Tucked away in Gov. Jerry Brown’s 2017-18 budget was some very disturbing news about jobs in California.
Although new jobs have been created, they don’t pay much.
The governor’s budget proposal says the tax revenue coming into the state treasury isn’t growing fast enough to keep up with spending because over the last four years, “the percentage of wage and salary growth from high-wage sectors dropped from 50 percent to 36 percent of total growth.”
California’s income tax collects revenue from higher earners but not from low earners.
Since the governor signed the current budget last June, “much of the employment growth” has come from “workers newly entering or reentering the labor force,” and combined with a rising minimum wage, this means “a greater share of wages is now going to lower-income workers.”
While that’s a “negative” in terms of state tax revenue, the budget calls it a “positive development” from “an income distribution standpoint.” Apparently the governor thinks a wider distribution of poverty is a worthy goal.
Well, he has achieved it. California now has the highest poverty rate of any state in the nation, 20.6 percent, when calculated under the U.S. Census Bureau’s Supplemental Poverty Measure to account for the cost of living.
Last June, the senior economist for the UCLA Anderson Forecast said the state is “essentially at full employment.” The report said we should start to see wage growth. But it hasn’t happened.
In the 40 years following World War II, from 1945 to 1985, wages and salaries in California grew at the average rate of 8.2 percent per year. Since 1985, the growth in wages and salaries has averaged 5 percent per year. Since 2000, 3.5 percent per year. In 2002 and 2009, wages actually declined.
The California Business Roundtable’s California Center for Jobs & the Economy looked at the jobs data between the first quarter of 2015 and the first quarter of 2016 and found that the total number of “private establishments” declined by 1,235. That means businesses. There are fewer of them.
“Middle class blue collar jobs remain 300,000 below the pre-recession level,” the report says, and “the lower wage industries paying near or at minimum wage accounted for nearly two-thirds of net jobs growth.”
There are now over 14 million Californians on Medi-Cal, the government’s safety-net health insurance, and more than 4 million Californians on food stamps. Many people who have jobs and are working hard are still unable to climb out of poverty.
The “full employment” story is undercut by the reality that tens of millions of Americans are no longer counted in employment statistics.
The chief economist of the Obama administration’s Labor Department, Heidi Shierholz, was asked in an interview about the declining rate of labor force participation, now below 63 percent despite the economic recovery. “It’s unambiguously true,” she said, and “something of a mystery as to what’s going on.”
Shierholz said the number of prime-age workers who have dropped out of the labor force is “one of the pieces of information that just makes me say, ‘We are not at full employment yet.’”
Good guess.
“We do have an unemployment rate of 4.7 percent,” Shierholz said, “but we are not seeing wage growth that’s fast enough for middle-income workers to really dig out of that inequality.”
In California, inequality is becoming less of a problem. Every month, more people are equally unable to pay the bills.