Governor Gavin Newsom’s constant reminders that California’s economy is not only a model of social justice but also “leading the nation” is a delusion. True, California has a huge GDP, growing primarily through soaring real estate prices and the stock prices of a few high-tech companies, but it is less seen as a site of class mobility and is gradually gaining ground. is losing. in technology-related industries.
In modern-day California, home to four of the world’s seven most valuable high-tech companies, tech bros and real estate speculators occupy what Lenin called “the high ground,” but the reality on the ground is much more. It’s fantastic. The view from where most Californians live is reflected in a new study sponsored by Chapman University, by Professors Marshall Topransky (Chapman) and Kenneth Murphy (University of California, Irvine): “California has lost its charm. Is there one?” was revealed.
The report notes that California has historically outpaced other regions in the growth of goods and services. However, the state’s GDP growth rate has declined significantly since 2022, and its growth rate is slower than that of other states. Employment and wealth distribution are of further concern.
California is particularly disadvantaged for blue-collar jobs such as manufacturing, a traditional path to upward mobility for minorities and people without college education. For a decade, California has lagged far behind states like Utah, Nevada, Texas and Arizona, according to Bureau of Labor Statistics data analyzed by Rightcast.
The Chapman paper acknowledges that the state has had enough job growth to keep unemployment low, but as the report details, most of California’s new jobs are high-wage jobs. It’s not concentrated in any department. Over the past 10 years, 62% of jobs added in California were in industries with below-average wages. This compares to 51.6% nationally. The situation has worsened over the past three years, with 78.1% of all jobs added in California coming from industries with below-average wages, compared to 61% nationally.
A lack of well-paying jobs in a state with a high cost of living likely contributes to the state’s out-migration and poverty rates. The Census Bureau, in its most comprehensive estimate, calculates the poverty rate at 15.4%. The highest in the country. California is home to many billionaires, but it’s also home to nearly 30 percent of the nation’s homeless.
Of course, not everyone suffered. Besides tech billionaires, who else is doing well in California? One example is older homeowners whose profits have increased as home values have increased dramatically. Civil servants have also grown.
Census Bureau data highlighted in the Chapman report shows that over the past decade, public sector job growth in California has grown at about the same pace as employment in California as a whole, but It shows that the average annual salary is almost double that of private sector jobs. . In other words, the path to the middle class comes through taxpayer-funded jobs, not private employment.
In the past, California cities such as San Francisco, San Jose, and San Diego all ranked in the top 10 as “advanced industry” employment centers with high investment in research and development and a high proportion of STEM jobs. But since 2020, only San Jose remains among the top 25 metro areas for such job growth. Currently, new hotspots are often located east of the Sierra Nevada Mountains, such as Austin, Texas; Nashville; Indianapolis; Salt Lake City; and Phoenix.
Can California come back to life? After all, many of the state’s assets remain, including research universities, big tech companies, and lifestyle attractions.
First, Newsom and other state cheerleaders must stop using the size of the economy as a cover for real problems. As the Chapman report states, regardless of a state’s strengths, low-wage jobs that overtake jobs in advanced industries are not sustainable.
The Biden administration has emphasized bringing manufacturing back to the United States, and President-elect Donald Trump has promised similar efforts, but California is missing out on opportunities due to the costs associated with its regulatory regime.
Consider technologies developed and employed primarily in California, such as EVs and the batteries that power them. Employment in these manufacturing industries has fallen overwhelmingly in red states, largely reflecting relaxed permitting rules, lower energy costs, and less onerous labor regulations.
Notably, Newsom, who has a feud with Elon Musk and has taken on a national anti-Trump role, has said that if the next administration in Washington repeals the federal $7,500 EV purchaser tax credit, California has promised to intervene with state rebates on cars. — Reportedly, with one exception: Tesla, which happens to be America’s dominant brand and the only EV manufactured in California. Fremont’s factories employ thousands of people in manufacturing excellence.
And it’s not the end of self-destructive political activity.
One “advanced industry” in which California, and especially Southern California, continues to dominate is the aerospace and resulting defense industry. The state continues to lead in aerospace jobs, and innovative startups like Orange County’s Anduril appear poised to take advantage of President Trump’s emphasis on military spending. In his first term, he increased the defense budget to a historic high.
But are California’s Democratic leaders on board?
Once again, the state’s relationship with Mr. Musk, President Trump’s “first friend” and the world’s preeminent space pioneer, would demonstrate just the opposite. Musk decided to move SpaceX’s headquarters from Hawthorne to Texas this year, angered by a California law that allows schools to keep parents quiet about their children’s LGBTQ+ identity. And just a few weeks ago, the California Coastal Commission denied SpaceX’s request to increase rocket launches from Vandenberg Air Force Base. The committee reportedly discussed his political views before voting on the issue. Even Newsom opposed it.
This is no way to build a truly inclusive and healthy economy. Gavin Newsom can talk all he wants about California’s benefits, but the path the state’s Democrats have set us on is deeply regressive.
Joel Kotkin is a contributor to Opinion, a Chancellor’s Fellow in Urban Futures at Chapman University, and a senior fellow at the Civitas Institute at the University of Texas at Austin.
