California’s inability to solve any basic cost-of-living problems is forcing people in their 20’s to start their lives outside the Golden State.
This not only says a lot about California’s present, but signals big trouble for the future.
According to a new study by the payroll company, ADP, the hottest job markets in the nation for people in their 20’s are concentrated in large metropolitan areas in the south.
While that’s great news for places like Atlanta, Charlotte and Raleigh, it’s a cry for help in California.
The study focused on three data points: Cost of living, hiring rate and salaries. Overall, California failed across the board.
Some regions scored well in some areas: The San Francisco Bay area of course had exceptionally high salaries, while the Inland Empire had a decent hiring rate. But the Los Angeles/Long Beach/Anaheim area scored near the bottom, as did Fresno.
The moral of the story though is that California needs to get its act together on addressing the high cost of living, or else.
High housing costs are problem No. 1
It starts with housing. The California Environmental Quality Act, known as CEQA, is the biggest culprit in blocking housing development throughout the state – which is why former Gov. Jerry Brown said reforming CEQA was “the Lord’s work.”
But there’s also a reason Brown and many others have been unsuccessful at reforming CEQA: key Democratic constituencies – unions, environmentalists and local governments – find it really effective at blocking housing.
Judging by corny ideas like Superintendent of Public Instruction Tony Thurmond’s proposal to build selective housing on public school property, it seems that state leadership will do anything to avoid meaningful CEQA reform.
So the housing problem remains, driving up the cost of living. In many areas throughout the state wages have risen as well, but the cost of living continues to drag wages down in terms of purchasing power.
Think about it like this: According to the study, the average salary in the Los Angeles/Long Beach/Anaheim region is $52,000. You already know this is not nearly enough to cover the cost of housing comfortably, but let’s go through the math just for fun.
The average rent in the region is somewhere around $2,672, according to the Los Angeles Almanac, which is significantly more than the less-than-30-percent-on-housing threshold recommended by financial experts.
It’s even worse if you want to purchase a home – it would take a salary four to five times the region’s average to afford a median-priced home, which, according to Zillow, is $959,639.
And it’s not just housing that’s driving up the cost of living.
Higher than average energy costs and taxes make life harder for ordinary Californians
California has exceptionally high energy rates, gas prices and total tax burden. In fact, I just received my largest electricity bill ever – largest by around 30 percent.
According to The Wall Street Journal, some Californians are actually paying more for electricity than rent! There are multiple reasons for the high energy costs, like aging infrastructure and bad policies, and lawmakers have done little to have prevented rates from nearly doubling over the past decade.
Californians are getting hit twice on gas prices, with both high gas prices due to environmental regulations and nation-leading gas taxes. And Californians suffer the highest top marginal tax rate and highest state sales taxes in the country.
And so on.
It’s not as though Californians get much in return. We still have to deal with the occasional blackout, some of the worst roads in the country, and a taxpayer-funded government incapable of fixing problems.
Mix all that together and you get people in their 20’s looking elsewhere to live. Or if you look at the state’s out-migration numbers – where nearly twice as many people are moving away as moving in – it’s more than just people in their 20’s going elsewhere.
“People are leaving because of economics – wages are somewhat higher, but the median home price is about $900K, public schools are deficient, taxes are high, gas and utility costs are high, businesses are leaving because labor costs are high, regulation is high, taxes are high, it turns out to be more profitable to be in TX or another Southern state,” said Lee Ohanian, professor of economics and director of the Ettinger Family Program in Macroeconomic Research at UCLA.
Private sector job market in trouble
There’s still the issue of the state’s dismal hiring. According to Ohanian’s research citing federal data, California’s private sector job growth accounts for a mere 0.07 percent of the 7.32 million private-sector jobs created nationally since January 2022.
In the past 18 months, California’s private sector jobs have declined by 46,000.
In June, California was tied with Nevada for second highest unemployment rate in the country.
It’s hard to overstate how bad that is. Making matters worse, is the fact that the job creation that has happened in California has all been government jobs – nearly 97 percent since January 2022.
As Ohanian pointed out in a recent column: “a state’s economy obviously cannot survive just by creating public-sector jobs.”
Indeed.
Someone will have to pay for it, which means California will continue to get more expensive.
Until California policymakers get housing and energy costs under control and make California competitive with other states on tax policy, people will continue flocking elsewhere.
But it won’t be entry-level, college-educated workers because they are flocking to the south. California’s birth rate is plummeting and is in fact at historic lows, so this will limit the production of taxpayers as well. And California’s population is aging – it is predicted that by 2040 one in four Calfironians will be 65 or older – and retirees are generally done with a lot of their tax paying.
Matt Fleming is opinion columnist for the Southern California News Group and CEO of Sower Strategies, a digital marketing and public affairs firm.
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