21st Century California Careers

Bill Watkins
Executive Director of the Center for Economic Research and Forecasting at California Lutheran University

California is undergoing profound change.  Most strikingly, people are leaving the Golden State, which was once the preferred destination of migrants worldwide.  California’s domestic migration has been net negative for over 20 years.  That is, for 20 years, more people have been leaving California for other states than have been arriving from other states.  The state’s population is only growing because of a relatively high birthrate, mostly among immigrants.

Domestic migration is not a one-way street.  It may be net negative, but lots of people are coming to the state.  It’s just that more are leaving. Generally speaking, low and middle-income people are leaving.  Those coming tend to be wealthier and older than those leaving.  They are people who can afford California’s higher costs and limited opportunity.  These migratory trends are increasing income-inequality in America’s most unequal state.

Businesses are leaving the state too, but not all businesses.  Tradable goods producers are leaving California, because the state has for ten years maintained the single worst business climate in America.  Tradable goods are goods that can be produced in one place and consumed in another.  Manufacturing is the classic example, but technology is changing what is a tradable good.

Today, many jobs that used to be considered non-tradable services are now tradable services.  Back-office accounting functions can be done anywhere, as can legal research or title research.  Just about any job that is done at a computer is now a tradable service.

Unless they have a monopoly, tradable goods and tradable service providers face relentless price competition.  California’s high-cost environment is forcing them to relocate to lower-cost communities to survive.  Tradable producers won’t be providing 21st Century California jobs.

California, with its beaches, deserts, mountains, cosmopolitan cities and other attractions, is a major tourism destination.  These amenities also make California a wonderful place to live for those who can afford it.  So, wealthy people come to or stay in California, and then try to close the gate behind them.  Our cities become ever more divided between the older haves and the younger have-nots, between opulent consumption and not-so-much consumption.

So who will provide jobs for 21st Century Californians?  In a single word the rich and upper middle class affluents. When they come as tourists, they spark demand for leisure and hospitality jobs.  Consequently, this sector has been California’s second most rapidly growing sector with over 15 percent (239,400 jobs) growth since the beginning of the recession in October 2007.  Only healthcare grew faster or created more California jobs.  Since it is hard to guide tourists or change bed sheets remotely, these are non-tradable services jobs.

The resident rich will also create jobs.  We see this already in places like Santa Barbara, where there are types of jobs that were unimaginable until recently.  People will come to your house to cook your gourmet meal, clean your house, bathe your dog, trim your toenails, and supervise your exercise. They’ll even bring an athletic gym in the back of a truck.  There are doggy day care centers, with web cams to watch your puppy while you’re separated.  There is a pet cremation center.  There is a dog bakery.  Some people make a living walking other people’s dogs, while some people make a living taking older, apparently poorly-motivated, people for exercise walks.

Huge amounts of money are spent on homes, and not just on the purchase.  Remodels are almost perpetual for some, and they are happy to pay huge sums for quality craftsmanship.  So it is with cars.  Car collectors used to be hands-on.  Today, many hire someone to restore their cars.

The list of services that wealthy people are willing to pay for is unlimited.  Rich people, indeed all of us if we could afford it, enjoy paying someone else to do even mildly unpleasant chores.

This has resulted in rapid-for-California growth in non-tradable services jobs.  According to the California Employment Development Department, non-tradable services jobs grew 14 percent since 2000, while tradable-goods jobs declined by 24 percent.

We’ve seen this before.  Domestic service was a large sector in Victorian England, peaking about 1891 when internal combustion engines and automobiles brought renewed economic growth.  This provided new opportunities for workers and raised the cost of service workers.

California won’t see a new burst of economic or job growth in tradable sectors, particularly when the current tech boom evaporates. This is because California’s coastal elites will more successfully restrain growth than did their Victorian predecessors, perpetuating and increasing the state’s income inequality.

While the Irish Potato Famine and popular pressure forced the Corn Laws’ repeal, California’s elite face no such pressure.  In California’s one-party system, environmental purity easily trumps economic opportunity, and since California is only a state, it has a relief valve for disaffected citizens.  They can easily leave, and everyone that leaves increases the sustainability of the Coastal Elite’s no-growth, consumption based economy.

California’s bureaucracy will provide plenty of jobs too.  When the bureaucracy decides everything, as it does in California, it’s a unique source of middle class jobs.  Working for California’s bureaucracy pays well, but other options can be more profitable.  Lobbying and fighting the bureaucracy can be big business.  As it is, every California community has people whose only job is to help businesses and people navigate the local bureaucracy.

California’s formidable tech sector will diminish as a source of jobs and economic growth.  Venture capital’s changing economics and California’s ever-increasing costs will drive new growth to up-and-coming centers of innovation, places like Austin.  As it is, Austin, with 73.9 percent growth in tech-sector jobs between 2004 and 2014, saw more rapid growth in tech-sector jobs than San Jose, with 70.2 percent growth in tech-sector jobs over the same period.

We’ll be left with a bunch of rich people and a big bureaucracy and the people who serve them.  California will still be a beautiful place, but it’ll hide an increasingly ugly social reality.

Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting, which can be found at clucerf.org.

Cross-posted at New Geography.

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