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Tarnishing the Golden State

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Tarnishing the Golden State

Onerous regulations squash the California Dream. March 15, 2022
California
Economy, finance, and budgets
Politics and law

No state advertises its egalitarian bona fides more than California. Governor Gavin Newsom brags that his state is “the envy of the world,” a place that is “not going to abandon our poor people.” In his inauguration speech, he claimed that “unlike the Washington plutocracy, California isn’t satisfied serving a powerful few on one side of the velvet rope. The California Dream is for all.” Yet even as Newsom and his progressive allies have backed Black Lives Matter and enacted a racialized “ethnic studies” curriculum in public schools, reality tells a less positive story. The Golden State’s racial minorities are far from thriving. Increasingly, they’re seeking fortunes elsewhere—often to redder, less “enlightened” states.

The minorities leaving California are not running away from beautiful weather or scenery but toward an opportunity horizon that no longer seems achievable in the Golden State. In a new report for Chapman University, my coauthors and I found that African-American and Latino Californians’ real earnings ranked between 48th and 50th among the states. Blacks in California earn roughly the same, or slightly less, than do their counterparts in Mississippi. The state has the nation’s worst cost-adjusted poverty rate and the third-highest Gini Inequality index (behind New York and Louisiana). According to the United Way of California, over 30 percent of California residents lack sufficient income to cover basic living costs even after accounting for public-assistance programs; this includes half of Latino and 40 percent of black residents.

It was different once. Ever since the nineteenth-century Gold Rush, people from around the world rushed to California to seek their fortunes, giving the state a diverse population of whites, Asians, Latinos, and blacks. Deeply afraid of an “Asian invasion” into what newcomers called Gold Mountain, incumbent Californians limited the rights of Chinese, Japanese, and other migrants from the East and backed racially oriented bans originating from Washington, D.C. that lifted only in the early 1950s. The Asian population has risen since. Until 1990, Asians were not systematically enumerated in the decennial census but were instead combined with Pacific Islanders; this larger grouping increased from 2.0 percent to 9.6 percent of the state’s population, according to Census Bureau research. The state’s Asian population increased from 10.9 percent in 2000 to 15.1 percent in 2020.

Immigrants also entered from Mexico, at first to escape the chaos of that country’s brutal 1910–1920 revolution. Controls on Mexican migration tended to follow economic conditions, but a liberalization of immigration laws in 1965, and a mass amnesty in 1986, assured that Latinos would be the Golden State’s largest group. Census Bureau research indicates that California’s Hispanic population rose from 6.0 percent in 1940 to 13.7 percent in 1970 and 32.4 percent in 2000. A figure of 37.6 percent was reached in 2010, rising to 39.4 percent in 2020.

Finally, African-Americans started coming to the state in the 1920s and 1930s, with their numbers increasing during World War II. Lured by good jobs in the state’s burgeoning aircraft, automobile, and construction economies, blacks may have faced some discrimination, but far less than they did elsewhere. In L.A., wrote Ralph Bunche, blacks were “eating high up” off the hog. As late as 1940, less than 2 percent of the population was black—a number that more than doubled by 1950 and reached a peak of 7.7 percent in 1980. Since 2000, however, California’s black population has dropped from 6.7 percent to 5.4 percent.

Today, the California opportunity structure is no longer so promising. Once seen as a mecca of sorts for blacks, L.A. now ranks toward the bottom of the Urban Reform Institute’s Upward Mobility Index, which measures such factors as income, housing affordability, unemployment, educational attainment, and homeownership. San Francisco does poorly by the same metrics. The best American cities for upward mobility today are not Los Angeles or San Francisco but Atlanta; Phoenix; Virginia Beach and Richmond, Virginia; and Lancaster, Pennsylvania.

Today’s California is a state where aggregate wealth is enormous but is heavily concentrated. Since 2008, one Chapman University report suggests, California has created five times as many low-wage as high-wage jobs. It has lost 1.6 million above-average-paying jobs in the past decade, more than twice as many as any other state. The Bay Area, epicenter of progressivism and home to the tech industry, has morphed into what Bloomberg CityLab describes as “a region of segregated innovation,” while San Francisco, according to the Brookings Institution, experienced the fastest growth in inequality among the nation’s large cities from 2007 to 2012.

Over the past decade, California has fallen into the bottom half of states in manufacturing-sector employment growth. It ranked 40th last year, easily outpaced by competitors such as Nevada, Kentucky, Michigan, and Florida. Even without adjusting for costs, notes the New York Times, no California metro ranks in the U.S. top ten in terms of well-paying blue-collar jobs, but four—Ventura, Los Angeles, San Jose, and San Diego—sit among the bottom ten. And while the state struggles to create jobs in construction, personal services, and tourism, it aims to bury forever its once-massive oil and gas industry. The fossil-fuel industry in California still contains more than 300,000 jobs, roughly half of those held by minorities and many high-paying. But in Kern County alone, 24,000 jobs could be at risk.

San Francisco Bay in the 1850s. Ever since the Gold Rush, people from around the world rushed to California to seek their fortunes. (Photo by: Universal History Archive/Universal Images Group via Getty Images)

Why have things turned out so poorly for many minority residents of California? It’s critical to separate lawmakers’ intentions—which tend to be well-meaning—with the actual effects of their policies. Californians have no problem calling for the amelioration of racial disparities, but the consequences of the state’s environmental and housing regulations have been far from egalitarian.

First, environmental policies have had unequal effects. In a report for Breakthrough Journal, Jennifer Hernandez demonstrates that many policies designed to fight climate change come at the expense of the poor and minorities. “The state’s overwhelmingly White climate activists, underwritten by its overwhelmingly White billionaires,” she writes, have “demanded unprecedented action to remake the state’s economy and its communities in response to an existential threat.” But the policies they recommend have driven electricity and gas prices to among the nation’s highest, with electricity prices 50 percent above the national average and gasoline costs exceeding even import-reliant Hawaii. These prices are among the reasons, Hernandez contends, that manufacturing and other blue-collar employment has been reduced.

In a lawsuit filed with 200 civil rights leaders, a group of activists alleges that the California Air Resources Board adopts policies essentially discriminatory toward minorities. “CARB,” the group wrote to the agency in October 2020, “willfully elected to increase housing costs and make it more difficult for members of our communities to close the wealth gap.” Yet despite strong minority support and a theory of disparate impact that progressives tend to embrace, the suit has received little coverage from the state’s green-oriented mainstream press.

As a recent Massachusetts Institute of Technology report suggests, overreliance on renewable energy will continue to impose costs, including for massive new battery-storage capacity; high prices are a feature of super-green energy policies, as seen in both Europe and California. Big-tech executives can locate energy-intensive work elsewhere, and some have profited from investments in renewables. But many other Californians, primarily in the hotter interior, have fallen into energy poverty. Black and Latino households already pay from 20 percent to 43 percent more of their household incomes on energy than do white households. In 2020, over 4 million households in California (30 percent of the total) experienced energy poverty. “Between 2011 and 2020,” Hernandez observes, “the state’s home energy affordability gap rose by 66 percent, while falling by 10 percent in the rest of the nation.”

Second, owning a home has become increasingly unattainable. Since World War II, homeownership has defined middle- and working-class aspirations and accounts today for roughly two-thirds of the wealth of middle-income Americans. Homeowners have a median net worth more than 40 times that of renters, according to the Federal Reserve.

Historically, the Californian dream was built around homeownership as well. But ever-more draconian regulations have boosted the price of housing well past affordability for most. In January 2021, the median California home cost was nearly $700,000, up 21 percent from the prior year, and required an annual income of $122,800 to qualify for a mortgage of $3,070 per month. Based on that measure, Hernandez estimates, only 20 percent of state Latino and black households—half the national rate—could qualify to buy a house in the state, compared with 40 percent of white households.

For many minorities, the California dream is vanishing. The environmental regime has helped raise prices so that only 34.6 percent of African-Americans own homes in metro Los Angeles, 34.9 percent in San Francisco, 29.0 percent in San Diego and 27.5 percent in San Jose, compared with the national rate of 43.5 percent. Homeownership rates for Latinos at the national level are more than one-quarter higher than in these four metros, according to 2019 American Community Survey data.

Instead, most minorities struggle as lifelong renters. For about 54 percent of all renters in California, housing costs exceed 30 percent of household income, the traditional definition of unaffordability. Nearly 70 percent of all state households with unaffordable housing costs are nonwhites.

The result is a state where twice as many Latinos and African-Americans as whites express problems with paying their bills, according to a recent PPIC survey. Latinos and blacks are more concerned than whites about high housing prices. At the same time, a new UC Berkeley poll shows that people under 40 are most negative about Governor Newsom’s performance. Younger Angelenos, according to one UCLA survey, are more dissatisfied with living conditions in the city.

Perhaps more revealing are migration patterns, showing not only an exodus but also a lack of new migration. The black population in California is dropping, particularly in the Bay Area, while it rises in Salt Lake City, Phoenix, and Las Vegas. In San Francisco, the black community has declined from one in seven in 1970 to barely one in 20 today, with many of those remaining ensconced in public housing. San Francisco’s African-Americans are now so marginal that a filmmaker even made a movie called The Last Black Man In San Francisco. Over the past two decades, the black household population also has declined in Oxnard and Los Angeles.

Hispanics and Asians, according to an analysis of census data, are also moving. Even the foreign-born—the group that has transformed California over the past few decades—are staying away. An analysis of census data by demographer Wendell Cox shows that the foreign-born population is actually declining in Los Angeles and fading in the Bay Area, while growing by as much as 30 percent in Dallas–Fort Worth, where a chunk of the state’s corporate base has been moving. This loss of new migrants seems likely to continue. During the 1970s, refugees from Vietnam poured into the state. Today, due to high costs of living, newly released State Department recommendations on relocation options for Afghan refugees raise caution about some California cities as destinations.

Yet it will fall to minorities to change the state’s conditions. Demographic trends, particularly migration trends and low birthrates, mean that the share of whites in California will continue to decline. The recall election may have given Newsom and his Democratic allies the notion that California is hopelessly indigo in perpetuity—local media, such as the Los Angeles Times, favor still more draconian climate legislation. But the state’s current neo-feudalist drift benefits a small, mostly white power structure while cutting off opportunities for others.

Signs of discontent continue to emerge. At a time when electric vehicles cost more than $50,000, Newsom’s executive order banning the sale of internal combustion vehicles by 2035 was derided by Latino voting-rights advocates, many of whom have openly criticized efforts to phase out affordable gas-powered cars in favor of expensive EVs, and to eliminate gas-powered “stoves, water heaters and furnaces” that require “us, or our landlords, to make investments we can’t afford.” A similar objection was raised by African-American assembly member Jim Cooper: “How will my constituents afford an EV?” he asked on the day the order was signed. “They can’t. They currently drive 11-year-old vehicles.” The remarkable defeat last year of a well-funded referendum to restore affirmative-action laws was driven by Latino and Asian voters. And the recent Asian-led recall of radical school board members in the progressive bastion of San Francisco suggests a broader reaction against progressivism’s excesses. Claims that opponents were Trumpian “white supremacists” simply illustrates how deluded the political elite has become.

Ultimately, it will be up to the state’s new minority-majority to determine whether California can reclaim its status as the beacon of aspiration for people of all backgrounds.

Top Photo by Alexi Rosenfeld/Getty Images

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