California bets on new technologies, innovation to keep jobs at home.

A major talking point in 2004, California's  outsourcing issue seems to have all but disappeared.

In 2004 a number of outsourcing bills were churning through the state legislature, three of which were vetoed by Governor Arnold Schwarzenegger, who cited barriers to trade and unnecessary business hurdles among his reasons for vetoing the bills.

Today there are no California bills addressing outsourcing or the offshoring of jobs, which indicates a realization that the practice is here to stay and legislation isn't a cure, says Ashok Bardhon, a senior research assistant at UC Berkeley's Haas School of Business.

Bardhon recently completed a study on the outsourcing of service industries, which account for about 50% of U.S. jobs.

"These jobs have gone overseas in order to remain competitive," Bardhon says. "Instead of creating legislation against offshoring, we should be creating a new range of jobs in the industries where California already shows strength."

The software industry has been the most susceptible to competition from China and India, where engineers can be hired for about one-tenth of a U.S. salary. But Bardhon says California still excels in exports of services in the environmental, consulting, legal, engineering and financial industries.

"In these areas California is very technologically advanced compared to other countries," Bardhon says. "As long as we stay at the cutting edge of innovation, creating new jobs and new sectors, we can remain competitive despite the jobs going overseas."

But sometimes new technology can be detrimental to job creation, such as in the movie industry, says Sen. Sheila Kuehl (D-Los Angeles).

The advent of blue and green screen technology has made it possible for directors to shoot a film based in the United States from anywhere in the world. Not only does the actual filming move overseas, but so do the post-production jobs, Kuehl says.

"Just as with other industries, these producers are looking at their bottom line," she says. "They have no commitment to L.A. labor. Really, our only option is to offer them incentives to hire our workers."

With a celebrity governor in office, Kuehl thought she might have a chance of reversing the exodus of film industry jobs from California by offering incentives to keep production here. But she says she ran into a number of roadblocks before her plan could be introduced.

Instead, she said she's on board with other legislators who are pushing for allowing research and development in California for new technologies like stem cells and biodiesel.

"Outsourcing isn't going to just go away," she says. "We've got to start educating and developing for future technologies to retain jobs here, even if they aren't the same jobs."