
Middle class is disappearing in California as wealth gap grows - spking
https://thehill.com/opinion/finance/412928-middle-class-is-disappearing-in-california-as-wealth-gap-grows
======
vannevar
The author cites a variety of statistics regarding California's government
programs and poverty rate, then draws the completely unsupported conclusion
that the one creates the other. Generally, the conservative argument against
taxes and regulation is that they handicap business and consequently hurt
economic growth. It's hard to make that argument for California, which has had
one of the strongest state economic growth rates in the nation despite being
the largest state economy. Faced with this clear contradiction, the author
simply dispenses with any kind of coherent theory and simply takes as a given
that California's poverty must be due to taxes and welfare programs.

~~~
rayiner
California does not have particularly strong economic growth. From 2003 to
2013, it slightly trailed the country in GSP growth per capita and personal
income growth:
[https://www.heritage.org/sites/default/files/~/media/infogra...](https://www.heritage.org/sites/default/files/~/media/infographics/2015/05/sr152/bgredstatesbluestatestable3825.jpg).
(To calculate GSP growth per capita, divide the GSP growth column by the
population growth column.) More recent data also shows pretty middling
results:
[https://www.bea.gov/news/archive?field_related_product_targe...](https://www.bea.gov/news/archive?field_related_product_target_id=461&created_1=All&title=&=Apply).
Adjusted for cost of living, California's income level is about in the middle
too:
[http://i.imgur.com/WdfQqJR.jpg.[1]](http://i.imgur.com/WdfQqJR.jpg.\[1\])

The idea that California is a prosperous state is a myth. California is a very
expensive state, with higher salaries that do not compensate for the cost of
living. And it has a few very rich people (in tech, entertainment, etc.) that
don't do much to move the needle on averages.

[1] One can debate the relevance of the cost-of-living adjustment for
engineers making $400k/year, but in the middle class salary range, where
groceries and rent make up a bigger fraction of expenses than toys or savings,
cost of living is a driving factor.

~~~
vannevar
According to the Bureau of Economic Analysis at the US Department of Commerce,
California is in the top ten US states for per-capita GDP growth since 2009.
Not 'middling' at all, particularly considering it was the country's largest
state economy to begin with. And a big reason the cost of living is high there
is precisely _because_ the economy has been so good. The middle class hasn't
been hurt by taxes and regulations, it's been hurt by low wage growth as the
top 1% of the population has absorbed a grossly disproportionate share of the
robust economic growth. The same problem shared by the rest of the country.
Taxes aren't too high, they're much too low, particularly on the wealthy.

Not sure where your numbers came from (the link at the bottom of the image,
referencing a report at alec.org, is broken).

~~~
rayiner
The specific ordering is somewhat sensitive to the specific date ranges.
Looking at the BEA data:
[https://apps.bea.gov/regional/histdata/releases/0616gsp/inde...](https://apps.bea.gov/regional/histdata/releases/0616gsp/index.cfm)

If we use 2009 to 2015 as the data points (which is the most I have on this
chart), the following states grew faster than the U.S. average:

    
    
        North Dakota	1.37
        Texas		1.16
        Oklahoma		1.16
        Michigan		1.15
        Ohio		1.13
        Pennsylvania	1.11
        Indiana		1.11
        Nebraska		1.10
        California		1.09
        Iowa		1.09
        Minnesota		1.09
        Tennessee		1.09
        Wisconsin		1.08
        Massachusetts	1.08
        Illinois		1.07
        Kentucky		1.07
    

I wouldn't call growing at about the same rate as Iowa and Tennessee as being
particularly exceptional, even if it's technically in the top 10.

More important, because cost of living continues to explode, California
continues to be middling in terms of purchasing power:
[https://spectator.org/adios-california/](https://spectator.org/adios-
california/) (California 37th in GDP per capita adjusted for cost of living).
For real people, that's the most important benchmark of economic health.
(Which is why when you're comparing _different countries_ , you always use
PPP-adjusted numbers.)

Note that this particular problem isn't something you can fix through
redistribution. California's COL-adjusted GDP per capita being in the middle
means that, no matter how you distribute it, California's _on average_ just
can't buy as much stuff (food, housing, etc.) as Iowans.

~~~
vannevar
_I wouldn 't call growing at about the same rate as Iowa and Tennessee as
being particularly exceptional, even if it's technically in the top 10._

I would. Iowa and Tennessee are much, much smaller economies. It's truly
remarkable that California, with an economy ten times larger, can nonetheless
grow at a comparable rate.

While it's true that the cost of living is higher (in large part because the
quality of life overall is higher), it is simply not true that "it doesn't
matter how you distribute it." The subjective experience depends quite a lot
on how it's distributed. I assure you that millions of middle class
Californians would be much happier if their wages had grown even half as much
as the massive increases taken by the top 1%.

~~~
rayiner
> I would. Iowa and Tennessee are much, much smaller economies. It's truly
> remarkable that California, with an economy ten times larger, can
> nonetheless grow at a comparable rate.

No it's not. California's economy is larger simply because it has more people.
That doesn't make it any harder to grow the economy further. According to the
same BEA data, the Great Lakes region as a whole (which has a population
comparable to California) grew faster than California. If your theory were
correct, it should be much harder for the U.S. to grow than France, and for
France to grow than Sweden. But that's not borne out by the data:
[https://snbchf.com/wp-content/uploads/2013/11/GDP-Per-
Capita...](https://snbchf.com/wp-content/uploads/2013/11/GDP-Per-Capita-
Developed-Nations1.jpg)

(If California's economic production _per capita_ were much higher, you might
hit "diminishing returns" effects, but that's not the case.)

~~~
vannevar
_That doesn 't make it any harder to grow the economy further._

Nonsense. Economic growth depends on a complex web of law, culture and
resources. Large economies _are_ systematically harder to grow than smaller
ones. It's not simply a matter of adding people. It _is_ in fact harder for
the US to grow than France, the fact that it actually happens doesn't negate
that reality. Remember, the fundamental argument you're making is that
California operates under a handicap because of its taxes and regulations. It
should be laboring under both that burden _and_ the additional inertia that
comes from a larger economy. I think its growth (not to mention the historical
success of the rest of the industrialized world, virtually all of it more
socialized than the US) belies the conservative old wive's tale that you can't
have a stable, growing economy and maintain a sensible tax and regulatory
environment at the same time.

~~~
rayiner
I’d be very curious to read a citation for that assertion.

> Economic growth depends on a complex web of law, culture and resources

If anything the opposite is true. Larger regions create economies of scale in
these areas. A company can amortize the cost of complying with California laws
over a much larger market than Iowa law. A product targeted at California
cultural trends has a much larger market than one targeted to Iowan cultural
trends. Historically, the size of the US internal market has been a huge
benefit compared to smaller European countries.

~~~
vannevar
It's harder to grow a large economy for all the same reasons it's harder to
grow a large business (percentage-wise) than it is to grow a small one. Sure,
there are some economies of scale. But in the end, there are always fixed
components to growth that are less dependent on size, and those less elastic
components are necessarily more significant for a smaller economy (or company)
than for a larger one.

Going back to the original point of my criticism, even if you regard
California's growth as merely average, that doesn't explain how that modest
growth has resulted in the middle class squeeze. Any loss incurred by the
middle class as the result of tax or other government policies pales in
comparison to the massive loss of the wage increases that should have
accompanied even modest growth. The problem is clear: left to its own devices,
the market doesn't distribute growth in anything like a fair (by value
actually contributed) manner. Wealth, in and of itself, creates a huge
advantage in capturing new growth, and that advantage is nowhere
counterbalanced. Money naturally runs uphill until some kind of catastrophe
interrupts it.

------
watt
"Despite having just 12 percent of the national population, California
represents nearly a third of all Americans on welfare. [...] In Texas, 6
percent of families in poverty receive welfare. In California, the figure is
66 percent. "

I don't know how welfare works in USA, but if it's a federal level program, it
would seem California is pulling a pretty clever hack there.

~~~
dragonwriter
> I don't know how welfare works in USA, but if it's a federal level program,
> it would seem California is pulling a pretty clever hack there.

Welfare isn't a program, it's many different programs, almost none of which
are fully federally funded, and where (because of its strong aggregate economy
despite poor distributional features) California gets less federal cost
sharing than most other states (the absolute minimum) in most components that
are partly federally funded with a variable federal share. California also has
some of the most expansive state (or local) funds only welfare programs.

And, bottom line, California pays more federal taxes than it gets federal
spending, unlike lots of poorer states; in summary, it's not hacking anything
here.

Also, the 6 vs. 66 number for Texas vs California is almost certainly using
the federal poverty line, not the local CoL-adjusted poverty figure as the
base universe. California, on average, has a much higher cost of living than
Texas, or the US as a whole, and so the comparison doesn't actually represent
those actually _in_ poverty.

~~~
rayiner
On the new supplemental poverty measure, which accounts for cost of living,
California is at 19% and Texas is at 15%:
[https://www.census.gov/content/dam/Census/library/publicatio...](https://www.census.gov/content/dam/Census/library/publications/2018/demo/p60-265.pdf).

------
rjkennedy98
> '“Not In My Backyard” development and construction restrictions mean that
> California cities are much more expensive for the poor'

Don't agree with the rest of the article but this is the crux of the issue.
Banning single family zoning in urban areas like Minneapolis is doing would be
a good start. The hypocrisy among liberals when it comes to housing is just
astonishing. Nothing epitomizes this as when the Mayor of Berkeley who
independently joined the Paris climate accords called a pro-housing bill an
attack on their way of life [https://www.berkeleyside.com/2018/01/22/berkeley-
mayor-wiene...](https://www.berkeleyside.com/2018/01/22/berkeley-mayor-wiener-
skinner-housing-bill-declaration-war-neighborhoods).

------
chrisseaton
I can't tell if they think they vast numbers of people in California working
in tech, research, academia etc are working class, or upper class. Both seem
ludicrous ideas.

~~~
theoh
The argument made in the piece is that there is increased polarization between
the haves and the have nots. Successful professionals are haves.

I don't know what nuances the term "upper class" has historically had in
California; perhaps it's not the right word for those earning (as little as) a
hundred thousand a year. But the idea that there is now a privileged
socioeconomic group which no longer blends, at the low end, into the
traditionally larger middle class and lower middle class seems like a clearly
testable proposition.

In other words, the claim is that the middle class is evaporating and tech
professionals are left on the wealthier side of the gap, typically earning
"upper class" salaries.

In the UK, a huge proportion of the population identifies as working class,
somewhat bogusly. Tech workers tend to be part of what is sometimes called the
"technical middle class", a new (post-WW2) and slightly wretched group with
little cultural or social capital but strong finances. Ramen-eating
programmers are in the technical middle class even if their earnings haven't
yet matched those of more established professionals.

I agree that both "working" and "upper" are anachronistic categories.

~~~
chrisseaton
I think if you're working a job and earning a salary or a little equity, then
you're clearly middle class at best.

I think it's the working class that's being eroded, leaving the a middle class
on one side, and the destitute on the other, with the upper class being the
same as it ever was.

~~~
theoh
Well, the Pew research organization puts everyone who earns above a certain
amount in the upper class. It's about 100k. And we know that the rich have got
even richer in the last few years, with a thinning of the "middle" earners.
There are plenty of articles out there which focus on the erosion of the
middle class.

As I mentioned, some people (in the UK for example) are invested in the idea
of the working class, and draw the class boundaries between working and middle
so as to enlarge the working class. Often this is about preserving their own
identity rather than assessing the wealth of different social strata. But
living in relative comfort has been a middle class thing.

------
masonic
URL redirects to thehill.com

------
gumby
This is really an oddball collection of bad news (although it does properly
add context to the %-of-population numbers). This bad news is well worth
repeating, though there's plenty more.

However it's hard to understand the point of the piece. The author describes
herself as a libertarian and wrote a book calling taxation a rip off. Yet the
only real analysis seems, to my reading, to claim that more government would
help. It seems especially at the end that she is criticizing unregulated
capitalism.

(for context: I consider CA to be one of, if not the, best run states in the
Union, despite its manifold problems and failures. And while like anyone I
could easily make a list of rules I think should be eliminated, I hardly think
the blanket libertarian position of "less regulation" is any sort of
solution).

------
stochastic_monk
Non-AMP link: [https://thehill.com//finance/412928-middle-class-is-
disappea...](https://thehill.com//finance/412928-middle-class-is-disappearing-
in-california-as-wealth-gap-grows)

~~~
dang
Changed from
[https://www.google.com/amp/s/thehill.com/opinion/finance/412...](https://www.google.com/amp/s/thehill.com/opinion/finance/412928-middle-
class-is-disappearing-in-california-as-wealth-gap-grows%3famp).

