Squeeze on Business Puts Strain on State’s Declining Middle Class
Sacramento
It’s an old threat: Treat businesses better or they’ll pick up and leave the state. Plop down in Nevada or Texas. Maybe Guangdong.
I’ll admit it, my usual response is this: Here’s a map. Take your jobs with you.
That will leave more room on the freeways for me. More water for my fish. Cleaner air and more affordable housing.
When I was born in California, there were 6.5 million people living here. That was pre-economic growth. We could afford to live in a two-story house a block from the beach in Santa Barbara on an oil worker’s wages.
By the time I went to San Jose State, there were 15 million Californians. Still, students paid only token registration fees. No tuition. No overflowing classes.
Now we’re passing 35 million. Tuition’s rising, classes are clogged. Coastal property’s out of sight for a working stiff. California’s carrying capacity is strained; water’s drying up.
The packed-in populace has more demands for government services than willing taxpayers.
So would somebody again explain to me the benefits of growth? That is, for the vast majority of us who aren’t profiting off the pockmarking of paradise.
Sure, that’s simplistic.
California could corral population growth by limiting housing, as they did in Santa Barbara and at Lake Tahoe. But politically that won’t sell. It would drive housing prices beyond the reach of average families.
We’re not going to halt the hordes. But we could guide the growth so, if it must be endured, there’s some benefit.
California could benefit from more middle-class jobs. At least staunch the hemorrhaging.
“No matter how you define middle class,” says Deborah Reed, an economist at the Public Policy Institute of California, “the thing you can say is that the rich are getting richer and the poor are getting poorer.... There has been very little income growth in the middle. Working harder has held incomes steady.”
The richest Californians are shouldering an increasingly larger share of the state tax burden -- many screaming because they’re the least likely to benefit from government services. The biggest beneficiaries of services, the poor, don’t pay state income taxes. The middle class benefits from schools, parks and transportation, but its importance as a tax source has been declining.
Mark Ibele, tax consultant for the legislative analyst, says that in 1978, the top 10% of income earners paid 62% of the state income tax. Everybody else paid 38%. In 2000, the top 10% paid 77%, and the rest only 23%. And the top tax rates actually were higher in 1978.
The University of California Institute for Labor and Employment concluded in a study last fall that “job growth in California during the 1990s was highly polarized, with large numbers of high-quality jobs and low-quality jobs being generated but with relatively little growth in the middle range.”
So what if the middle class downsizes?
It’s this ship’s glue.
One of its roles is to keep government on an even keel -- resisting excessive giveaways of tax money on the left and too-generous tax breaks on the right.
But mostly, a strong middle class keeps society in balance.
“The ladder of opportunity is central to our culture,” says Ruth Milkman, director of the UC labor institute. “If you knock the middle rungs out of the ladder, it’s a lot harder to climb. People with hopes of moving up in the world are a lot more willing to participate in civic culture. If they feel frozen out, why would they want to bother?”
Jean Ross, director of the California Budget Project, a liberal think tank, says simply: “The middle class is needed to ward off social unrest.”
Have-nots against the Haves.
Jack Stewart, president of the California Manufacturers and Technology Assn., will talk all day about this.
In the last two decades, he says, California’s manufacturing jobs declined from 2 million to 1.8 million. Service jobs doubled from 2.3 million to 4.6 million. The rub: An average manufacturing job pays $55,000; an average service job $30,000.
The median income in L.A. County, when adjusted for inflation, dropped from $45,000 to $42,200 in the 1990s.
Blame environmental regs and expensive land -- the results of overpopulation -- for pushing out some manufacturers. The end of the Cold War gravely wounded the aerospace industry. Then the dot-com bubble burst.
But Stewart also blames Sacramento. The wasteful, costly workers’ comp system, which employers finance, badly needs reform. Electricity rates are too high for manufacturers, he contends, and residential customers should pay a bigger share.
“Sacramento is sending a message [to business] that it doesn’t give a darn anymore,” Stewart says. “It’s got other priorities. That’s extremely shortsighted.”
The politicians do need to treat businesses better -- businesses willing to provide good-paying work for the middle class.
Myself, I’d prefer a California with 6.5 million people -- 15 million tops. But whatever the size, it should be dominated by a vigorous, hopeful middle class.
