El Rostro Cambiante De La Bahîa Norte
(The North Bay’s Changing Face)
How should companies react to the major demographic shift that’s coming?
(The North Bay’s Changing Face)
If you could close your eyes and see about 20 years into the future, what do you think the North Bay region would look like? According to a recent study by Dr. Robert Eyler, chair of Sonoma State University’s economics department, you’d find less baby boomers and more Latinos. Eyler’s study says the trend, which will be noticeable by 2023, is due to a rise in the Latino population, which is projected to become the dominant ethnicity in the North Bay by 2033. What does this shift mean to the workforce and business owners? How can employers prepare for retiring baby boomers and an influx of Latinos in the next few decades? We asked Eyler and local attorneys for their take on these changing demographics.
Latinos in, boomers out
This past spring, after three months of analyzing California Department of Finance (DOF) figures and census data, Eyler released his report, “The Challenges of Changing Demographics” to the North Bay Leadership Council.
“The most surprising finding is that the North Bay will slowly get younger after a rapid aging process,” says Eyler. “The graying of this region has long been a given, and this reverse effect is somewhat shocking. Sonoma and Marin counties will lag behind Lake, Mendocino, Napa and Solano counties in the ethnicity changes, but will age faster and remain older than the other counties.”
Eyler says this will put a lot of pressure on Sonoma and Marin businesses to find suitable workers for many jobs, and that those businesses will probably have to import workers from adjacent counties.
“The largest challenge will be finding a suitable labor force at affordable wages,” says Eyler. “However, a paradox is that living costs in this area are unlikely to fall much in real terms, thus wage demand will continue to climb. Not every business can have large enough margins to support ‘living wages,’ and businesses can’t ask workers to commute long distances without some compensation. Other challenges include commercial real estate costs that could be driven by rising residential costs and changing demand.”
What recommendations would Eyler make to businesses?
“Business should become active with local educational institutions, if they’re not already. Help shape curriculum and attempt to recruit directly from those programs,” he says. “From a skills standpoint, that’s the best way I can think of to ensure delivery of educated and prepared workers to the labor market.
“Also, businesses should become involved in community issues—especially workforce housing—and lend a voice, rather than just political donations, to that arena. Workforce housing exists because workers aren’t paid a wage that supports local living. Businesses must be aware that governments are always looking for a way to shift that burden to business taxes if businesses aren’t creative about solutions. Proactive solutions to these problems can mean a reduction of profits, another cruel paradox. Ultimately, though, businesses must be prepared for the changing demographics and recognize their options some years in advance.” In other words, it may be difficult in the short term, but companies will be better prepared in the long run if they start planning now.
Bolstering Eyler’s findings, DOF figures released this summer state that Hispanics are expected to be California’s majority by 2042. The report also estimates a North Bay population explosion. In Napa County, DOF contends, there will be a 101 percent increase of population to more than 251,000; Sonoma County’s population will increase by 65 percent to more than 761,000 and Marin will grow by 24 percent to more than 307,000.
What to do?
John O’Brien, senior partner and senior business partner with O’Brien Watters & Davis, LLP in Santa Rosa, believes Eyler’s study will serve as a wake-up call to businesses that will lose experienced workers in a short time.
“From the standpoint of retention of more senior workers, I think businesses have to encourage continued employment and try to convince people to delay retirement,” he says. “They could give pay incentives or retirement pay incentives—perhaps more deferred compensation arrangements to defer some pay to post-retirement, when it’s taxed at a lower level, or continuing health care benefits. Employers should be more receptive to hiring older workers. Also, be more receptive to part-time workers. I think that’d be one way to encourage senior workers to stay; if they didn’t have to work full time.”
O’Brien believes education is the key to incorporating the emerging Latino population. “Education and job training are even more important now, in the near future, to train the Latino population to take over these positions. I think our education system needs to step up even more, not only in training in English, so people can learn and master the language, but also so they can acquire the required job skills.”
Ironically, law is one profession that needs more Latinos. The California State Bar surveyed its members and noted that only 4.8 percent of the state’s lawyers are Hispanic. Staff writer Diane Curtis of the California Bar Journal noted in a recent article that Fresno County is 44 percent Hispanic but only 7.4 percent of the lawyers in the county are Hispanic; in Los Angeles County, where Hispanics make up 45 percent of the population, just 6.6 percent of the attorneys are Hispanic.
“Given the population, there are very few Latino lawyers in the state of California,” says O’Brien. “I know the State Bar has an ongoing task force to try to educate high school and college students about the benefits of going to law school and the need for a more ethnic group of attorneys in California, especially at law firms in counties that have a high percentage of Latinos in the community. But it’s hard to find a Hispanic attorney. I think it’s the same in the medical profession. I have many doctor clients who’ve been looking to hire Latino physicians to come here; that’s going to become more of an issue in the future.”
Brian A. Noble, associate at Friedemann Goldberg LLP in Santa Rosa, says language is the key to the legal profession.
“I believe the biggest challenge for this emerging workforce, particularly as it relates to the legal profession and the Latino population, is the language barrier,” he says. “The courts have services for people who speak primarily Spanish to obtain access, but in terms of actually participating in the legal profession, immigrants will have to be fluent in English—there’s no way around that.
“Law schools are only going to teach in English, and the courts will always primarily function in English. Thus, it’s incumbent on Sonoma County, the state and the country to make sure all Latino immigrants have the education and language skills necessary for equal access to the legal system and to integrate into the legal profession.”
Demographics and agriculture
Napa and Sonoma counties rely on Hispanic workers for many agricultural industries. How will this influx of Hispanic workers affect the wine business, for one?
“I’m both a wine grower and a winemaker, and what I understand from my vineyard manager is that the available labor force for agriculture and vineyards is under some strain because of a shortage of workers,” says Robert Anderson, partner in Lanahan & Reilley LLP in Santa Rosa.
"What’s not apparent from the demographics is how the Latino population will increase. If the increase is coming from immigration, and if it can be done in a way that creates a useable work force, then I think it would be beneficial to the agricultural community. I think whatever happens with immigration reform bills needs to be flexible enough to provide for an agricultural labor force coming to this country. It’s important to the agricultural community.”
Kevin DeBorde, associate at Dickenson, Peatman & Fogarty in Napa, suggests looking to history for an answer to the changing demographics in the wine industry.
“I don’t believe it will have a tremendous impact. I think there are always changing demographics within the agricultural industry,” says DeBorde. “The demographic changes happening with Latinos mirror what they’ve always been within that industry. We started off with a lot of Italian immigrants who came here and built wine businesses. Mike Grgich of Grgich Hills came in as an immigrant [from Croatia], worked his way up as a winemaker at Chateau Montelena and is now one of the grandfathers of the wine industry.
“Looking at the Mexican American or Mexican population, in 1999, according to an article in the San Francisco Chronicle, there were zero wineries owned by Mexican Americans. As of 2004, there were 13. By today, I would think that number has grown again, and I would imagine it will continue to grow. Wine will continue to be produced; vineyards will continue to be farmed.”
Is it true?
DeBorde is skeptical of the latest DOF population figures. “I find it hard to believe that Napa County is going to double in size in the next 20 years. How can that be? There was an editorial in the New York Times a few days ago that talked about whether such growth is inevitable. I don’t know the answer to that, but I do know it’s going to be difficult to find locations for a doubling of the population.”
DeBorde notes that housing prices are already high and, if there’s going to be such an enlarged demand from the increased population, they’ll remain high.
“The only way it could be accomplished is massive high density, which you can see already in Petaluma. Sonoma has developed some low-income housing near the plaza, and downtown Napa is in the process of putting in mixed-use opportunities. That’s the only way it’s going to occur. Even given that, I’m skeptical of the county’s ability to double in size. If nothing else, is there enough water to support that? When you look at housing and building moratoriums throughout Napa and Sonoma, it’s hard to believe there’s going to be that much water available.”
Citing unfruitful predictions from Paul Ehrlich’s 1968 book The Population Bomb, DeBorde concedes Latino demographics are changing and that businesses should prepare for that eventuality.
Noble thinks home ownership may no longer be a reality for some Sonoma County residents or, at the very least, they may have to wait longer to purchase a home.
“You need cheap land to build affordable housing,” he says. “Just tacking on a 10 percent affordable housing quota to an otherwise expensive subdivision isn’t going to alleviate the problem. Even those units will become desirable and expensive beyond the means of low or moderate income households. However, it doesn’t seem like Santa Rosa—or Sonoma County—is going to reduce permitting or building fees or move growth boundaries out any time soon. Moreover, moving the existing growth boundaries at this point may be a nonstarter, both politically and practically, because even if the boundaries were moved, just beyond are vineyards and other valuable real estate.”
And if incoming workers can’t find permanent housing, Noble sees another problem down the road. “In Sonoma County, you’re going to have a transitory population, which is discouraging, because they’re never going to get a foothold in the community. That threatens to displace the historical success pattern—namely, that immigrants arrive in Sonoma County and form a community of their own, and as the second and third generations of residents gain better language skills and attain higher levels of education, these individuals assimilate and become part of the fabric of Sonoma County.
“Here, it might be that present housing costs and the cost of living in general prevents immigrants from establishing those necessary roots in the community. Latino immigrants may be stuck in the limbo of coming to Sonoma County to work seasonally and then having to return to either Mexico or other parts of California, where it’s more affordable to live. Napa, Marin and Sonoma counties may have already priced themselves out of any real community growth, leaving instead widening social fault lines based on the increasing cost of living in these areas.”
Have counties gone too far with growth restrictions?
“This is a hot button issue, but in balancing the environment and growth restrictions, I think Sonoma County’s slow growth directives might have led to unintended consequences, such as the unaffordability of housing” states Noble. “Sonoma County needs to either reevaluate its slow growth priorities to strike a greater balance between the environment and its population’s requirement for affordable housing or seek alternate solutions to tackle the housing shortfall. For example, Santa Rosa is trying to address this issue by encouraging higher-density housing downtown and in-filling the existing housing boundaries.
“To ensure the stability of Sonoma County’s workforce, employers may need to take steps to ease the housing burden—or at least promote greater housing growth in the area to help their workers get a foothold in the community. In general, however, businesses will always be wary about incurring these costs because they might evolve into legacy expenses that businesses are expeted to shoulder indefinitely, much like health care costs. Yet housing is going to be the key that keeps people here. If people establish roots in the community, in my experience, they’re less likely to move somewhere else, even if there are slightly better opportunities in other areas. Thus, to encourage the future stability of its workforce, Sonoma County needs to ensure that people have the opportunity to put down those roots that keep them a part of the community.”
Planning for the future
Doug Spletter, associate attorney with Gaw Van Male in Napa, feels that, in 20 or 30 years, business owners will be faced personally with many of the same succession issues and exit strategies they see their aging workforce struggling with now.
“In addition to the normal, day-to-day business issues, business owners also need to focus on controlled growth and exit strategies,” he says. “These two items will directly affect the business owners’ retirement income. An exit strategy could involve family succession planning, outright sale to a third party or sale to employees.
His firm recommends business owners create a business continuity plan that states the company’s planned future and the owner’s exit strategy.
“Discussing retirement and exit strategies inevitably leads to an assessment of a business owner’s individual, family and business goals and values. Typically, they operate their businesses under the same set of values as their personal lives.”
Spletter believes savvy businesspeople can use the rise in the Latino population to their advantage. “I was very surprised by the demographic data and the expected growth in the Latino population,” he admits. But from a business standpoint, this data represents the growth of a market that businesses and employers need to recognize, develop and adapt to. Those businesses that do so will continue to flourish with the changing demographics.”
O’Brien says businesses will, by necessity, become bilingual—at least until new Hispanic residents master English. “Both for-profit and nonprofit companies are going to have to hire both Spanish and English speaking employees. That has to do with not only day-to-day business operations, but also with marketing and customer services. I think we’re going to see more bilingual websites; marketing will definitely have to be focused more toward the Latino population.”
As far as the aging baby boomers, DeBorde thinks there’s opportunity for growth in the health care industry.
“Who’s going to care for them?” he asks. “It seems like one of the major considerations will be education and making certain we have a population that can handle professional services, such as nurses and doctors and related health care professions, as well as professions such as hospitality and retail. I don’t know how we’re going to educate enough health care professionals to ensure the aging demographics can be adequately cared for. I see that as a concern along with the rising cost of health care.
“From a pure business perspective, obviously, that’s a growth industry and more businesses should figure out ways to get involved, whether it’s through assisted care living situations or other methods. Certainly, it’s going to be expensive for companies to handle their health care costs. I don’t know how you get a handle on that, but it’s certainly an issue many are going to be facing, including the wineries and vineyard owners who are worrying about taking care of their workers. Those workers are going to grow older down the road.
“What are the health care costs associated with the retiring workforce?” asks DeBorde. “I would encourage companies to look into entrepreneurial methods for providing health care services. Napa County has quite a few retirement communities, and I think you’re going to see a continued growth in those areas. That’s assuming we have proper, professional health care providers.”
Words of advice
What’s a business owner to do?
Like Eyler, DeBorde advises businesses to invest in education. “It’s clear that we have to shore up our educational bases and make sure we’re doing our best to provide educational opportunities to every person living in our various North Bay counties,” says DeBorde.
“To do that, I think we’re all going to have to dig deep and invest time and money. I think companies need to be aware that, if they want to continue to have a good workforce, they need to push the state, federal and their local jurisdictions to make the money available—and they need to figure out ways to get people to devote substantial amounts of time to make certain that happens.”
O’Brien suggests inclusion. “One good way for employers to deal with the future is to learn more about the Latino culture and incorporate some of those things into the workplace as a way of welcoming Latino workers to make them feel at home and to get them to buy in to the company long-term.”
Spletter is optimistic. “As existing markets grow and new markets develop, the demand for labor increases. The demand will be met with very competent people regardless of race. That’s one of the benefits of our form of economy: it perpetuates itself. As the Latino population grows, their participation in every aspect of our economy is going to grow.”
Whether businesses are eager to welcome the opportunities these changing demographics portend or if they’re dreading the loss of their established workforce, it appears clear that it’s better to act sooner than later. Planning now means you and your workers will be ahead of these demographic challenges.
