Is L.A.’s middle class coming back?
IN 1999, United Way of Greater Los Angeles released a sobering report on Los Angeles County, borrowing Charles Dickens’ title, “A Tale of Two Cities,” to describe the growing divide between the area’s haves and have-nots.
From 1970 to 1998, the report said, the poverty rate rose to more that 20% from about 11%. During the 1990s, more than 200,000 manufacturing jobs, many in the high-paying aerospace industry, were lost, and during that decade, the five fastest-growing jobs paid less than poverty wages. In short, middle-class jobs were disappearing.
A follow-up United Way report, issued in 2003, concluded that inequality was still increasing.
But last week, the UCLA Anderson Forecast, an often-cited forecast produced by UCLA’s business school, reported a provocative -- and unexpected -- finding in its quarterly economic estimate: Income inequality in Los Angeles declined from 2000 to 2005 because some of the middle-class jobs lost in the 1990s have been replaced. Over the last six years, nearly 150,000 manufacturing jobs disappeared in Los Angeles, but 130,000 jobs were created in health and human services, construction and educational services, and 50,000 in professional scientific and technical services, finance and insurance. Unfortunately, though, restoring L.A.’s middle-class heritage is still a longshot.
Income inequality is nothing new, of course. In an address at Temple Israel of Hollywood in 1965, Martin Luther King Jr. bemoaned that the nation’s economically marginalized were “perishing on a lonely island of poverty in the midst of a vast ocean of material prosperity.” More recently, many studies released by the nonpartisan Congressional Budget Office have traced the nation’s widening income gulf. For instance, the share of the nation’s after-tax income for the top 20% of U.S. households jumped to 50% in 2004 from 42% in 1979, while the bottom 20% saw their share decline to 5% from 7%.
Despite its good news, the UCLA Anderson Forecast analysis shows that income inequality in Los Angeles has been greater than in the U.S. as a whole over recent decades. To determine the level of inequality, the forecast used the Gini coefficient, which measures how evenly income is distributed among households in an area. The higher the number, the more income is concentrated in fewer hands. On a scale in which zero represents perfect equality (everyone has the same income) and 100 perfect inequality (one person has all the income), Los Angeles County scored 68 in 1999, 40% higher than that of the nation as a whole and a 20% increase from the 1980s. Perhaps most striking, this put Los Angeles on par with inequality levels in Mexico.
The recent creation of middle-class service jobs for workers such as paralegals, architectural draftsmen and equipment technicians, however, has dropped L.A.’s inequality score to 61, according to Jerry Nickelsburg, an economist at the Anderson Forecast.
Despite this improvement, inequality in Los Angeles remains nearly one-third higher than in the rest of the U.S., which itself has a level of income inequality rivaling many developing nations. Nickelsburg concludes that L.A.’s lower score is probably a correction to the rapid increase in inequality during the 1990s that resulted from job losses in the aerospace and defense industries.
Overall income distribution is just one measure of inequality and does not provide a complete picture of the social and economic divisions that plague Los Angeles. A growing body of research demonstrates that neighborhoods are increasingly segregated by economic class. A recent study by the Brookings Institution found a dramatic decline in the number of neighborhoods across the country that are middle income; some become poor, others high income. But nowhere was the drop more dramatic than in Los Angeles. In 1970, 52% of L.A. neighborhoods were middle income. By 2000, only 28% were, the lowest percentage among the top 100 metropolitan areas in the nation.
Furthermore, in a region with a high cost of living, such as Los Angeles -- where more than half of renters pay more than one-third of their income to keep a roof over their heads -- a mid-level income is unlikely to support a middle-class lifestyle.
In United Way’s recently released quality-of-life index, we combined income, employment and cost-of-living indicators and found that the economic status of L.A. residents worsened overall from 2000 to 2005. In addition, rising inequality in wealth in L.A. may be of greater concern than inequality in income because such assets as homes and investments provide the long-term security necessary for people to enter and stay in the middle class. In other words, declining income inequality doesn’t necessarily signal a resurgent middle class.
Still, as encouraging as the growth in middle-class jobs is, the huge gap between the relatively low skills of the workforce in the county and the higher-level technical and “soft” skills -- critical thinking, team building, the ability to be cross-trained -- demanded by many new industries in the information economy must be addressed through education and training. There are promising signs that this kind of training is happening. Across the country, employers, unions, schools and job trainers are collaborating on programs that help people develop the basic and technical skills required in such work as providing healthcare, storing and moving goods (think the port of L.A.) and refining petrochemicals, especially in the South Bay.
Like other urban regions, Los Angeles is facing the impending retirement of its highly skilled baby boomers. Unlike many other metropolitan areas, we have the advantage of a relatively young population: 60% of our residents are under 40. Investing in this young population to create a workforce that can perform multiple tasks and be frequently cross-trained and retrained for the jobs in the 21st century economy will determine whether Los Angeles will remain a “Tale of Two Cities” or become a place of “Great Expectations.”
