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The Shriveling Middle Class In California
By Wolf Richter www.testosteronepit.com
An ominous trend picks up speed: the middle class is shriveling. In 1980, 60% of Californians lived in middle-income families. By 2010, only 47.9% did, according to a study by the Public Policy Institute of California (PPIC), a non-partisan research organization (24-page report PDF, 2-page summary PDF). Main culprits: declining incomes and disappearing jobs.
From 2007, when the recession began, through its end in 2009, family incomes across the spectrum dropped over 5%. But then, instead of going into recovery mode, they continued to go south for another 6% through 2010—the end of the timeframe of the study. Given the astronomical cost of living in California, the study defined a middle-income family as one that earned between $44,000 and $155,000 in 2010.
But the declines weren’t spread evenly across the income spectrum. Families whose incomes were in the top 10% saw their incomes decline 5%. Those at the bottom 10% of the spectrum, the poorest families in California, saw their incomes plummet by 21%.
In a further indictment of income inequality in California—something that is clearer than daylight if you walk or drive around with your eyes open—the upper 10% enjoyed incomes that were higher than those of their counterparts in the rest of the US, while the lowest 10% earned less than their counterparts elsewhere. And income inequality between to top 10% and the bottom 10% doubled since 1980, to where in 2010, the top end earned 12 times as much as the bottom 10%.
Family income is a factor of wages, hours worked, underemployment, and unemployment. The main culprit for the loss of family income during and after the recession was unemployment which, according to the Bureau of Labor Statistics, peaked at 12.5% from September through December 2010. It has since edged down but still hovers at 11.7% (preliminary, October 2011).
However, the BLS percentages of unemployment are a form of statistical hocus-pocus that distorts and understates the actual unemployment problem. Here are the raw numbers of employed people in California:
Peak employment in California occurred, according to the BLS, in January 2008, when 17,023,322 people were working. At the trough in August 2011—that’s correct, August 2011, that’s not a typo—only 15,830,729 people were working. During that period, 1,192,593 jobs had evaporated. Where the heck is the jobs recovery?
Maybe it’s in the future. Maybe it has started a couple of months ago. But there are certainly no signs of a jobs recovery in California before September 2011—and even that may turn out to be a fluke.
And if there actually is a jobs recovery that would raise family incomes? The PPIC warns:
If previous post-recession patterns repeat themselves, it is likely that lower-income families will recover much more slowly than those at the high end, potentially worsening income inequality that is already at a record high.
A thriving economy based on the American model requires a thriving and growing middle class. However, the current conditions—a shriveling middle class and rising income disparity—mark the transition to a banana republic.
Meanwhile, corporate tax dodging in California and elsewhere in the US puts the finger on the strenuously hushed-up Basic Flaw In The Tax Code.
Wolf Richter www.testosteronepit.com
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http://www.youtube.com/watch?v=Sq8OU-7JDFA&feature=player_detailpage
Americans really just don't get it yet. There is not going to be a middle class. The elite want to wipe them out completely.
Read:
http://www.wix.com/andrewcostell3/simple-wealth-book
Californians are just the canary in the coal mine.
Read it and weep.
What happens in CA happens to the rest of the US.
Just later.
at the cutting edge "even in revolution" eh? just remember "they don't call it Occupy Wall Street" for nothing. And those folks aren't going anywhere. They ARE New York.
Yeah, earlier on I would have never pegged California as on the cutting edge of the revolution, but now I think it may well be.
It actually started in the rust belt circa 1975 as they began dismantling the steel industry and shutting downs steel mills and associated operations.
By the early 80's unemployment had gotten to around 12% in that area. Now you can go through what were once clean middle class cities and see trees growing through what were houses.
You are absolutely RIGHT!
you fn dumbasses stuck on the right vs. left paradigm aren't smart enough to know you are being screwed without lubricant by the reps from both sides. the only nations in the world with any growth are the ones with the most .gov interference whether it be in socialist europe or communist china or the indian bureautocracy. until you dumbasses quit your nagging wife bickering you will never see a return to the greatness of the usa again. the bankers seduced both sides into a credit expansion orgy that has bankrupted the world while, under the ruse of globalization, multinationals have gutted the income of the middle class. the problem is not political. the problem is economic. take your political pissing match to a bath house and blow each other and make up. this is the usa. it has been stolen from you. take it back.
The RINO Repubs are shit but the Dems are absolute vermin. My guess is you are a lib because your muslim has destroyed everything so you shift to the "all parties are bad" BS.
Well Mexifornia ia f**ked and there has not been a Repub in charge for 20 years. Arnold is a Dem and had no power. Under Pete Wilson they passed cutting off endless benefits to illegals. Liberal judges with teh stroke of a pen nullfied what TAX PAYING CA voters had voted for. F You. The Dems destroyed CA.
Freddie, you are always spewing an opinion. Could you post something that has an actual fact contained therein?
For someone who claims to not listen to the Gasbag, the Clown or Faux News in general, you are very likely the most partisanly shrill shill at the Hedge...
Your posts are devoid of content and mind numbingly predictable... Surprise us by appearing to be erudite, if you can....
+1 upper class. Politics is a side show, as you noticed, similar to monday night football only the wealthy get to play in this game. The lower classes get to play sports while the upper classes get to play politics. You mentioned take it back. It is gone the middle classes do not have the time nor patience (nor intelligence) to comprehend the economic destruction that has enveloped them. Like you referred to in your post they expect some savior from a political party to come to their rescue when in all reality the political party is the one screwing them over. Red and blue. Learn to swim.
There are many people living on the edge in Sou Cal and those working are one paycheck away from being screwed. Those not working are subject to getting a regular unemployment check. Violent crime seems to have increased. On the other hand, the mall seems packed; PF Changs had an hour & a half wait the other weeknight.
The divide between the top 20%ers and everyone below that seems to be increasing and there seems to be some pent-up passion regarding the obvious inequality.
Many people have lost their homes; many are downsizing & cannot afford high rents/mortgage payments. Jobs are scarce and employers are scalping workers in many ways. It's a meaner world.
Seems to be a lot of confused people experiencing "normalcy bias" too.
However if you took away everyone's iphone they would start drooling and running in circles.
that's impossible with gov moonbeam, feinstein, boxer, waxman, pelosi and waters in charge of the state
California is just America turbocharged... getting to where we're ALL going, just a bit faster.
A healthy economy with a healthy middle class needs a high return on investment environment* in order to exist. When that environment goes away, as it did in the seventies when America (and much of the rest of the West) exited the final build-out phase of the industrial revolution, the middle class fades as well. That decline can be stalled a bit through debt growth or redistribution, but those are merely stop-gaps. Low ROI means small middle class, large underclass.
Its a bit counter-intuitive: A nation is at its richest when it is borrowing to build the structure for a mass middle class, but once finished with that century-long project, that nation becomes poorer. The high ROI environment, full of large-scale endeavors that pay for themselves through increased economic activity, is gone...leaving behind a low ROI environment of maintenance and upgrades.
It is said that back in the fifties, one dollar of debt produced four dollars of growth. Nowadays, we're lucky if the return on debt is in the positive numbers... we can only dream of 4 to 1. Some folks attribute this decline to excess debt, but I think the excess debt is a symptom; the cause is a lack of high return endeavors in the nation. The low hanging fruit has been plucked.
We have left the land of "and" for the land of "or". We used to be able to have good wages AND good retirements AND good stock returns, low taxes AND good infrastructure AND good public services... but in a time of low ROI all those "ands" become "ors".
California is already at the place the whole West is going. In the low ROI environment where prosperity is hard to find, the brightest are fleeing the free market sectors for the fiat sectors (government, law, education, finance), where a good living is more a matter of pleading for legislative tweaks than competing with the hungry, motivated hordes overseas. The roads fall apart because maintaining them means raising taxes instead of letting new growth pay for them. Pensions become empty promises because not even government can afford 3 for 20 when real returns are only two points over inflation.
Forget the fairytales from futurists -- California is the real preview of the post-industrial future.
*[When I say "high ROI environment" I mean more than just a good return for a few businesses; I mean a high return on debt for every sector, private and public. Government and utilities can borrow billions to build highways and bridges, and string power and phone lines to every house in the country... and pay for it through the new economic activity it produces. Industry can make the tools and materials needed to build all those projects, for a client base with deep pockets and decades-long horizons. And the people get well-paying jobs, rising standards-of-living, and first world infrastructure... all paid for relatively painlessly through future economic growth.]
Very well put and spot on. You certainly see the "big picture". I'm sure you have planned accordingly.
it was actually the end of the rust belt in the northeast and upper mid west that was the future of the usa with detroit as the poster child. none of this needed to happen but it did and it could be turned around but that is looking more and more like a utopian dream.
I agree with the rust belt part of your comment, but disagree with the "none of this needed to happen" part. It did have to happen... it was inevitable. That's my point, but I didn't do a good job making it. I am having trouble putting this concept into words.
Let me use Detroit as an example.
Detroit was built on the mass marketing of personal transportation. In 1900, there was about 1 car per 100 adults. By 1970, there was roughly 1 car per 1 adult. (Note -- those are rough guesses for illustration purposes... I don't want to quibble about the actual numbers.) Going from 1 per 100 to 1 per 1 was a tremendous boom -- mass access to personal transportation produced huge economic gains -- not just for the businesses selling cars, car parts/accessories, and gas, but for the consumer who bought the car and the government as well. It was a high ROI society-wide. It was debt for investment, and the investment paid off. It was a virtuous circle of win/win/win.
Nowadays, even if Detroit was still the Motor City of the past, personal transportation would still have decayed into a low ROI industry, because it is a played out market -- you're still going to be around 1 car per 1 adult. Sure, the Big Three might still be making some money, but the economic gains/standard-of-living rise would be small or nonexistent. It has a low ROI society-wide -- it should be seen as mostly debt for consumption, not investment.
Selling more cars is no longer producing more middle class citizens, it is only maintaining the gains of the past. And maintenance is spending money just to run in place.
Do you see what I am trying to say? Creating your middle class makes you rich but keeping your middle class makes you poor.
cars are to men what shoes are to women. while a agree with your analysis the fact of the matter is we'd own ten cars if we simply had the cash. that's even if we lived in a one bedroom efficiency in Lower Manhattan with 1000 dollar a month "car parking rental spots." it's really a disease actually....
i dis agree with you only on the timetable. it is inevitable as it is with all empires. however, there were things that were done that greatly accelerated the process. there are still things that could be done today to stave off the inevitable but they won't be done. the essence of your arguement is the reason illrgal immigrants have been allowed free access to the usa. more people simply means more room to grow. they forgot about the part of the model that says more people need good jobs to foster the growth. they gave the jobs away, first to the japanese and taiwan then to china and india.
"it was inevitable" I completely agree. It was inevitable and always will be inevitable. A society is only as strong as its members. The members in our society are choosing sloth instead of intelligence and they wonder why they now have to suffer.
Keeping the middle class fat and happy has now produced a nation of takers instead of a nation of givers. You reap what you sow.
California's middle class is not really shriveling. But the state is being overrun by a tide of low income illegal immigrants who are drastically changing the dynamics of the state. A few decades ago California elected Ronald Reagan as governor. That would be impossible now.
As new immigrants from banana republics flood into the state, California itself is becoming more and more like a banana republic.
low income?
when $15/hr is paid in cash that's $30k/year without tax which is about $45k/year
multiply that with two parents working while grandma takes care of the kids in 2 bedroom place...
they save enough money to open up a taco joint to serve a city that just turned 90% illegal Mexican.
but nowadays, even illegal mexicans say no mas.....they crossed the border to join USA, but find Mexico.
Mexico is rich now due to the underclass all getting their welfare from uncle sam.
The mexicans are full of the American spirit of 100 years ago: Independence, personal sovereignty and the willingness to throw off the shackles that bind.
Racist bastard. You cannot attribute a single race with all that is divine and yet damn the rest. We are a great seething mass of humanity, some are rich, some are poor, some are energetic and driven, some are tired and worn down.
Some mexicans are industrious and ambitious, and some are not, just as some americans and some canadians and some europeans are.
If you want to blame or attribute aspects of our current situation to anything in particular, start with demographics and trade and follow the path that opens to you.
It has little to do with race.
Prankster - Not sure I follow your comment or perhaps you misunderstood my comment. I was pointing out in my comment the fact that are doing to us what we did when we came to this country. It all flows in circles and for us to not see that with the amount of illegal mexicans in "our" country taking over small portions to create their own communities - it all reeks of the past. I give the Mexicans all the credit in the world they live a lot more freely than most of the "white" citizens of the U.S. They have a richer culture than most in the US. That will all change as the television will soon destroy their traditions. Soon they will all stare like zombies into their rectangle cathedral and pray to the tv to solve their ills. Once you start allowing the television to influence your children more than you do, it is game over. You are dumb and your children will be dumber.
actually you can attribute all that is divine to single race. and that does indeed make you a "racist." just a point of logical cognition that's all.
how about getting on the welfare gravy train?
ca is a banna pepper republic. the top banna is in the belt line. drawing up paper defences to defend from american terrorist who will get thier pound of flesh. kind of like a well known tyrrant did in his last days commanding dead divisions or ones that exisited in papper only. as thier own lies and filth consumes them i will laugh untill its time to cry
Absolutely incoherent with one toe immersed in complete lunacy. Thread winner.
Yes! I would have missede that if you had not pointed that out. + 1
California / Compounds & Ex-Con security guards. Oh and Porn!<
Imagine how pissed those firefighters would be if they found their money was re-hypothecated out of existence! Maybe UBS was trying to avoid distorting the market with large purchases. Or maybe they were trying to drive the valuations higher with numerous buy orders of selected investments. Maybe some computer programmed by an Indian was doing all the trading. Who knows? Who cares, as long as the money isn't re-hypothecated.
Couldn't happen to a nicer bunch.
Fuck those government leeches.
Just wait until the unemployment runs out.
Californians with money are fleeing to the intermountain west (we call it "Californication", e.g. - Park City, Utah).
I hear apartment rents in L.A. are $3,000 a month; you would have to deal drugs to pay that rent.
I don't see how CA can stay afloat much longer.
That would be a pretty posh (or overpriced) apartment. Really posh ones in Park City might rent for nearly as much.
How's the job market in Park City these days?
I'm not in Park City but I hear it is rough, unless you work in hospitality or landscaping; more opportunity in SLC and it's a half-hour drive up to P.C.
Most of those posting here do not really understand CA in the least: on the one hand CA has major ag businesses and the folks in those areas tend to be pretty normal and conservative. Then you have the urban areas: LA, SF, Sacto where about 90% of the population lives. They, by their voting, determine the fate of the state. These urbanites tend to be super liberal and dumb....most of them believe that food comes from Safeway....
Having been involved with probably 20 different start upcompanies in CA over more than 40 years, I would have to say that today you would be crazy to start up a companyin CA. This state has created a new layer of regulation which rides on top of all the Fed regs. You have your OSHA and then you get to have your Cal OSHA....ditto about every other regulatory agency. Even the ag based businesses are getting out of Dodge...Hilmar elected to do their new cheese factory in Texas, even though they atarted in CA and have a major presence here.
When it comes to nutty regulations, CA (barring NYC) is hard to top for gun control. As we all know gun control really has nothing to do with reducing crime, but our state legislature keeps pushing through new controls at a massive cost despite an underwater budget. Massive cost and no return. This is just an example of the thinking process in Sacto. Even the auto industry must meet special regulations in CA, again driving up the costs to be here.
With the crashing CA commecial and residential real estate markets, soon the local governments will not be able to cover the interest on past bond issues due to the drop in property tax receipts. Expect this to be a major source of news announcements during 2012. That will further cripple development within the state.
It is really unfortunate that CA gone the way it has, but it is due to the urban liberals with absolutely no sense of how things are actually made and how they must be paid for.
If I sound pissed, I am.
"These urbanites tend to be super liberal and dumb....most of them believe that food comes from Safeway...."
So let me get this straight... the ones who took jobs causing them to struggle to survive on their hard labor, who are aged beyond their years are the smart ones. On the other hand, the ones who pursued jobs allowing them to live a cush lifestyle and look young for their age are the dumb ones? And, just guessing, your ability to come to this conclusion makes you one of the smart ones?
well it is true that most people think their food comes from Safeway. If they can afford Safeway of course. What's your view of food stamps? Wouldn't California collapse tomorrow if the food stamp program suddenly stopped paying?
yes, the are super dumb. they lack common sense. they want to ban everything
"Most of those posting here do not really understand CA in the least: on the one hand CA has major ag businesses and the folks in those areas tend to be pretty normal and conservative. Then you have the urban areas: LA, SF, Sacto where about 90% of the population lives. They, by their voting, determine the fate of the state. These urbanites tend to be super liberal and dumb....most of them believe that food comes from Safeway...."
Yeah, right...
Those POOR farmers, and those STUPID "others."
It's about corporate farming. You know, the ones selling to Safeway. Hm... do you think that there could be a connection as to how things turned out this way? Naw!
And what most people who THINK they know about California is all based on white-centric storylines.
Much of California's wealth was initially created by, wait for it... a, well, what's California's state motto?
Thanks for proving my point...most who post here do not have a clue about CA. All the farmers I dealt with in the Central Valley were family farms. Granted that some are bigger than others, but they are not corporate by any means. Have you ever been to the Central Valley?
I've been in/through most parts of California, but it's been many, many years (sigh, military).
There are plenty of large farms. And, as the folks who once inhabited a lot of California can attest to, working one's own land is key to creating a stable environment. Funny that crap like NAFTA worked to displace farmers in Mexico (win for US corporate Ag) and send them to the US as cheap migrant workers (win for US corporate Ag).
I'm in the process of starting up a farm. NOTHING has been given to me- no family handouts or hand-me-downs (family dynasty stuff).
YOU do not have the simplest clue about CA.
Just pontificate about your "native" understanding to those of us who grew up there, and all you do is show your complete and utter fucking IGNORANCE about the state and its inhabitants.
YOU are a complete and utter fucking FOOL, and your mother was an ignoramous for birthing you.
your whore mother should have flushed when she shit you out
I know, if God was smart enough to create a free market world, with no rules or centrally planned commandments, how did California go so wrong?
Fucking commies
Here on the right coast (N.J.), I've been watching ongoing construction on the site of a former GM dealer (Cerami Pontiac) which was dumped by GM in 2008 and went out of business. The old building was demolished to the ground, and a much larger multi-story steel-framed building emerged on the site.
Today I finally saw what it is: an immense Mercedes-Benz dealership, with three-story glass on three sides of the huge showroom, facing busy Route 17 in the mega-mall town of Paramus, N.J.
With residential real estate prices depressed, the N.J. middle class isn't doing that great. But someone thinks the prospects for the upscale Mercedes market justify a showcase Mercedes-Benz outlet.
It just goes to illustrate testosteronepit's thesis, that the high-income cohorts are cruising through the economic crisis unscathed, while the bottom cohorts contemplate food stamps, car repos, and cardboard boxes for homes.
Cheers to our comrades in sunny Big Cali, as well as to all you ex-Californians!
Democrat Jon Corzine and the unions F over the middle class of NJ. Corzine, friend of the muslim, also looted MF Worldwide.
Been to Paramus a couple of times.
You have a big PGA tournament there sponsored by the London bank Barclays.
Just a few notables on this bank for anyone's interest.
Origin: 1690.
Introduced the first credit card in the UK.
Introduced the world's first ATM.
Bought Lehman Brothers after its collapse.
In March 2009, it was reported that in 2008, Barclays received billions of dollars from its insurance arrangements with AIG, including $8.5bn from funds provided by the United States to bail out AIG. (From Wikipedia)
In March 2011 it was reported that Barclays had overtaken Banco Santander to claim top spot as the UK's most complained against bank, with the country's official banking regulator, the Financial Services Authority having recorded 276,315 new customer complaints against Barclays Bank during the second half of 2010
Yet.....In September 2011 Chief Executive officer Robert Diamond said that the bank is back on track to meet its target of achieving 13 percent return of equity by 2013.
Involvement with South Africa under apartheid Financial support for the government in Zimbabwe Accusations of money laundering Tax avoidance Links to the arms trade Food speculationSounds to me like it should have been the inspiration for the movie The International.
Anyways...I think they opened an office in Jersey City and just got naming rights to the new stadium that will be the home of the now not so New Jersey Nets.
I guess all those Barclay bankers in Jersey need a place to buy their Mercedes Benz.
As Kermit the Frog said, “It isn’t easy being green.”