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Joe Guzzardi: California is no longer a haven for the middle class

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3 comments:

  • Brian Dockter posted at 8:49 am on Sat, Apr 26, 2014.

    Brian Dockter Posts: 2839

    Why is California's Middle Class Wealth Deteriorating?

    by Jack M. Stewart

    California has always been the land of golden dreams. If you didn't get rich quick, you at least made it into the middle class as the entrepreneurial economy churned out better jobs and greater wealth. The belief that tomorrow will be better than today united Californians of all races and cultural heritages.

    Now those golden days appear to be fading. This state is getting poorer.

    Last month Californians found out how much poorer. Household income figures released by the Census Bureau showed a broad decline in the 1990s throughout most of Southern California, and household incomes are barely holding their own in the rest of the state. For the first time since the Great Depression, Californians are not doing better than their parents' generation. For a surprising number of people, the California Dream has sunk into quicksand.

    As the Los Angeles Times reported in August, "In Los Angeles County the median income dropped from $45,000 in 1990 to $42,200 in 2000, when adjusted for inflation - a stunning change from the previous two decades when median income in the country rose 3.5% in the '70s and 21.5% in the '80s." This decline in real incomes didn’t stop at the Los Angeles County line; it was felt in every Southern California county except Ventura where there was a slight gain.

    These are real dollars families will not have to pursue the promise of a better life that brought them their parents or grandparents to the Golden State.


    The reasons for this decline are not hard to find. In the last decade, middle class jobs became scarcer, especially with the aerospace industry’s job loss of the early 1990s. At the same time, the region continued to experience an influx of low skilled immigrants.

    A more fundamental reason for this loss of dollars in workers’ pockets is California's unhealthy business climate. Companies that could create high paying jobs are voting with their feet and leaving California. A San Jose company that leads the world in making thin-film disks for data storage recently heralded to Wall Street that it was relocating all "of our production capacity overseas." Abandoning California has become a positive signal to investors.

    Why should this be? The California Manufacturers & Technology Association recently commissioned the Milken Institute of Santa Monica to look at manufacturing in California. They compared our costs of doing business with those of other states including America's other megastate and California's main rival for high quality jobs - Texas. In four areas key to job creation success - wages, industrial land, state taxes, and energy - California is a worse place to manufacture a product than Texas.

    The least difference was in wage costs. Our salaries are 117 percent of the national average while Texas is 98 percent. But cost of living is higher here, and California employers must pay higher wages to keep and attract skilled workers. It is the other three factors that are killing our competitiveness.

    Industrial land costs are 40 percent above the national average in California. In Texas they are seven percent below the national average. A variety of environmental, workers’ compensation and other workplace mandates make it much more expensive to locate a plant here.


    The California tax burden is 24 percent above the national average; it is 25 percent below the national average in Texas. Arizona, Wyoming, Nevada, Colorado, Texas, Oregon, Washington and Nevada all lowered their business tax burden in the 1990s. California’s rose by 3.8 percent. Any wonder these states are attracting companies out of California.

    Only now are Sacramento policy makers coming to realize the structural budget deficits this state suffers are the direct result of declining economic activity, primarily the loss of high paying manufacturing jobs. Yet there has been far too little interest in correcting the flaws that drive the high-paying, upwardly mobile California jobs to other states and nations.

    If taxes are bad, the cost of energy is worst. California's electrical costs for manufacturing were 194 percent of the national average in 2001 - almost twice what they were anywhere else in the country. In Texas, they are five percent below the national average. Texas recently implemented a successful energy deregulation plan, and everyone knows what happened in California.

    So it is no surprise that between 1992 and 1998 Texas led the nation in creating manufacturing jobs, especially electronics and computer manufacturing, with 72,000 new jobs. And in California? This state lost 39,000 manufacturing jobs in the same period.

    Even worse, 157,000 manufacturing jobs have been lost between January 2001 and July 2002, eight percent of our industrial work force. Job losses have not tapered off; July's manufacturing job loss was 9,900. Is there any reason to believe these jobs will ever come back?

    California won't rebuild its high-income job base if the legislature continues at its business-as-usual pace. This session was one of the worst for job creation, with literally dozens of bills on the Governor's desk that will add more costs to manufacturing in California.

    But, say the politicians, these are just minor costs, a few dollars here, a few dollars there, just a pinprick or two. But the California business climate has been dying the death of a thousand pinpricks.

    And now Californians know the cost. An income drop of $2,800 per family in Los Angeles County alone is billions of dollars in lost incomes and lost purchases, and worst of all, in lost hope for a better life that is central to the California Dream.

    It's time for California policymakers to wake up to the loss of high paying, high quality jobs, and to do something about it. That should be a high priority for the next legislative session, but will not be until policy makers focus on the severe decline of middle class wealth that is occurring throughout California.

     
  • Brian Dockter posted at 8:41 am on Sat, Apr 26, 2014.

    Brian Dockter Posts: 2839

    http://www.cmta.net/oped/090502middle_class_wealth.php


    The California tax burden is 24 percent above the national average; it is 25 percent below the national average in Texas. Arizona, Wyoming, Nevada, Colorado, Texas, Oregon, Washington and Nevada all lowered their business tax burden in the 1990s. California’s rose by 3.8 percent. Any wonder these states are attracting companies out of California.

     
  • Brian Dockter posted at 8:31 am on Sat, Apr 26, 2014.

    Brian Dockter Posts: 2839

    Good Column Joe. Indeed CA can be used as a template on how to make the Middle Class an endangered specie.

     

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