City of Angels evolving into a city of contrasts.

City of Angels evolving into a city of contrasts

Welcome to Los Angeles. Welcome to the Third World.

Metropolis Los Angeles, a middle-class stronghold through the 1960s -- a refuge for Depression-era Okies and Arkies, and lebensraum for winter-bound Iowans and New Yorkers -- now is becoming a land of wealth and poverty, a type of modern Dickensian hell. Increasingly, it is becoming an Americanized version of a Third World nation's capital city, growing dependent on cheap labor as its middle class vanishes and wealth eyes poverty across walled barriers.

For the first time in its history -- and just as the region seemed to be coming into its own -- Los Angeles must face down economic problems that threaten to derail progress.

Growth and more people have been the answers for earlier bouts of poverty and economic doldrums. but the old salves may not work any more. In fact, waves of poor immigrants may only worsen matters for an infrastructure and educational system already bursting at the seams.

Beset by crime and high housing costs, Los Angeles' middle class has lost its grip here -- by some calculations, becoming a minority -- while movie barons build $50 million manses and cardboard shantytowns pop up wherever allowed.

Here are Beverly Hills and Bel Air, but also two cities -- Cudahy and Bell Gardens -- with per capita incomes below that of East St. Louis, the Midwest town routinely portrayed in national media as the country's most wretched municipality.

Everywhere about them, Angelenos see growing contrasts that boggle the sensibilities: Here UCLA, Caltech, the Claremont Colleges and USC are ivy towers to rival any; here parents are afraid to send their kids to public schools, and many don't.

While leaders chart the construction of a $100 million Disney Concert Hall in downtown Los Angeles, elementary school orchestras have been silenced.

Cedars-Sinai is a world-class hospital; a quarter of Angelenos lack health insurance.

The region's aerospace industry converts technological wizardry into profits, and entrepreneurs from around the world make their marks here; blacks in South Central Los Angeles are economically worse off than before the 1965 Watts riot.

Always, the press of immigration and a dwindling proportion of middle-class jobs play havoc with efforts to maintain middle-class public space, school, living standards and government services.

"We are creating a two-tiered society of haves and have-nots," says Goetz Wolff, industrial economist in downtown Los Angeles. "And realistically, it is only going to get worse."

Recreating a middle class and a livable city presents a Herculean task for the region's policymakers. Indeed, the task is so large that business leaders and owners may be better off adapting to, rather militating against, the Third World Los Angeles.

For retailers, the new reality means picking one's spot. Department stores may have to reconsider Los Angeles, where budget shopping and Rodeo Drive -- or zesty entrepreneur retailers on Melrose Avenue or Santee Alley -- call the shots. Buffums has closed, Broadway is teetering and Sears is leaving; the exodus may be permanent.

The foray of mainline grocer Vons into Hispanic marketing, with its Tianguis brand stores, is instructive.

For small manufacturers, the future holds a nearly endless supply of cheap labor -- the same workers upon which the bulk of local manufacturing relies today. If government, clear-air and other regulations can be endured, Los Angeles may remain a good place to have a small factory.

But for the region's aerospace industry -- the last of the area's big, heavy manufacturers, now that the steel, rubber and auto plants have left -- the future is more troubled.

In a recent survey issued by the Los Angeles Area Chamber of Commerce, the lack of work force skills, particularly production labor, was listed as problem No. 1 by defense contractors. That far exceeded complaints about the regulatory climate or housing costs.

For building contractors, tomorrow may mean quitting or joining the increasing number of builders who pay their workers in cash, and thus incurring a far lower labor cost than contractors who dot the i's and cross the t's.

For those seeking white-collar workers, the future -- and already the present -- looks troublesome. Housing costs in areas perceived to be "nice" may continue to soar, but the local labor force will be more and more composed of the immigrant and the undereducated. As a world-class city, Los Angeles can import skilled talent -- but must be prepared to pay for it.

And as the city becomes divided by geography and class, security firms may blossom. More wealthy homeowners may opt for walled compounds or mini-neighborhoods, creating a greater demand for guards.

Immigration

As in earlier epochs of the city's history -- such as when Anglo gold-hunters flooded into the Southland, shoving aside the Californios of yore -- Los Angeles today is a metropolis defined by immigration.

Transformed in a generation by waves of workers seeking a better life, Los Angeles County today has no majority ethnic group, being roughly four-tenths Anglo, four-tenths Hispanic, one-tenth Asian and one-tenth black.

Propelled by immigration and high birth rates, Hispanics will soon eclipse all others to become Los Angeles' majority ethnic group. That's an astonishing demographic upheaval, given that 20 years ago, people with Spanish surnames composed less than one-fifth (18.3 percent) of county population.

In the 1980s, about 1.62 million documented and undocumented immigrants came here and stayed -- and nobody knows how many immigrants have worked here and left in the last 10 years, los olvidados to all but friends and employers. About one-quarter of the county's nearly 9 million residents are foreign born.

As if in flight, the number of Anglos in Los Angeles County is shriveling, both absolutely and percentage-wise.

In 1970 there were 4.77 million Anglos in the county, 67.9 percent of the total population; by 1990 there were 3.62 million Anglos in the county, 40.8 percent of the county's 8.86 million residents.

The heavy immigration into Los Angeles County is a reality local officials never planned for. Even a powerful (if splintered) local Establishment is unimportant to millions of Koreans, Taiwanese, Hong Kongers, Hispanics, Mid-Easterners and Eastern Europeans seeking a better life than possible in their homelands.

Though life in Los Angeles may be up-ended by immigration, border control is a federal matter. Besides, many industries, from agriculture to restaurants to manufacturing to building services, rely on foreign workers and are not eager to see the labor supply dry up.

Indeed, having relied upon an increasing amount of cheap labor for 20 years, now the local economy can't do without it, say many.

"We literally are dependent. Immigrants are critical to the construction, tourism (hotels and restaurants), apparel, building services, furniture and other industries," said Jack Kyser, economist with the Los Angeles Area Chamber of Commerce. "They take jobs others won't."

Rich man, poor man

Perhaps the most basic aspect about Third World Los Angeles is a widening gap between growing classes of rich and poor, and a shrinking of the middle class.

"The nature of available jobs has changed, and we have more people disconnected from the economy," says James Johnson, UCLA professor and director of Center for Study of Urban Poverty, discussing the decline of heavy manufacturing in Los Angeles.

By one estimate, the fraction of upper-income households in Los Angeles, defined as those with incomes exceeding $50,000, tripled to 27 percent in the 1980s, while the fraction of families with incomes below $15,000 rose to 40 percent from 30 percent.

The middle class shrank to 32 percent from 61 percent, by these definitions.

Yet Southlanders, as a group, are richer than ever. Per capita income in Los Angeles County reached an average of $18,790 in 1988, up 23.8 percent from 1970, according to the U.S. Department of Commerce's Bureau of Economic Analysis.

And as Angelenos become riven by class, they are geographically separating as well: Per-capita income in wealthy beach cities and other enclaves increased at double-digit rates through the 1980s, while other areas -- such as Bell, South Gate and Lynwood -- had income increases of less than 5 percent, well below the rate of inflation.

"When you see the walled fortresses out on the Westside or in Palos Verdes, you are seeing the kind of city I saw in Bogota (Colombia)," says economist Wolff. "That is what it reminds me of."

The neighborhoods of fortresses largely exclude the young: In 1987 more than one quarter -- 26.3 percent -- of Angelenos aged under 18 lived in poverty, compared with 13.7 percent in 1969.

The overall poverty rate, for all age groups, increased from 11.1 percent to 15.6 percent in the same time frame, meaning that about one out of six Angelenos is poor, or about 1.5 million people.

Hispanics, with a 25.2 percent poverty rate, have the greatest exposure to poverty among major ethnic groups.

Working in the low-end of the economic spectrum, Mexican immigrant workers make about 36 percent as much as native-born Anglo workers, according to a recent study by UCLA.

Like their counterparts in Sao Paulo, Mexico City and Calcutta, manual and unskilled workers in Los Angeles make so little that even working full-time, between one-quarter and one-third are poor, the UCLA study reports.

It's not hard to see why many working Angelenos are poor: Working at the minimum wage full-time for a year, a worker would make about $8,500. A family of four needs $13,360 in 1990 to stay out of poverty, according to U.S. Census Bureau definitions.

As bad as the numbers are, those who deal with official data say the real story is almost surely worse. The homeless, the immigrants, the transient are hard to find and frequently elude census takers. Too, the very rich tend to hide income and wealth.

"The official figures probably understate the income of the wealthy and the numbers of poor," says Paul Ong, UCLA professor in the School of Architecture and Urban Planning.

Home and homeless

While the middle class has been shrinking, the cost of the middle-class dream -- a house -- in Los Angeles has far outstripped family income, relegating homeownership to the upper-middle class and the wealthy.

This is far cry from a strong Angeleno tradition of homeownership, established in the 1920s, and 1930s. In the pre-war era, homeownership rates soared past 90 percent in Los Angeles, as developers lured droves of winterbound Eastern workers here with visions of a two-bedroom bungalow on a nice-sized lot.

(Ironically, some unionists in the 1920s accused employers of creating a type of employee servitude by collaborating with developers so that workers could buy homes on seven-year mortgages. A worker who had to pay off a home over seven years was less likely to strike, unionists claimed.)

In the post-war era, many G.I.'s bought homes with government help.

But today the median-priced house in Los Angeles County commands $200,000, even in the face of a housing slump, and homeownership rates have dropped to 60 percent or less.

At current prices, only 21 percent of families can afford the median-priced home at current prices, according to the California Association of Realtors.

Yet even as the middle-class strains for homeownership, a new super-level of dwelling has emerged in Los Angeles, where $5 million and up is the entry price.

Entire pages in Los Angeles Times Sunday real estate pages are devoted to these multimillion-dollar domiciles, and there is even a $12 million condominium for sale in the Golden Mile section of Wilshire in Westwood.

Whole cities and neighborhoods -- such as Pacific Palisades, Hidden Hills, Beverly Hills, Brentwood, Bel Air and San Marino -- have little housing for sale under $500,000.

The acceleration of housing prices in some neighborhoods is startling: As recently as 1972, a small house on a quiet street in Pacific Palisades, near the beach bluffs, sold for $40,000, or about $35.50 a square foot, in an open market transaction.

Today housing in the same area commands an average $500 a square foot, a 14-fold increase, according to Dataquick Information Services. In the same time period, general prices about tripled, according to federal stats.

But as elite neighborhoods skyrocketed a worsening sore on Los Angeles, although no official statistics are gathered.

"You see homeless shanties along the 405 Freeway, in the produce market area, everywhere, in the produce market area, everywhere they can get away with existing," says Alice Callaghan, director of Las Familias Del Pueblo, a social service agency in downtown Los Angeles. "Many homeless are hidden away, because they fear losing their belongings."

Permanent underclass?

Some researchers claim that Los Angeles is developing a permanent and growing underclass which may render obsolete a reassuring self-image of a city of upward mobility and a dominant middle class.

As migrants pour into Los Angeles, the old unionized, well-paying industrial jobs in big factories have left. At one time Los Angeles was the nation's second-largest auto manufacturing center; today, only the endangered General Motors plant in Van Nuys remains. Gone are the big rubber plants Goodrich, Goodyear and Firestone, as are Kaiser, Bethlehem and U.S. Steel steel plants. There used to be more than 40 iron foundries here; now there are 10. Much heavy manufacturing has gone overseas.

Of major, high-paying industrial sectors, only the aerospace business remains in Los Angeles.

The decline of heavy manufacturing in Los Angeles has snapped the industrial transmission belt into the middle class, say some. The old factories allowed a man with a high school education and a strong back to join a union and earn a middle-class wage, as was seen in the Kaiser steel plant in Fontana, which opened in 1942, employed 9,000 workers, but closed 42 years later.

Without heavy manufacturing, a whole segment of Angelenos cannot enter the middle class, argue some. Janitorial work, hamburger-flipping or working in a garment shop doesn't provide homeonership-type wages.

"We have a segment of the population that is economically marginalized, that is disconnected from the economy," says Johnson of UCLA. "If you have no connection to the mainstream economy, it makes it difficult to get into the middle class."

A sharp reduction of unionized, manufacturing jobs makes it difficult to envision lower-income people entering the middle class in large numbers, say some.

"Whereas previous immigrant waves resulted in labor ultimately absorbed into the economy, and realized upward mobility, today the nature of opportunities has changed," said UCLA researchers Paul Ong and Rebecca Morales in a recent study. "The Los Angeles metropolitan area is becoming America's first Third World metropolis."

The region's native-born Hispanics appear at greatest risk of remaining in the underclass. Fully 40 percent of native-born Hispanics -- members of the ethnic group that will soon become the region's majority -- do not graduate from high school.

And, in a classic Catch 22 situation, the dwindling of middle-class jobs and the middle class itself raises hard questions about how well companies that need skilled workers will be able to fulfill their needs in the future.

But others say each large wave of immigrants that has come to America has enriched life here, and has been eventually absorbed, even as the initial immigrants were poor.

"It's been said we are a Third World economy on a First World infrastructure, but this is not an accurate assessment," said the chamber of commerce's Kyser. "We do not have a Third World culture, or even a common culture. We have multiple cultures. And immigrants here may be assimilating faster than people think."

Even UCLA's Johnson is not willing to predict a "permanent" underclass.

"Maybe some policy-makers are consigning a generation away, but I am not," said Johnson. "If we apply our resources, we can reverse the cycle of poverty for many youths."

In the next two parts of this series, the Business Journal will explore Los Angeles' labor scene and a growing "underground" economy. [Graph Omitted] [Tabular Data Omitted]

PHOTO : A land of stark contrasts: Increasingly, the lavish wealth of cities like Beverly Hills coexist with squalid shantytowns of the underclass

PHOTO : The poor: Their numbers are growing