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Primary Snapshots: The Golden State of Inequality

California's economy is booming, but the state's poorest residents are falling further and further behind.

At a glance, California’s economy seems like it should be the envy of the nation.

Since the end of the Great Recession, the state has outperformed the nation by half when it comes to economic growth; while the U.S. economy has grown 22 percent from 2009 to 2018, California’s grew 32 percent, according to the D.C.-based Economic Policy Institute. Its hot housing market has rebounded from 2009, when the value of the median house bottomed out, dropping nearly 60 percent in less than two years. Meanwhile, the state’s unemployment rate has reached a historic low.

But looking behind top-line numbers shows not only an economy disproportionately benefitting the affluent but one in which the worst off are falling further and further behind.

California’s rich are, of course, getting richer: From 2009 to 2018, the state’s top five percent of households saw their inflation-adjusted incomes grow 22.3 percent. At the same time, the bottom 20 percent of households saw their incomes fall by 1.8 percent when inflation is taken into account. As a result, by this metric inequality increased in California at nearly twice the national average. The increase in income inequality was larger than in all but three states, while the state is home to a vast unsheltered homeless population that accounts for 47 percent of the nation’s total.

Even at a record-low unemployment rate, there are still over three-quarters of a million Californians unable to find work. But nervous economists are beginning to point not to the state’s seemingly healthy unemployment rate, but to the total state labor force, which increased in 2019 by just 0.2 percent, while the U.S. labor force grew by 0.9 percent over the year. If the state does not have a sufficient labor force, jobs will go unfilled and economic growth is more likely to stall out.

To understand why workers might be leaving California, creating what business leaders have called “an eventual demographic time bomb,” we return to that double-edged metric: housing. A rebounded market rewards housing-as-commodity but places housing affordability further out of reach for most Californians. And California has the highest percentage of cost-burdened residents in the nation, at 41.6 percent, according to the Harvard Joint Center for Housing Studies.

For many Californians, incomes are simply not keeping up with the cost of living. Climate change has begun to exacerbate equity problems, with those at the bottom feeling the worst effects of droughts and fires. At the same time, California’s economy and policy options have been constrained by reactionary tax policy, restrictive zoning policy, and widespread worker misclassification — though Californians are fighting back on all fronts. If it is true that as goes California so goes the nation, then we’re all in for some struggles.


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