Gavin Newsom often highlights California’s wealth during his campaign trips around the nation, presenting the state as a thriving economic powerhouse.
However, there’s a less flattering reality: Californians actually have less disposable income compared to other Americans. Recent research from the Pacific Research Institute points out that while the median household income in California is about 20% higher than the national average, the cost of living impacts residents’ disposable income, leaving them with 35% less to spend.
“The data clearly indicates that California’s economic issues are becoming increasingly evident,” noted Dr. Wayne Winegarden, one of the study’s co-authors.
Affordability remains a critical issue for Californians. Newsom refers to California as experiencing a “miracle,” boasting that the state has grown into the fourth largest economy worldwide. Yet, the high cost of living is prompting many residents to pack their bags and move elsewhere.
The situation is dire. The state’s poverty rate stands at 17.7%, reflecting a systemic crisis rather than a success story.
A significant factor in this decline is the slow job growth. In the past five years, starting from 2020, California’s job market expanded by a mere 2%, in stark contrast to the national growth rate of 4.3% across the other states. Without counting health and social services, which are largely government-backed, private sector jobs in California shrank by 2.7%, while they rose by 3.4% nationwide.
These statistics are part of why people are leaving the state. According to the PRI researchers, factors such as exorbitant housing costs, high taxes, expensive energy, and strict regulations have contributed to California’s economic downturn.
While it’s true that California has become the world’s fourth largest economy, the overall picture is more complicated. Over recent years, the state’s economy has decreased from accounting for 14.5% to 13.8% of the total U.S. economy, a trend suggesting that it’s not just competition abroad that’s affecting performance, but also from the other 49 states.
In terms of job creation, California once led the way, especially from 2007 to 2020. But that momentum faltered post-pandemic and as a result of policies enacted by Newsom and other lawmakers. The technology sector, which was a cornerstone of California’s economy, has also seen a decline, with its share of U.S. tech jobs falling from nearly 20% to about 16% since the pandemic began.
So, it seems, this trend may worsen as tech innovators leave the state over fear of a proposed “billionaire tax.” Their departures could trigger a chain reaction, prompting other entrepreneurs to establish new tech hubs in friendlier states.
According to the PRI authors, the upcoming election is pivotal, marking a potential moment for change in state policy. “California stands at a crossroads,” they say. “Lawmakers can maintain the status quo of high expenses and low growth, or pursue reforms that pave the way for opportunity, affordability, and dynamic economic growth.”
Residents have a choice: they can vote for leaders who will steer the state in a better direction or maintain Newsom’s current trajectory. If voters don’t act, tougher times could loom on the horizon, and the responsibility will lie with them.
