Creating Opportunities for a Rising Standard of Living
Our region is economically diverse. We have an educated and well-trained workforce, an
innovative business culture, and excellent universities. Our transportation, water, and
energy infrastructure systems serve the needs of the greater region while meeting the
demands of the modern global marketplace.
The region’s K-12 school system has the resources to provide well-trained teachers, deliver
education programs that meet the needs of learners at all skill levels, and parents and
families are committed partners in the education process. The region has a highly
educated and well-trained workforce and all segments of society are able to participate in
our economic prosperity. Our workforce is capable of adapting to the ever-changing needs
of modern industry. Local businesses work closely with schools to develop programs that
fit their needs.
We embrace our economic and social diversity. A majority of our residents have gainful
employment with improved purchasing power and increasing economic prosperity. These
attributes place our region among the most competitive in the world and have
contributed to a significantly higher and sustainable standard of living for all our
residents. Environmentally-friendly and sustainable business practices have become a
hallmark of the region.
Presidential, gubernatorial, and local elections
are often decided on the candidates’ economic
policies and on the state of the economy itself.
Growth and migration directly correlate with
fluctuations in national and regional
economies. The reputations of cities and
regions are often based on the strength of
their local industries. People, constantly
searching for a higher standard of living,
count on the economic opportunities provided
in their area.
No matter how localized or community-
specific our jobs may be, none of us work in a vacuum. We all operate within the broader context of
a regional and global economic setting.
Within this context, the San Diego-Baja California binational region faces increasing domestic and
global competition. Many people are aware of globalization, but few understand that
regionalization, or the increasing importance of regional economies, is the other side of the coin. As
Neal Pierce, a nationally syndicated columnist, and others have observed: Only regions have the
necessary scale and diversity to compete in the global marketplace.1 Individual counties and cities
lack the essential infrastructure or a sufficiently skilled labor pool to compete at that level.
In economic terms, our region is directly connected to the greater Los Angeles area; it’s our gateway
to the domestic and international marketplaces. To our south, we depend on Baja California for an
important part of our labor pool. Southwestern Riverside is becoming an increasingly important
source of labor and an alternative housing choice for many.
Our relationships with our neighbors influence our regional economic planning process and
decisions. On that stage, the San Diego region has the scale and diversity to compete.
To maintain and expand the San Diego region’s economic vitality, we need to attract and retain the
best and brightest people to live and work here. Research shows that CEOs who are considering
relocating their companies are significantly influenced by the quality of life they can expect for
themselves, their families, and their employees in a new location. The Regional Economic Prosperity
Strategy (REPS) serves as the primary economic element of the Regional Comprehensive Plan (RCP),
which applies a quality of life approach to growth management.2
The recession of the early 1990s reminded us that our economic prosperity should not be taken for
granted. Cutbacks in military defense spending further intensified that recession, but the San Diego
region eventually emerged from stalled growth in its per capita income levels by 1995, as shown in
Figure 4E.1. By monitoring per capita income, we can measure individuals’ job quality and
purchasing power in the marketplace; thus reflecting workforce health. Economists use real per
capita income to measure standard of living.
Figure 4E.1 compares the change in per capita income over time for the region, state, and nation.
The way to track change is by setting the standard of living for the region, state, and nation equal
to zero in 1980, and then measure the change over time.3 The chart shows that our standard of
living is growing slower than the nation’s, but at a rate similar to that of the state.
Historically, growth in the San Diego region’s real per capita income (adjusted for inflation) has
lagged behind the state and nation. Robust growth from the mid-1990’s increased income levels for
the region, state, and nation. Growth slowed in all areas after 1998, although San Diego displayed a
significantly stronger upward trend until 1999. After that, all areas began to enter the most recent
recession and have continued to struggle. However, Figure 4E.1 shows that growth in per capita
income for the nation outpaced California and San Diego.
1 San Diego Regional Economic Prosperity Strategy: Toward a Shared Economic Vision for the San Diego Region,
2 San Diego Regional Economic Prosperity Strategy: Toward a Shared Economic Vision for the San Diego Region,
3 Yearly variations in growth are measured by indexing the values to 100 (or 0 percent) in 1980, then tracking the annual
change over time. The percentage change has been indexed to zero.
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
FIGURE 4E.1—SAN DIEGO REGION’S STANDARD OF LIVING
INDEX OF REAL PER CAPITA INCOME IN THE U.S., CALIFORNIA, & SAN DIEGO (1980-2002)
Source: Bureau of Economic Analysis, SA1-3 Annual State Per Capita Personal Income Series, 2004
Despite our slower growth rate, compared to the U.S. and California, the San Diego region’s real
per capita income is slightly higher (refer to Table 4E.1), although it is in the middle when
compared to other major metropolitan areas similar to ours.4 It is important that the region
continue to make investment and policy decisions with the goal of increasing economic
competitiveness if we wish to outpace the state and nation in terms of per capita income growth.
TABLE 4E.1—REAL PER CAPITA INCOME U.S., CALIFORNIA,
& SAN DIEGO (1999-2001)
SD CA US
1999 $34,726 $32,491 $30,106
2000 $35,628 $34,196 $31,091
2001 $35,070 $33,286 $30,894
Source: Bureau of Economic Analysis, SA1-3 Annual State Per Capita
Personal Income Series
4 SANDAG, Indicators of Sustainable Competitiveness, 2003.
During the recession, the down-sizing of the region’s defense industry resulted in a shrinking of the
economy and high unemployment. The region saw an exodus of long-time residents seeking work
In search of solutions, economists focused on the idea of fostering specific groups of industries that
can add wealth to a local economy while not wholly depending on the size or health of the local
market for their own growth. These groups are known as “traded” or export-oriented industry
clusters. Industrial clusters are groups of complementary, competing, and interdependent industries.
They make money—for themselves, and, indirectly, for the region—primarily through export of
goods and services. Economists identified 16 such clusters (described in Table 4E.2) that are not
constrained by the size of the local market and are most responsible for setting wage rates in the
region. They also drive the expansion of local
businesses that provide support services.
Maintaining and improving the health of the
region’s clusters is an integral step towards
improving the region’s economic prosperity.
Experts forecast continued low levels of
unemployment for the region. As such, the quality
of new jobs and skills of the remaining workforce
becomes increasingly important as we seek to raise
incomes. This concept is directly related to the core
values and policy objectives of the RCP, which can
be simplified into the following: San Diego residents want good jobs and regional employers want
skilled employees. The Economic Prosperity Strategy seeks to address both of these areas through
infrastructure investments and public policies that promote traded industry clusters, and by focusing
on improving the skills and abilities of the local labor force.
At one time, firms depended mostly on local resources such as labor, raw materials, capital, and
infrastructure. These resources are known as factor costs, and the firm with the lowest factor costs
won. The changing nature of competition now supersedes this historical model. Globalization
allows firms to acquire factors such as low-cost labor, raw materials, capital, and even generic
scientific knowledge from international markets. Burgeoning technology also helps firms overcome
or circumvent weaknesses in local factors. For example, high product quality and extraordinary
technical standards can offset high wages.
The most dynamic and innovative companie