California becoming dangerously stratified

Excerpted from “Golden State may be blinded by its luster” a disturbing opt-ed piece in the San Francisco Chronicle by Joel Kotkin- an Irvine senior fellow at the New America Foundation:

For much of the past century, California has often seen itself — and been seen by others — as America’s avant-garde state… Recently, Gov. Arnold Schwarzenegger compared California to “the ancient city-states of Rome and Sparta,” praising it as “the harmonious, the prosperous state, the cutting-edge state.” Perhaps it’s time to ditch the celebratory rhetoric and take a closer look at the sober realities. Our magnificent state may still be the home to Silicon Valley, Hollywood, the nation’s largest port complex and the world’s richest agricultural valleys, but by many critical measurements the state is slipping.

The most obvious signs are economic. Although far from moribund, the state may not be as fundamentally strong as its boosters, including the governor, suggest. The state rate of GDP growth over the past decade has been strong, ranking fourth in the nation, but California has been losing ground in the new millennium. In 2004-05, it fell to 17th, behind not only fast-growing Arizona and Nevada but also Oregon, Washington and rival “nation-state” Texas.

Job creation has been even less impressive. In the Bay Area and Los Angeles, it can only be considered mediocre or worse. More disturbing, as California’s population has grown — largely from immigration — per-capita income growth has weakened… Today, California ranks 12th in per-capita income. And it’s losing ground: Between 1999 and 2004, California’s per-capita income growth ranked a miserable 40th among the states. This slow growth reflects a gradually widening chasm between social classes. Although the rest of the country has also experienced this trend, the gap between rich and poor has expanded more rapidly in California than in the rest of the country.

Similarly, the governor’s entertainment industry friends, as well as art and developer elites close to Mayors Antonio Villaraigosa and Gavin Newsom, may feel these are the best of times. But Los Angeles and San Francisco, along with Monterey, now suffer a poverty rate of more than 20 percent, among the highest level in the country.

Parallel to these developments, California is losing its once broad middle class, the traditional source of its political ballast and much of its entrepreneurial genius. Outmigration from the state is growing and, contrary to the notions of some sophisticates, it’s not just the rubes and roughhouses who are leaving. Indeed, an analysis of the most recent migration numbers shows a disturbing trend: an increasing out-migration of educated people from California’s largest metropolitan areas.

Given the shrinking per-capita income advantage for being in California, moving elsewhere increasingly makes sense, particularly for those who do not already own homes and don’t have wealthy parents…

Taken together, these trends suggest that California could be devolving toward an unappealing model of class stratification. As educated white-collar and skilled blue-collar workers leave, businesses in the state will be forced to truncate their operations — perhaps having an elite research lab, design office or marketing arm in California but shunting most midlevel jobs elsewhere.

Remarkably, neither political party seems to have a clue about any of this. David Crane, Schwarzenegger’s economic adviser, seems to think the state can make do by concentrating on the highest value-added work. He seems untroubled that more mundane jobs go elsewhere. That may make sense if you are a venture capitalist, dot-com wiz or movie producer, but it’s not so great if you are an electronics technician, customer support employee or movie grip.

To regain its promise, California needs to stop stroking itself and reverse course. A state that’s great for a relative handful of moguls — no matter how enlightened — and their servants cannot serve as the national model for anything but decadence and decline.