1995 Employment Inventory. Map 2 Biotechnology & Pharmaceuticals Cluster Concentrations of Employment By Community Planning Area, San Diego Region Map 3 BIOTECHNOLOGY AND PHARMACEUTICALS CLUSTER By Planning Area San Diego Region Concentration w Average o Times Average 3 Times Average Cluster Employment Below Regional Average Up to 3 Times Regional Average 3 Times Regional Average or More Torrey Pines University Source: SANDAG 1995 Employment Inventory. May - June 1998 SANDAG / SourcePoint INFO 15

16 Communications Cluster Concentrations of Employment By Community Planning Area, San Diego Region Mira Mesa Map 4 COMMUNICATIONS CLUSTER By Planning Area San Diego Region Cluster Employment Below Regional Average Concentration ow Average o Times Average er 3 Times Average Up to 3 Times Regional Average 3 Times Regional Average or More Source: SANDAG 1995 Employment Inventory. Sabre Springs Tierrasanta Kearny Mesa Otay Mesa - Nestor Source: SANDAG 1995 Employment Inventory Environmental Technology Cluster Concentrations of Employment By Community Planning Area, San Diego Region San Marcos Map 5 ENVIRONMENTAL TECHNOLOGY CLUSTER By Planning Area San Diego Region Concentration w Average o Times Average 3 Times Average Cluster Employment Below Regional Average Up to 3 Times Regional Average 3 Times Regional Average or More Torrey Pines Mira Mesa Santee Southeast San Diego Source: SANDAG 1995 Employment Inventory. 16 INFO SANDAG / SourcePoint May - June 1998

17 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. Software & Computer Services Cluster Concentrations of Employment By Community Planning Area, San Diego Region Map 7 SOFTWARE AND COMPUTER SERVICES CLUSTER By Planning Area San Diego Region Concentration w Average o Times Average 3 Times Average University Scripps Miramar Ranch 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 17

18 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. 80% 60% 40% 20% 0% -20% BIOMEDICAL PRODUCTS Percentage Change in Employment and Wages* -40% Employment Index Wage Index Biomedical Products The San Diego region s Biomedical Products cluster produces instruments, medical devices, equipment and other apparatus primarily for consumption by the medical field. Examples of this cluster s products include X-ray machines, surgical knives, and contact lenses. Biomedical products have a wide range of uses such as delivering pharmaceuticals, monitoring patients, providing therapy, and serving as artificial human organs. The Biomedical Products cluster is knowledge-intensive, requiring advanced research and development. The cluster is often combined with the Biotechnology and Pharmaceuticals cluster and referred to as a Bio-Sciences cluster. Real wages and employment in the Biomedical Products cluster remained fairly stable from 1990 to From 1994 to 1996 real wages in the cluster began to increase as employment began to fall. BIOTECHNOLOGY & PHARMACEUTICALS Percentage Change in Employment and Wages* 100% 80% 60% 40% 20% 0% -20% -40% Employment Index Wage Index Biotechnology and Pharmaceuticals The Biotechnology and Pharmaceuticals cluster includes industries engaged in researching, manufacturing, or processing a broad range of biological, chemical, and medicinal products. Medical and industrial chemicals and preparations also are included in this grouping. The cluster does not include instrument or equipment production. Examples of the products include antibiotics, bacterial vaccines, and biological laboratories. The Biotechnology and Pharmaceuticals cluster is often combined with the Biomedical Products cluster and referred to as a Bio-Sciences cluster. Employment in the cluster has increased steadily every year since Real wages, after dropping 16 percent in 1991, have also risen steadily and once again equal the 1990 figure. 80% 60% 40% 20% 0% -20% BUSINESS SERVICES Percentage Change in Employment and Wages* -40% Employment Index Wage Index Business Services The Business Services cluster includes industries that provide a variety of professional services to local business establishments, including management, legal and personnel supply services. Many of today s business service industries, such as intellectual property law, catalog publishers, and computer facilities management, are developing specialized skills to better serve the region s cluster industries. Other than a slight drop in 1992, Business Services employment has increased steadily from 1990 to Real wages have remained stable over this time period. * Data indexed to INFO SANDAG / SourcePoint May - June 1998

19 Communications The Communications cluster includes industries primarily engaged in researching and manufacturing communications-related products. The cluster also includes industries that provide point-to-point communications services such as cellular and digital phone and pager services. Examples of cluster products include cellular and digital phones, fax machines, and encryption devices. The Communications cluster was one of the region s first large emerging high technology clusters. From 1992 to 1996 employment increased dramatically for the Communications cluster despite the loss of 2,700 jobs in 1991 during the recession. Real wages have been relatively stable during the six year period. 80% 60% 40% 20% 0% -20% COMMUNICATIONS Percentage Change in Employment and Wages* -40% Employment Index Wage Index Computer and Electronics Manufacturing The Computer and Electronics Manufacturing cluster includes industries that manufacture and assemble electronic components and products. The emphasis of this cluster is on high technology and computer-related products and their input components. Cluster products include speaker systems, printed circuit boards, and computer terminals. The Computer and Electronics Manufacturing cluster plays a vital role in the regional economy because it produces essential input components for numerous high-tech industries such as Biomedical Products, Communications and Defense and Transportation Manufacturing. From 1990 to 1992 employment in this cluster decreased rapidly, then remained stable until 1996 when it jumped back to above its 1990 level. Real wages for the cluster have risen over the same time period. COMPUTER AND ELECTRONIC MANUFACTURING Percentage Change in Employment and Wages* 80% 60% 40% 20% 0% -20% -40% Employment Index Wage Index Defense and Transportation Manufacturing The Defense and Transportation Manufacturing cluster includes industries engaged in manufacturing or assembling aircraft, ships, boats, and defense related products such as guided missiles. As a result of decreased defense spending, some cluster businesses have been forced to diversify their product line to include commercial and high technology goods and services. Despite the massive defense cutbacks, today s Defense and Transportation Manufacturing cluster s employment concentration is significantly higher than the national average. This cluster has experienced the largest employment decline of any cluster group from 1990 to Real wages have fluctuated slightly and in 1996 were just over their 1990 level. 80% 60% 40% 20% 0% -20% -40% DEFENSE & TRANSPORTATION MANUF. Percentage Change in Employment and Wages* -60% Employment Index Wage Index * Data indexed to May - June 1998 SANDAG / SourcePoint INFO 19

20 80% 60% 40% 20% 0% -20% ENTERTAINMENT AND AMUSEMENT Percentage Change in Employment and Wages* -40% Entertainment and Amusement The Entertainment and Amusement cluster includes industries engaged in arranging and providing amusement, recreation and entertainment services. Examples of firms in this cluster include tour operators, zoos, museums, and golf courses. The Entertainment and Amusement cluster, combined with the Visitor Industry Services cluster, in the past have been referred to as the tourism industry. Employment and real wages in this cluster have fluctuated from 1990 to A surge in employment growth starting in 1994 has resulted in a 40 percent rise in jobs over the level in Wages, however, were up by less than 10 percent. Employment Index Wage Index ENVIRONMENTAL TECHNOLOGY Percentage Change in Employment and Wages* 80% 60% 40% 20% 0% -20% -40% Employment Index Wage Index Environmental Technology The Environmental Technology cluster is an emerging cluster of industries that manufacture products with environmental applications. Examples of cluster specializations include environmental engineering services, laboratory analysis, marine sciences, air and water filtration, environmental construction, and toxic, hazardous and radiological waste disposal and monitoring. Characteristic issues facing today s environmental marketplace include water purification, pollution prevention and monitoring, waste disposal site renovation, and waste treatment and storage. Employment in the Environmental Technology cluster remained fairly stable from 1990 until 1995, then increased rapidly. Real average wages in for the cluster have increased 15 percent over the six-year period. FINANACIAL SERVICES Percentage Change in Employment and Wages* 80% 60% 40% 20% 0% -20% -40% Employment Index Wage Index Financial Services The Financial Services cluster includes industries engaged primarily in deposit banking, extending credit in the form of loans, and the exchange of securities and commodities. A unique characteristic of this cluster is that almost all of the other clusters have a significant relationship with the Financial Services cluster and, more precisely, the Banking industry. Despite a slight rebound in 1996, employment for the Financial Services cluster has been declining since Real average wages, however, have been increasing over the same time period. * Data indexed to INFO SANDAG / SourcePoint May - June 1998

21 Fruits and Vegetables The Fruits and Vegetables cluster includes industries engaged in the production and maintenance of fruit, melons, tree nuts and vegetable crops. The San Diego region ranks as the top avocado producer in the country. Other important fruit and vegetable crops include lemons and tomatoes. While employment in the Fruit and Vegetables cluster has fluctuated above and below the 1990 employment amount, real average wages have remained within $300 of the 1990 figure. 80% 60% 40% 20% 0% -20% FRUITS AND VEGETABLES Percentage Change in Employment and Wages* -40% Employment Index Wage Index Horticulture The Horticulture cluster includes industries engaged in the production and maintenance of ornamental plants, nursery crops and food crops grown under cover. The Horticulture cluster accounts for a majority of the value of 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 situation similar to the Fruits and Vegetables cluster, the Horticulture cluster s real average wages have remained stable while employment has declined slightly. HORTICULTURE Percentage Change in Employment and Wages* 80% 60% 40% 20% 0% -20% -40% Employment Index Wage Index MEDICAL SERVICES Percentage Change in Employment and Wages* Medical Services The Medical Services cluster includes industries primarily offering health services to the general public through hospitals, medical facilities and offices. Employment in the Medical Services cluster has increased slightly from 1990 to The cluster experienced the largest percentage decrease in real average wages (11%) over the six-year period. 80% 60% 40% 20% 0% -20% -40% Employment Index Wage Index * Data indexed to May - June 1998 SANDAG / SourcePoint INFO 21

22 RECREATIONAL GOODS MANUFACTURING Percentage Change in Employment and Wages* 120% 100% 80% 60% 40% 20% 0% -20% Recreational Goods Manufacturing The Recreational Goods Manufacturing cluster includes companies that manufacture recreational goods, sporting and athletic goods, and toys. Due to the rising demand for high performance products, new composite materials are becoming more common in goods produced for the golf, tennis, biking, surfing, and scuba diving industries. The San Diego region now contains the nation s largest manufacturer of golf clubs. The Recreational Goods Manufacturing cluster exhibited the highest percentage increase in both employment and real average wages from 1990 to Wages peaked in 1994 while employment continues to grow. -40% Employment Index Wage Index 80% 60% 40% 20% 0% -20% SOFTWARE & COMPUTER SERVICES CLUSTER Percentage Change in Employment and Wages* -40% Employment Index Wage Index Software and Computer Services The local software industry developed from a service to the Defense industry. When defense spending decreased, the software industry adjusted its focus towards the commercial market and has now linked itself to most of the other high technology cluster industries. The Software and Computer Services cluster includes industries that provide services such as computer programming, prepackaged software, and software development. The cluster has grown very quickly and offers the highest wages of all 16 industry clusters, 120 percent above the regional average wage. Both employment and real average wages have consistently risen from 1990 to VISITOR INDUSTRY SERVICES Percentage Change in Employment and Wages* 80% 60% 40% 20% 0% -20% -40% Visitor Industry Services The Visitor Industry Services cluster includes industries such as Hotels and Motels, which provide services to the entertainment and visitor industry. The primary focus of the cluster is the hotels and other lodging places sector. Employment in the Visitor Industry Services cluster fell slightly at the beginning of the 90s but has recovered to reach the 1990 level. Real average wages have remained constant over the six-year period. Employment Index Wage Index * Data indexed to INFO SANDAG / SourcePoint May - June 1998

23 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 contains 12 percent of the Biotechnology and Pharmaceutical employment. Chula Vista has 13 percent of Defense and Transportation Manufacturing cluster employment and nine percent of Biomedical Products employment. While El Cajon has less than four percent of total regional employment, it has 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. A majority of the fastest growing and highest paying high technology cluster industries are located in the City of San Diego. 6 Source: San Diego Association of Governments, 1997 May - June 1998 SANDAG / SourcePoint INFO 23

24 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, ,194 7,183 10, ,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 % Emp. 12% 9% 0% 0% 0% 0% 1% 0% 1% Biotechnology & Employment Pharmaceuticals % Emp. 6% 1% 0% 0% 0% 1% 1% 0% 1% Business Services Employment 1,975 1, ,100 1,159 1, % Emp. 4% 2% 0% 0% 2% 2% 3% 0% 2% Communications Employment % Emp. 3% 1% 0% 0% 1% 2% 1% 0% 0% Computer & Employment 1, Electronics % Emp. 7% 1% 0% 0% 1% 1% 3% 0% 0% Manufacturing Defense & Employment 53 2, Transportation % Emp. 0% 13% 0% 0% 4% 0% 0% 0% 0% Manufacturing Entertainment & Employment Amusement % Emp. 1% 1% 1% 0% 1% 1% 1% 0% 1% Environmental Employment Technology % Emp 8% 0% 0% 0% 2% 1% 2% 0% 0% Financial Services Employment % Emp. 5% 4% 0% 0% 3% 2% 2% 0% 5% Fruits & Vegetables Employment % Emp. 0% 0% 0% 0% 0% 0% 0% 0% 0% Horticulture Employment % Emp. 14% 1% 0% 0% 0% 20% 3% 0% 0% Medical Services Employment 1,094 3, ,589 2,077 3, ,043 % Emp. 2% 5% 1% 0% 3% 3% 5% 0% 6% Recreational Employment 2, Goods Manufacturing % Emp. 45% 1% 0% 0% 8% 1% 5% 0% 0% Software & Computer Employment Services % Emp. 6% 1% 1% 0% 1% 2% 1% 0% 1% Visitor Industry Employment 3,474 3,804 3, ,297 2,020 3, ,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