Its coastal cities are pricey, global hubs of talent and innovation
The state of California seems to attract apocalyptic news coverage and the way things are going, it’s unlikely to let up. You may have heard about an exodus of people fleeing lengthy commutes through gridlocked traffic, unaffordable housing, high taxes, wildfires, electricity outages and, always, the massive earthquake that will soon cause havoc.
And then you may hear from an employer in California offering you the most interesting job at, by far, the highest pay you’ve ever considered.
What’s a sane and reasonable person to do? Some homework, obviously, and in the article that follows, I rummage around public and private data sets to help you understand the truth of California’s challenges and rewards.
—The big picture: To overgeneralize, the state’s coastal cities are nearly essential locations for some ambitious people in the tech and entertainment industries, where concentrations of talent come together to generate enormous innovation and wealth. Your Silicon Valley startup failed? If you’re a programmer, chances are you can walk across the street and get another job tomorrow.
For many of us in less glamorous lines of work, though, attaining income to cover the high cost of living in those cities is very difficult, if not impossible. Inland, away from the Pacific Ocean, California is much more like most of the rest of the country: not so expensive, not so economically dynamic.
Also, it’s a big state, with 40 million people, the fifth-largest economy in the world, and 1,040 miles north to south. So, while writing about the whole of it may make for a better story, any serious consideration of living there — and buying a house, say — ought to focus more locally.
Price isn’t the only housing problem. There’s an acute shortage of homes in coastal cities. That forces many workers into long commutes. And tens of thousands of less fortunate Californians are homeless. The NIMBY (not in my backyard) sentiment among existing homeowners keeps new housing from being built in many areas. In fact, the overwhelming majority of neighborhoods in California’s major cities are zoned for single-family homes, which keeps more affordable options like condos or apartments from being built. So, that dynamic, along with a strong job market and rising incomes, pushes home prices up.
—Spending power: You have a pretty good idea how far a dollar goes where you currently live, but before considering a move you should check out purchasing power in cities across the country. This Tax Foundation webpage
Does the big salary your new job offers translate into a better living in San Jose, where purchasing power is roughly 80 cents on the dollar vs. the national averages? It can, especially if you’re a highly skilled tech worker. Incomes for programmers and others in tech-heavy cities have risen faster than the cost of living. For many other workers, however, pay hasn’t kept up.
—Jobs: Suppose you hate the job you moved to California for? There are lots more, right now. Programmer in San Jose? Indeed.com shows some 8,000 openings as of this writing. Registered nurse in Los Angeles? About 3,400 openings. Sales manager in San Diego? About 500. Indeed, LinkedIn, Glassdoor and other job sites aren’t just for getting a job. You can also find out about general demand in your area for your profession. It helps to know.
The ups and downs of California are magnified, compared to the U.S. as a whole. During recessions, the jobless rate tends to exceed the national level. During boom times, California booms bigger. Over the long term, the California economy outpaces the country as a whole.
—Taxes: Taxes on income, real estate, retail purchases, gasoline and other items are important considerations, and the Tax Foundation has handy maps for most categories. California’s income tax is high, 13.3% on the very top incomes (including most capital gains), of course added to a top federal rate of about 37%.
—Transit: Getting to that new job and your kid’s school and, maybe, your mother-in-law’s house is essential, and commutes can be long in California. General commute times
—Are people fleeing the state? Since 2006, more than 1 million Californians departed, but that’s only 2.5% of the population, and more people than that newly arrived. Some years, there’s a net outflow but long term, the population steadily rises. Some major employers, such as Toyota, have decamped to Texas, where wages are lower and labor laws more employer friendly.
Even some technology employers are trying to reduce dependence on the state’s expensive labor market. Software startup Zapier is one of several Bay Area tech companies that is now offering a $10,000 “de-location” bonus for moving away from the area.
—Can lower-wage people afford to stay? The state’s minimum wage is set to adjust to $15 by 2023. It’s one of just a half-dozen states that offers a paid family leave program. And one of a dozen or more states with a (limited) tuition-free college program. Housing prices and commutes are pushing middle- and lower-income households east in the state, and there appears to be little let-up in that trend.
—What about those wildfires and balky power grid? As population increasingly has pushed into brush areas, fire risk has grown. You can look up municipal fire risk on a handy webpage
Pacific Gas & Electric, the state’s largest utility, serves 4.6 million households mostly in central and Northern California. It’s in bankruptcy and faces $30 billion in liabilities for its equipment allegedly sparking wildfires. Over concerns that its equipment isn’t safe to operate when high winds increase the fire warning, PG&E temporarily shut down service in certain areas during the 2019 fire season. The utility and its regulators have years of rebuilding ahead to make up for deferred investment and to adjust to worsening conditions from climate change.
PG&E’s customers pay 20.06 cents per kilowatt hour, compared to an average 16.06 cents statewide and 10.48 cents nationally. Rates could rise to pay for PG&E upgrades.
But actual utility bills aren’t so high. The U.S. Energy Information Administration says California ranks next to last on annual energy consumption per person. The news outlet CalMatters says California’s average monthly electricity bill, at $101.49, is below the national average of $111.67.
It’s accepted wisdom among California haters to say that its higher taxes and level of business regulation will ruin its economy. Of course, they’ve been saying that for decades. Matthew Winkler, the founding editor-in-chief of Bloomberg News, in a series of columns in recent years took the opposite point of view: “The high taxes and ubiquitous regulation critics cite when assailing Golden State government are proving no impediment to business and investment. They may even be a benefit, as public policy and people’s preferences converge.”
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