San Francisco

Blade Runner Meets Old Testament

John Sanphillippo — Thu, 01 Oct 2020 20:29:01 -0400

I took these photos at midday as I went about my usual chores. The forest fires that have been burning across California sent ash over San Francisco turning the sky a freakish shade of orange. Birds sat on the ground looking confused. The streetlights remained on since their sensors indicated it was still night at noon.

My neighbor sent up his drone and captured images from directly above our building. I got an instant Blade Runner 2049 vibe. Is this life imitating art? Or is art giving us a sneak preview? As grim as the air quality is in the city it’s even worse in the countryside closer to where the fires are burning.

Photo credit: Darius Emrani

I had to drive down to the tech suburbs south of the city and the scenes were equally spooky. The YouTube headquarters, Merck, SAP, and Walmart’s IT center were all wrapped in an orange shroud.

See the rest of this piece at Granola Shotgun.

John Sanphillippo lives in San Francisco and blogs about urbanism, adaptation, and resilience at granolashotgun.com. He earns his living by buying, renovating, and renting undervalued properties in places that have good long term prospects. He is a graduate of Rutgers University.

This is the Great Reshuffling

John Sanphillippo — Tue, 22 Sep 2020 20:29:01 -0400

The Interwebs are abuzz over the mass exodus from cities triggered by the coronavirus. Cue up the images of Moses parting the sea for a caravan of U-Hauls destined for the verdant cul-de-sacs of the Promised Land. This outward population migration is quantifiable and real. You’ll get no arguments at all from me. But the nuances are being lost in the chatter.

Back in December of 2014 a friend who works for one of the big tech companies was wooing new recruits that had been flown in. She asked me to take a couple of recent grads around the city. One was from Florida and the other was from Texas. They were smart and charming and ready to begin their careers. I took them to the various tourist areas, we enjoyed a few meals together, I answered their questions, and then delivered them back to their luxurious accommodations courtesy of their corporate sponsor.

While we explored the city I listened to the conversations as they got to know each other. Which of their schools was more fun to attend? Are Florida girls prettier than Texas girls? There was the obligatory money talk concerning how much they might receive in stock options when the company goes public and what kind of house they would buy with the windfall. They agreed that a three car garage was a must. (Evidently a two car garage is just lame.) A swimming pool. At least five bedrooms since the kind of girls they would inevitably marry would insist on that much space. Et cetera.

These were not San Francisco people. They might drift in for a while, build up their careers, and make some easy money. But they were never going to remain for long. They were always destined for a suburban life elsewhere. And the stock talk reflected the reality that financialization had funneled wealth to flow to some individuals and locations selectively while many others were outsourced into the minimum wage gig economy and unemployment.

As this marginal demographic departs the city a void is being created and it’s providing wiggle room for people who genuinely want to be here. The city has needed this correction for years and there’s a collective sigh of relief that it’s finally arrived. It’s true that city dwellers can leave and continue to work from home in a distant suburb or rural retreat in another state. But it’s also true that people trapped in the ‘burbs against their desires are slightly more able to move in to the city.

When I encounter people moving house I like to ask where they’re heading. Some lost their service economy jobs and don’t expect them to ever come back. They aren’t leaving voluntarily. They just don’t see a future for themselves in a place that won’t recover for a very long time. They also don’t see comparable jobs waiting for them anyplace else. Others had their roommates leave and now paying the rent as an individual simply doesn’t pencil out. Most of these folks are returning to family or friends elsewhere against their wishes with no clear path forward beyond mom’s basement.

But there are also many examples of people who are finally able to upgrade and get a better quality space in a more desirable location within the city. Competition has evaporated and rents are coming down. Not all the U-Hauls are leaving town. For those who retain their incomes an opportunity has presented itself to upgrade at a discount.

A fascinating dynamic is unfolding next door. My neighbors are currently renting their one bedroom apartment for $4,300 a month. They contacted their landlady who lives out of state, explained the city wide economic situation, and asked for a rent reduction. She said no. They then contacted the owner of the soon-to-be vacant unit next to them and were welcomed into a nearly identical apartment for $3,300. Is that “cheap?” No. But it’s a $1,000 savings every month with no change to their living arrangements. They signed up and are sliding their furniture about twelve feet over to their new accommodations.

The couple who are vacating that apartment aren’t leaving the city. They’ve just bought themselves a proper house with a back garden a few blocks away. Their moving van isn’t going far at all. They’re excited about their new digs and have already dubbed their new home The Oasis.

This morning I got a call from a friend who lives in a rural area three hours away. He and his girlfriend have been saving up for a house for a few years. There are no truly affordable places in California anymore, but they had hopes of finding a modest fixer upper within their stretched budget. In the last five months an army of city people have moved in and driven up the cost of property in a panic. Crappy homes are now selling with multiple all-cash offers for $100,000 above the asking price. COVID-19 has brought many sad situations with a lot of loss. But it’s also creating new winners. This is the Great Reshuffling.

This piece previously appeared in Strong Towns.

Johnny Sanphillippo is an amateur architecture buff with a passionate interest in where and how we all live and occupy the landscape, from small rural towns to skyscrapers and everything in between. He travels often, conducts interviews with people of interest, and gathers photos and video of places worth talking about (which he often shares on Strong Towns). Johnny writes for Strong Towns, and his blog, Granola Shotgun.

Lazaretto Dining

John Sanphillippo — Fri, 04 Sep 2020 20:29:01 -0400

Last week a friend asked me for help in his back garden. This is the first time he’s owned a proper home rather than a condo and he’s not sure how to manage the yard. We’re in a part of the world where it doesn’t rain for most of the year and hand watering gets old fast. I brought over samples of the irrigation tubes and drip emitters I like to use and walked him through the installation process.

While I was there I suggested he install some emergency water storage on the property. I was friends with the woman who used to live in this house and showed photos of the tanks I had set up for her some years earlier. There was a long pause and he seemed skeptical, first about the need, then about the health concerns associated with plastic containers, then about the cost.

I gave a game show wave of my arm and pointed out the obvious. We were standing outside “social distancing” with masks on because we were in the midst of a global pandemic. Who would have expected that six months ago? Shit happens. We live in San Francisco. There’s absolutely going to be an earthquake sooner or later. And when the quake hits the city water supply will be compromised.

Given the official response to our current national drama from all sides it’s obvious that households will most likely be on their own for a period of time. I see a couple of 260 gallon water tanks as the absolute bare minimum level of preparedness. So I asked if he wants pure mountain spring water in a perfect surgical steel tank that doesn’t exist because he never got around to it? Or does he want some mediocre tap water in a food grade plastic tank that gets the job done? Or does he want… nothing at all?

As the Covid-19 situation drags on in what is likely to be a multi-year semi-permanent on again off again condition I’m constantly updating my extended pantry system. I’ve been in communication with my fellow long time preppers and homesteaders around the country along with a newly formed colony of inquisitive acolytes. We’re all seeing the same things.

Just try to buy a deep freezer or pressure canner these days. They’re all sold out and on back order for months. The price of canning jars and lids has more than doubled since the Big Cooties hit five months ago and they aren’t always available. Emergency preparedness websites were picked clean in the early days of the Covid freak out and are only now partially catching up as supply chains wobble. I cringe as folks rush to buy gold at all time high prices in a panic as if it had talismanic powers. What good will a few Krugerrands do if you have no food in the house and the store shelves are bare? The time to acquire such things is always before a crisis hits, not in the middle of one.

I was never in danger of running out of much of anything, but as stocks were drawn down these last few months I had to adapt and find new sources for replenishment. I’ve noticed the accelerated “dematerialization” of the retail economy as temporary workers in rented vans replace storefronts and full time employees. Products are now conjured from the ether and arrive directly from the cloud. It’s both more efficient and more precarious.

Last night dinner was mezze, a Middle Eastern style assortment of bread, lentils, hummus, vegetables, and so on. An Egyptian friend taught me how to make stuffed grape leaves a while back and I really love them. I have dried chickpeas and fava beans in great abundance, but I decided to test drive a restaurant supply falafel mix which I portioned out and vacuum sealed. It’s not bad and should keep long enough for many such meals over the coming year. I even have a little brass kitchen tool from Jordan that measures and scoops out the falafel mix for frying. Dinner at the lazaretto can be quite good if you plan ahead.

Apples are abundant these days so I canned a few big batches of sauce. I enjoy these homespun projects and the peace that comes with knowing I could go a really long time without money or outside supplies and still put food on the table. The more unstable the world becomes the more I prefer to detach as a form of insurance.

I upcycled the empty falafel mix bucket and put it to use turning the apple peelings into cider vinegar. A packet of champagne yeast and water are all that are needed to transform waste into something useful. These techniques have fallen out of favor for so long that the thought of making your own vinegar seems ridiculous – kind of like setting water aside for an earthquake. We neglect these things at our peril.

This essay first appeared on Granola Shotgun.

The Twilight of Great American Cities is Here. Can We Stop It?

Joel Kotkin — Sun, 16 Aug 2020 20:29:01 -0400

The dreadful death of George Floyd lit a fire that threatens to burn down America’s cities. Already losing population before the pandemic, our major urban centers have provided ideal kindling for conflagration with massive unemployment, closed businesses and already rising crime rates.

The forms of disintegration vary. In overwhelmingly white cities like Portland, Seattle, San Francisco and Minneapolis, violence has featured white radicals endorsing the extreme agenda of the neo-Marxist Black Lives Matter. In more diverse cities, such as Chicago and New York, protests have devolved into basic thuggery as law enforcement has been curtailed and large portions of the prison population have been released.

The pandemic has shaken the once confident ranks of new urbanists. At a time when even The New York Times is suggesting that density and packed transit lines worsened the contagion, some still embrace theology over data, with some advocating ever greater density, more crowding in cities, and mass transit. Fortunately, people tend to be less theological about their locational choices. According to The New York Times, 420,000 people left New York City between March 1 and May 1. This nearly equals the city’s total population increase from 1950 to 2019, according to demographer Wendell Cox.

Pandemic Impacts

The impact of dense conditions on the pandemic is clear. Overall, high-density locations have suffered three times the COVID-19 fatality rate of less dense, generally suburban areas and eight times those of more rural environments. Cities’ vulnerability comes not simply by calculating people per square mile, but by “exposure density” brought on continued contact with people, particularly in crowded, unventilated places like subways, small apartments, elevators and offices. After all, the New York area, the epitome of dense, transit-oriented urbanization, still accounts for roughly one-third of all U.S. COVID-19 deaths.

Even as the pandemic has spread to other parts of the country — notably meat packing plants, border towns and Native American reservations — the correlation is simply impossible to ignore. High rates of poverty and overcrowding, clearly factors in COVID-19 infections, can occur anywhere but seem most devastating in places where poverty meets density. The Brooklyn and Bronx boroughs, with higher rates of poverty than fashionable Manhattan, have endured a fatality rate 7.5 times the national average.

Urban planners, real estate speculators and their flacks may ignore these numbers, but people take their own health, and that of their families, more seriously. A recent Harris poll suggested that upwards of two in five urban residents are considering a move to less crowded places. More people, notes the National Association of Realtors, are seeking out single family houses with yards and workspaces.

Read the rest of this piece at Daily Caller.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Photo credit: ED Yourdon via Flickr under CC 2.0 License.

COVID Work Trip Reduction Estimates: CSAs with Transit Legacy Cities

Wendell Cox — Thu, 13 Aug 2020 20:29:01 -0400

America’s elite central business districts have symbolized the ascendency of big cities, epitomized by soaring office towers. But today, due the COVID-19 pandemic, so much office work performed in these CBDs can be done remotely, that their future seems far less towering than in the past. In contrast, less dense areas, notably exurbs, appear to have suffered less loss in their employment patterns.

This is not because these functions are unnecessary, but they do not need nearly the office space once imagined. much of their economic activity has continued outside the office. A Stanford University survey indicates that 42 percent of the workforce is working remotely — about 8 times the normal rate reported by the American Community Survey for 2018.

This article describes the reduction in work visits, by counties within the six combined statistical areas (CSAs) that have the nation’s six “transit legacy cities” (the municipalities of New York, Chicago, Philadelphia, San Francisco, Boston and Washington) at their cores. These cities (which are to be contrasted with metropolitan areas) accounted for 58% of transit commuting destinations in 2018 and have the six largest downtowns (central business districts or CBDs) in the United States. These dense developments function as the urban cores of the larger labor market CSA definition by the Office of Management and Budget. Each of these CSAs well served by lengthy commuter rail systems, as well as radial express freeways.

The Google Mobility Reports

The data is from the “Google COVID-19 Community Mobility Reports,” which estimate trips by people compared to a base of for various activities, including trips to the workplace. According to Google:

The reports use aggregated, anonymized data to chart movement trends over time by geography, across different high-level categories of places such as retail and recreation, groceries and pharmacies, parks, transit stations, workplaces, and residential. We’ll show trends over several weeks, with the most recent information representing 48-to-72 hours prior. While we display a percentage point increase or decrease in visits, we do not share the absolute number of visits. To protect people’s privacy, no personally identifiable information, like an individual’s location, contacts or movement, is made available at any point.

Trip rates are compared to a baseline of January 3 to February 6, 2020. The period covered is the month of June, when many parts of the nation were “locked down.” We have used the Google daily data, developing daily averages compared to the baseline period of January 3 to February 6, 2020.

These data reflect the economic disruption that COVID-19 has unleashed upon not only the CSAs, but their suburban and exurban ring components. They capture a measure of the decline in trips to work by people now working from home and by people who have lost their jobs, either permanently or temporarily. Both of these factors have created economic disruption. The first, working at home, has severely impacted businesses, for example downtown restaurants, bars and hotels that rely on work location driven commerce. Many are now deserted, and, like empty offices, could impact commercial real estate in the longer term, depending on how permanent is the current increase in remote working. The more challenging economic prospects of those who have been laid off is perhaps the most important disruption.

The discussion below describes the classification into CSA sectors (generally core, suburban and outside the principal metropolitan area), weighting the Google work visit figures by the workplace employment in each county (using ACS 2014-2018 work place data). These data are provided as very general estimates.

New York CSA: The 41 county New York CSA (12,400 square miles, 33,100 square kilometers) extends beyond the metropolitan area to include counties such as Fairfield (Bridgeport-Stamford) and New Haven in Connecticut, Mercer (Trenton) in New Jersey, Dutchess and Orange in New York and Monroe in Pennsylvania. New York is the largest CSA and has a sufficient number of counties to produce a more fine-grained analysis. Further, the New York CSA has the most diverse in urban form in the nation, with by far the nation’s densest central business district and the highest density neighborhoods as well as overall suburban densities in the New York barely one half that of Los Angeles suburbs, and smaller urban area densities that are one-third to one-fifth that of Los Angeles suburbs (New Haven and Poughkeepsie).

The largest percentage loss in workplace visits was (Brooklyn Queens and Hudson [Jersey City]). New York City’s four outer boroughs experienced a loss of 42.5% workplace visits. The inner suburban counties, all of which are adjacent to the city of New York, had an average loss of 38.2%. The outer suburban counties, which include all other counties in the metropolitan area, lost a considerably lower drop of 32.8%. The counties in the adjacent metropolitan area (in the CSA, but not in the MSA) lost 31.4%. Overall, workplace visits were down 41.1% in the New York CSA (Figure 1).

San Francisco Bay CSA: The 14 county San Francisco Bay CSA (10,600 square miles, 27,500 square kilometers) extends beyond the 5-county MSA to include counties such as Santa Clara, Sonoma, Solano and three in the San Joaquin Valley (San Joaquin, Stanislaus and Merced).

The city of San Francisco equaled Manhattan in its drop in workplace visitations, at 55.0%. Santa Clara County (San Jose), the center of Silicon Valley, but outside the San Francisco metropolitan area, suffered a drop of 48%, while suburban San Mateo County lost 46%. Overall, the employment weighted loss in the suburban counties of the MSA was 42.1%, while the loss in the CSA counties outside the MSA such as San Joaquin and Merced was 37.4%. The overall CSA loss was 41.9% (Figure 2).

Washington CSA: The 41-county Washington-Baltimore CSA (13,600 square miles, 35,100 square kilometers) was created by the merger of two of the nation’s largest metropolitan area. It extends to counties in Pennsylvania and West Virginia. This analysis separates the city of Baltimore, rather than considering it a suburb of Washington.

The city of Washington experienced the third worst workplace visitation loss among the six CSAs, at 50%. The largest loss in the CSA was in Arlington County, VA, adjacent to the District of Columbia, at 51.0%. The city of Baltimore, which is not a transit legacy city, has a smaller downtown and less reliance on transit had a loss of 35.6%. The other counties of the MSA lost 42.2%. The counties outside the MSA lost 33.2%. The overall CSA loss was 40.7% (Figure 3).

Philadelphia CSA: The 16-county Philadelphia CSA (7,300 square miles, 19,000 square kilometers) includes additional counties in Pennsylvania, such as Atlantic (Atlantic City) and Berks (Reading). The city of Philadelphia lost 39.0% of its workplace visits. The suburban counties declined 35.2%, while the counties outside the MSA lost 28.9%. The overall CSA loss was 35.2% (Figure 4).

Boston CSA: Unlike the CSA’s above, the 19-county Boston CSA (9,700 square miles, 25,100 square kilometers) does not have a separate county equivalent jurisdiction for its core city (Boston). The core Suffolk County is largely dominated by Boston, and which experienced a workplace visit loss of 41.7%.Suburban MSA counties lost 39.0%, while counties outside the CSA lost 29.3%. Overall, the Boston CSA loss was 36.9% (Figure 5).

Chicago CSA: The 19-county Chicago CSA ((8,900 square miles, 23.000 square kilometers) core county is Cook, includes the city of Chicago and a large suburban population. Cook County’s workplace visits were down 37.2%. It is likely that the city of Chicago’s workplace visits were down more, because it represents a smaller percentage of the central county than in the other five CSAs. The suburban counties had a loss of 30.9%, while the counties outside the MSA lost 20.2%. The overall loss was 33.9% (Figure 6).

Denser Areas Subject to Greater Economic Disruption

Just as denser areas of urbanization have borne the brunt of Covid-19 fatalities, they have also absorbed a disproportionate share of lost economic activity. Overall the workplace visit loss in counties with transit legacy cities reaches 46.7 percent while those outside, with their lower urban densities and greater dispersion of jobs fell by 32.9percent. All economies have proven vulnerable to the pandemic, but certain areas, particularly those with the transit legacy cities, with the largest CBDs and most transit dependency, have suffered markedly worse.

Wendell Cox is principal of Demographia, an international public policy firm located in the St. Louis metropolitan area. He is a founding senior fellow at the Urban Reform Institute, Houston and a member of the Advisory Board of the Center for Demographics and Policy at Chapman University in Orange, California. He has served as a visiting professor at the Conservatoire National des Arts et Metiers in Paris. His principal interests are economics, poverty alleviation, demographics, urban policy and transport. He is co-author of the annual Demographia International Housing Affordability Survey and author of Demographia World Urban Areas.

Mayor Tom Bradley appointed him to three terms on the Los Angeles County Transportation Commission (1977-1985) and Speaker of the House Newt Gingrich appointed him to the Amtrak Reform Council, to complete the unexpired term of New Jersey Governor Christine Todd Whitman (1999-2002). He is author of War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life and Toward More Prosperous Cities: A Framing Essay on Urban Areas, Transport, Planning and the Dimensions of Sustainability.

Photo: Chicago Loop (downtown), by author.

California's Woke Hypocrisy

Joel Kotkin — Thu, 30 Jul 2020 20:29:01 -0400

No state wears its multicultural veneer more ostentatiously than California. The Golden State’s leaders believe that they lead a progressive paradise, ushering in what theorists Laura Tyson and Lenny Mendonca call “a new progressive era.” Others see California as deserving of nationhood; it reflects, as a New York Times columnist put it, “the shared values of our increasingly tolerant and pluralistic society.”

In response to the brutal killing of George Floyd in Minneapolis, Los Angeles mayor Eric Garcetti announced plans to defund the police—a move applauded by Senator Kamala Harris, a prospective Democratic vice presidential candidate, despite the city’s steep rise in homicides. San Francisco mayor London Breed wants to do the same in her increasingly crime-ridden, disordered city. This follows state attorney general Xavier Becerra’s numerous immigration-related lawsuits against the Trump administration, even as his state has become a sanctuary for illegal immigrants—complete with driver’s licenses for some 1 million and free health care.

Despite these progressive intentions, Hispanics and African-Americans—some 45 percent of California’s total population—fare worse in the state than almost anywhere nationwide. Based on cost-of-living estimates from the U.S. Census Bureau, 28 percent of California’s African-Americans live in poverty, compared with 22 percent nationally. Fully one-third of Latinos, now the state’s largest ethnic group, live in poverty, compared with 21 percent outside the state. “For Latinos,” notes longtime political consultant Mike Madrid, “the California Dream is becoming an unattainable fantasy.”

Since 1990, Los Angeles’s black share of the population has dropped in half. In San Francisco, blacks constitute barely 5 percent of the population, down from 13 percent four decades ago. As a recent University of California at Berkeley poll indicates, 58 percent of African-Americans express interest in leaving the state—more than any ethnic group—while 45 percent of Asians and Latinos are also considering moving out. These residents may appreciate California’s celebration of diversity, but they find the state increasingly inhospitable to their needs and those of their families.

More than 30 years ago, the Population Reference Bureau predicted that California was creating a two-tier economy, with a more affluent white and Asian population and a largely poor Latino and African-American class. Rather than find ways to increase opportunity for blue-collar workers, the state imposed strict business regulations that drove an exodus of the industries—notably, manufacturing and middle-management service jobs—that historically provided gateways to the middle class for minorities. As a recent Chapman University study reveals, California is the worst state in the U.S. when it comes to creating middle-class jobs; it tops the nation in creating below-average and low-paying jobs.

Following Floyd’s death, even environmental groups like the Sierra Club issued bold proclamations against racism, but they still push policies that, in the name of fighting climate change, only lead to higher energy and housing costs, which hurt the aspirational poor. Many businesses, including small firms, must convert from cheap natural gas to expensive, green-generated electricity, a policy adamantly opposed by the state’s African-American, Latino, and Asian-Pacific chambers of commerce.

Meantime, California’s strict Covid-19 lockdown policies, imposed by a well-compensated (and still-employed) public sector, have imperiled small firms. “There’s a sense that there was major discrimination against local small businesses,” said Armen Ross, who runs the 200-member Crenshaw Chamber of Commerce in South Los Angeles. “They allowed Target and Costco to stay open while they were closed. Many mom-and-pops may never come back.” Many restaurants—roughly 60 percent are minority-owned—may never recover, notes the California Restaurant Association.

Read the rest of this piece at City Journal.

Joel Kotkin is the author of the just-released book The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute — formerly the Center for Opportunity Urbanism. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin

Photo credit Charlie Nguyen via Flickr under CC 2.0 License.

Is the California Dream Finished?

Joel Kotkin and Marshall Toplansky — Sun, 12 Jul 2020 20:29:01 -0400

For all the persistent rhetoric from California’s leaders about this state being on the cutting edge of social and racial justice, the reality on the ground is far grimmer.

Our new report on the state of California’s middle class shows a lurch toward a society in which power and money are increasingly concentrated and where upward mobility is constrained, amid shocking levels of poverty. Most of this data doesn’t even account for the recent effect of the coronavirus outbreak, which has pushed the state’s unemployment rate to 15.5%, higher than the nationwide rate of 14.7%.

Even before the pandemic, California topped the nation in the widest gap between middle and upper-middle income earners and has become progressively more unequal in recent years. But its greatest shame is the prevalence of poverty amid enormous affluence. California’s poverty rate, adjusted for cost of living, is the highest of any state and was higher in 2019 than in 2007.

California’s political leaders like to talk about racial justice, but Latino and Black populations bear the brunt of the pain. And by some measures, such as minority home ownership, California remains far behind states such as Texas, Michigan, Arizona and Florida.

Gov. Gavin Newsom and state lawmakers should stop trying to sell the myth of the California dream. On its current trajectory, this state is socially, fiscally and economically unsustainable.

The biggest drivers of California’s poverty and staggering inequality are low-wage jobs and extraordinarily high housing costs. But it’s not too late to change course if state policies that help create these twin crises are rolled back.

That means reforming business regulations and eliminating regulatory regimes that suppress development in the most populous counties. Instead of encouraging high density growth along the ultra-pricey coastal areas, we need an intensive, state-driven push for job development and housing creation in less costly peripheral regions.

Since 2008, the state has created five times as many low-wage jobs as high-wage jobs, according to an analysis of Bureau of Labor Statistics numbers. The vast majority of jobs produced pay less than the median wage, and 40% pay under $40,000 a year. No metro area in California ranks in the top 10 in the U.S. for well-paying jobs for people without a college degree, but in 2019 four — Ventura, Los Angeles, San Jose and San Diego — were among the 10 worst in the country for non-college educated people looking for better paying jobs.

State policies — particularly environmental regulations that have led to high energy prices and long approval processes to get development permits — have been key factors to constricting the creation of higher-paying jobs. California’s energy prices, now among the highest in the nation, hit not only the pocketbooks of working and middle-class Californians but have discouraged more jobs in manufacturing. And on July 1, the state gasoline tax rose again by 6%.

The state is also falling behind in creating business and professional service jobs, the largest high-wage sector. Overall, California lost 1.6 million above-average-paying jobs in the past decade, more than twice as many as any other state. This pattern could become worse if tech workers are given the option to work remotely after the pandemic ends. In fact, as many as two out of three Bay Area tech workers say they would leave that area if they could.

This lack of good jobs converges with unaffordable housing to destroy hope for a better future for millions of Californians. To qualify for a mortgage on a median-priced house (around $1.1 million) in the San Jose metropolitan area requires an annual income of about $250,000. In Orange County, $167,000 is required, and in Los Angeles County $125,000.

Newsom has called for building 3.5 million new homes by 2025. Yet, according to our analysis of Census data, housing construction continues to lag (burdened by lengthy permit processes and often years of litigation), with 110,000 housing units built in 2019 — far below the 302,934 units built in 1986 when California had one-third fewer residents. At the current rate, it would require nearly 30 years to build 3.5 million homes.

Persistent housing shortages mean that most new single-family and apartment construction tends to be for the high-end market. Only 7,800 of the new apartments built between 2015 and 2017 in Los Angeles — around 11% of total construction — are affordable, with rents of around $1,842 a month. By contrast, average rent on the 66,000 “market rate” apartments exceeds $2,500 a month.

With the Bay Area and coastal Los Angeles too expensive for most middle- and working-class families, they have headed to places with more affordable housing but relatively few high-paying jobs. The Inland Empire of Riverside and San Bernardino counties, for example, also suffers the lowest average pay of any of the nation’s 50 largest counties.

The COVID-19 pandemic offers California a way out of this dilemma if it can adjust to an already accelerating national movement away from dense cities and, even among millennials, toward suburbs. Employees working from home, notes demographer Wendell Cox, have already passed the number of those using transit in Southern California before the pandemic and have now grown markedly everywhere. This would represent an environmental win: it would allow commuters to work closer to home, thus reducing greenhouse gas emissions.

The many benefits of working remotely — or in dispersed business centers — are apparent, in terms of giving affordable new choices to California families and companies. This would mean rethinking state policies that have made reducing auto use a top priority and greenlighting projects in less expensive regions rather than force development into areas where prices are highest and opposition to new development is often most intense.

There’s certainly room to grow, contrary to conventional wisdom. Urbanization covered only 5.3% of the state in 2010, according to the Census Bureau data. Rather than try to cram growth into a few areas, it would make sense to find ways to offer incentives to a new Tesla plant to Fresno or to Riverside County, or have Google put a customer support operation in Manteca rather than Mississippi, as it announced recently.

But unlike in other states, there is no coordinated strategy in California to help industry grow middle-class employment. The biggest impediments are not physical or even fiscal but the willingness of state leaders to acknowledge the crisis for working people of all ages in California — made worse by the fallout from the pandemic. The question is, do they care enough about economic and racial justice to build a vision and adopt policies that would give more people a shot at a decent job and affordable housing?

This piece first appeared on Los Angeles Times

Marshall Toplansky is a clinical assistant professor of management science at the Argyros School of Business and Economics at Chapman University. He is a research fellow at the university’s Hoag Center for Real Estate and Finance and at the Center for Demographics and Policy.

Photo courtesy Orange County Archives, via Flickr under CC 2.0 License.

Neo-Feudalism in California

Joel Kotkin — Thu, 18 Jun 2020 20:29:01 -0400

From the beginning, California promised much. While yet barely a name on the map, it entered American awareness as a symbol of renewal. It was a final frontier: of geography and of expectation.
—Kevin Starr, Americans and the California Dream: 1850–1915

In the eyes of both those who live here and those who come to observe, California has long stood out as the beacon for a better future. Progressive writers Peter Leyden and Ruy Teixeira suggested last year that our state is in the vanguard of every positive trend, from racial diversity and environmentalism to policing gender roles. “California,” they said in a post on Medium, “is the future of American politics.”

If true, this may not be the best of news. Rather than the vanguard of a more egalitarian future, California has become the progenitor of a new form of feudalism characterized by gross inequality and increasingly rigid class lines, a trend that could be exacerbated in the aftermath of the coronavirus outbreak, which has devastated much of the blue-collar economy. But the shift is likely to only further enhance those at the top of the state’s new class structure, those best suited for the inexorable and expanding shift to digital platforms. These are the tech oligarchs who dominate an economy that leaves most Californians less well off.

The shift to online services is likely to boost the already established large tech firms, particularly those involved in streaming entertainment services, food delivery services, telemedicine, biomedicine, cloud computing, and online education. The shift to remote work has created an enormous market for applications, which facilitate video conferencing and digital collaboration like Slack—the fastest growing business application on record—as well Google Hangouts, Zoom, and Microsoft Teams. Other tech firms, such as Facebook, game makers like Activision Blizzard, and online retailers like Chewy, suggests Morgan Stanley, can also expect to see their stock prices soar as the pandemic fades and public acceptance of online commerce and at-home entertainment grows with enforced familiarity.

Growing corporate concentration in the technology sector, both in the United States and Europe, will enhance the power of these companies to dominate commerce and information flows. As we stare at our screens, we are evermore subject to manipulation by a handful of “platforms” that increasingly control the means of communication. Zoom, whose daily traffic has boomed 535 percent over the past month, has been caught sharing users’ data with other clients without approval.

All this is likely to accelerate the state’s trend towards extreme inequality. Although successors of the state’s entrepreneurial “garage culture,” these firms clearly are not raising all boats and creating opportunities for a broad portion of the population. Instead, according to liberal economist James Galbraith, California is becoming ever more unequal. Although its policies are widely praised on the left, the state now suffers a level of inequality worse than that of Mexico.

The Evolution of California’s Economy

Until the past decade, California boasted a remarkably diverse economy, resting on an array of industries that spanned the gamut from agriculture and oil to aerospace and finance, software, and basic manufacturing. The broad range of opportunities—plus the unmatched beauty and mild climate of the state—lured millions from around the world, from “rocket scientists” to impoverished campesinos. In the process, California developed a large, and increasingly diverse, middle class. “The California century,” notes Ethan Rarick, biographer of Jerry Brown’s father Pat, provided “the template of American life.” There was an American dream across the nation, he wrote, and California was “the proving ground for the American future.”

As recently as the period from 1996 to 2006, according to economist David Friedman, California’s job creation was well distributed among regions, job types, and incomes. But in the recovery after the Great Recession, which hit California more profoundly than the rest of the country, the state’s economy has become more narrowly focused and geographically constrained around the tech-driven Bay Area.

In large part due to the state’s onerous tax burden and regulatory regime, the headquarters of the large energy and aerospace firms that once provided middle class jobs have left California. These include large firms, such as Occidental Petroleum, Jacobs Engineering, Parsons, Bechtel, Toyota, Mitsubishi, Nissan, Schwab, and McKesson, as well as an estimated two thousand smaller companies.

These departures have precipitated a distressing decline in the quality of employment for most Californians. Although California has outperformed the rest of the country in overall employment growth over the past decade, most of the new jobs pay poorly. Overall, the state has created five times as many low-wage as high-wage jobs. A remarkable 86 percent of all new jobs created during this period paid below the median income, while almost half paid under $40,000. Even Silicon Valley has created fewer high-paying, as opposed to low-paying, positions than the national average, and far fewer than prime competitors like Salt Lake City, Seattle, or Austin.

Many of these jobs are particularly vulnerable to Covid-19, future pandemics, and the new attitudes that are likely to emerge as a result. In the pandemic, as everywhere, California’s low-end restaurant and retail workers have been hard hit, but California is particularly exposed to threats to the hospitality, food service, performing arts, sports, and casino sectors. These sectors have accounted for a quarter of all new jobs created this decade, with much of the growth concentrated in idyllic coastal southern California.

In contrast, over the past decade California has fallen to the bottom half of states in terms of manufacturing employment growth, ranking forty-fourth last year; its industrial new job creation declined to less than one-third that of prime competitors such as Texas, Virginia, Arizona, Nevada, and Florida. This has proven a disaster for working-class Californians. Even without adjusting for costs, no California metro ranks in the top ten in terms of well-paying blue-collar jobs, but four—Ventura, Los Angeles, San Jose, and San Diego—sit among the bottom ten.

Even one of the steadiest sources of higher-wage blue-collar employment, international trade, could be severely impacted. International trade, including exports and imports, supports nearly five million California jobs—nearly one in four. Yet, due to regulatory and labor issues, southern California’s ports of Long Beach and Los Angeles have been losing market share to other regions, notably in the South. Reduced trade flows, particularly with China, could have considerable negative effects.

These economic changes have pummeled the middle class—traditionally the bulwark against feudalization. In a recent study conducted by Chapman’s Marshall Toplansky, the vast majority of Californians have a negative net worth, the major exceptions being affluent retirees, people earning over $200,000 annually, and childless college graduates making $100,000 or more per year. The Golden State now suffers the widest gap between middle and upper incomes in the country: 72 percent, compared to a national average of 57 percent.

Silicon Valley: A Feudal Castle Town

As recently as the 1980s, the San Jose area boasted one of the country’s most egalitarian economies. Jobs in manufacturing, assembly, transportation, and customer support helped middle and even working-class families to achieve the California dream. But as Silicon Valley has shifted from an industrial to a software focus, it lost over 160,000 manufacturing positions. Even worse, as much as 40 percent of the current tech workforce is made up of noncitizens, many on temporary visas.

In the process, Silicon Valley has morphed into what CityLab has described as “a region of segregated innovation,” where the rich wax, the middle class declines, and the poor live in increasingly inescapable poverty. San Francisco, which has emerged as a major center of the Bay Area tech scene, has been the place where, according to the Brookings Institution, inequality grew most rapidly among the nation’s large cities in the last decade. The California Budget and Policy Center has named the city first in California for economic inequality; the average income of the top 1 percent of households in the city averages $3.6 million, forty-four times the average income of the bottom 99 percent, which stands at $81,094.

Rather than being a beacon of opportunity, the City by the Bay is a place where the middle-class family heads towards extinction. San Francisco also suffers the highest property crime and petty crime rates of any major urban area, and it has become the epicenter of an explosion in homelessness, even as homelessness has been reduced in much of the country.

For increasing numbers of residents, even massive wealth and unmatched natural amenities are not enough to keep them around. According to demographer Wendell Cox, last year the Bay Area lost an estimated fifty thousand more migrants than came. In 2018, roughly 46 percent of all Bay Area residents indicated they were planning to leave compared to 34 percent just two years earlier. This trend is particularly marked among the young. One recent report from the Urban Land Institute found that 74 percent of all Bay Area millennials were considering a move out of the region in the next five years.

California Is Getting Old

California’s demographics, long driven by newcomers, are changing dramatically. Between 2014 and 2018, notes Cox, net domestic out-migration grew from 46,000 to 156,000. The conventional wisdom among politicians in Sacramento, and their apologists in the press, sees California losing mostly its poor, its elderly, and its less skilled. Yet an analysis of IRS data for 2015–16, the latest available, shows that half of those leaving the state made over $50,000 annually, roughly one in four made over $100,000, and another quarter earned a middle-class paycheck between $50,000 and $100,000.

Perhaps the biggest concern is the loss of young people and families from the state. The largest group leaving—some 28 percent—is between the ages of thirty-five and forty-four, the prime age for raising families. Another third come from those aged twenty-five to thirty-four and forty-five to fifty-four. Sadly, it is among both the young and the more affluent that out-migration is getting stronger.

High housing prices, along with an increasingly dismal job picture, drive this trend. The rise in housing prices, together with soaring rents, has made the California dream all but unattainable for millennials, whose homeownership rates have dropped far below the national average. The salary needed to purchase a mid-priced house in the state has soared to $120,000, the highest on the continent by $30,000, and almost twice what is required to buy a home in Texas, Florida, or Arizona. In San Francisco, Los Angeles, and San Diego, according to the U.S. Census Bureau, the homeownership rate among twenty-five to thirty-four-year-olds ranges from 19.6 percent to 22.6 percent—40 percent or more below the national average.

California’s young families increasingly face a toxic combination of high costs and relatively low salaries. Californian millennials on average earn about as much as their counterparts in states such as Texas, Minnesota, and Washington, where the cost of living is far lower. Most seem doomed to spend their lives struggling to pay the rent. Zillow estimates that, for workers between the ages of twenty-two and thirty-four, rent absorbs over 45 percent of income in Los Angeles and San Francisco, compared to roughly 30 percent in Dallas–Fort Worth and Houston. In Los Angeles and the Bay Area, a monthly mortgage amounts to, on average, close to 40 percent of income, compared to 15 percent nationally.

For the next generation of Californians, arguably the best way to buy a home is a distinctly feudal one: win the birth sweepstakes and tap the Bank of Mom and Dad to make a purchase. Approximately one-third of FHA loans in California rely on family money, up from 25 percent in 2011; in some markets, like Los Angeles and Orange County, the rate is close to 40 percent. Overall, coastal California has one of the highest rates of family assistance to renters, well over 35 percent, compared to the national average of 26 percent.

As a result of this process, California’s population growth has all but halted and has fallen below the national average for the first time. In 2015, Los Angeles and San Francisco ranked among the bottom ten in birthrates among fifty-three major metropolitan areas, according to the American Community Survey.

A dearth of young people could pose particular problems for an economy like California’s, long dependent on innovation—which, as economist Gary Becker notes, has historically been the province of younger workers and entrepreneurs. This is occurring while international migration, the other source of demographic dynamism, has slowed to one-third the level seen in Texas, further depressing population growth. As a result, California’s fertility rate has dropped 60 percent more than the national average since 2010, and the state is now aging 50 percent more rapidly than the rest of the country. If these trends continue, wheelchairs will replace surfboards as state icons.

“The Other California”

One of my personal mentors, the late Michael Harrington, challenged America to confront poverty in his book The Other America. What would he think of contemporary California? He would be shocked, in particular, to see that despite the juxtaposition of enormous wealth and poverty, progressives like Laura Tyson and Lenny Mendonca see California as the home of “a new progressive era,” in which the state emerges as the exemplar of social justice.

The statistics for poverty, driven by high costs and diminished opportunities, are shocking. California suffers the highest poverty rate, adjusted for costs, of any state in the country, according to the U.S. Census. A recent United Way study found that close to one in three families in the state are barely able to pay their bills. Fully one in three welfare recipients in the nation live in the California, although it is home to barely 12 percent of the country’s population. Today eight million Californians live in poverty, including two million children, by far the most of any state. This number has risen since the recession, despite the subsequent boom.

The most extreme poverty is found in two places: the vast interior regions and areas close to urban cores. Anyone riding along Highway 33 through the Central Valley can see scenes that seem more like rural Mexico than America: abandoned cars, dilapidated houses, and deserted storefronts. Among the nation’s 381 metropolitan areas, notes a recent Pew study, four of the ten with the lowest share of middle-class residents are in California’s heartland: Fresno, Bakersfield, Visalia-Porterville, and El Centro. Three of the ten regions with the highest proportion of poor people were also in the state’s interior, and all have suffered among the largest rises in inequality.

Economist John Husing, whose work focuses on the Inland Empire, a sprawling region of 4.2 million inhabitants just east of Los Angeles, suggests the state’s green policies have placed it “at war” with industries such as home building, energy, agriculture, and manufacturing that have traditionally driven the interior’s economy. These losses are catastrophic in areas where many residents lack a college education, and five inland California counties have among the lowest percentages of educated workers out of all U.S. metropolitan areas. The Inland Empire, with a population nearly as large as metropolitan Boston, suffers the lowest average pay of any of the nation’s fifty largest counties and has among the highest poverty rates of any of the nation’s twenty-five largest metropolitan areas.

Yet perhaps the most searing poverty can be seen in Los Angeles, by far the state’s largest metropolitan area. The LA area, notes the Census Bureau, has the highest poverty rate of any major metropolitan region. One in four Angelinos, according to a recent UCLA study, spend half their income on rent, the highest again of any major metro area.

Amidst the pandemic, this huge inequality can be seen here and elsewhere in how the virus has hit the state’s poor and minority communities in the biggest urban areas. Despite its density and, for California, high levels of transit dependence, San Francisco has done better than less-dense South Los Angeles in terms of infections and death. (Nowhere has the state come close to New York levels of fatalities.) Similarly, the affluent, tech-oriented, auto-dependent economies of Silicon Valley, West Los Angeles, the South Bay, and Orange County have done far better than the heavily minority inner city. These affluent areas also benefit, as Richard Florida has pointed out, from their plethora of high-end, digitally enabled jobs; the more an economy has this orientation, the easier it has been to limit the pandemic.

Hopefully the virus may bring a novel sense of reality, and even a touch of humility, to state policymakers. “Virtue signaling” steps like outlawing plastic bags have served to spread infection, so much so that San Francisco, the unofficial capital of Ecotopia, now bans reusable totes instead. Other progressive policies, such as allowing vast homeless encampments, are now widely seen less as exercises in tolerance and more as ideal breeding grounds for the virus, as well as more deadly contagions such as typhus. Motivated by the virus, there are finally steps being taken, notably in Los Angeles, to force the homeless off the streets and into safer, more sanitary environments. Among these populations, there are even indications of a return of the signature malady of the Middle Ages, bubonic plague, although the mainstream media seeks to blame this, like most ills, on climate change as opposed to failed social policy.

The Failing Race Card

Perhaps no state advertises its multicultural bona fides more than California. These narratives portray a proudly multicultural California—where Hispanics and African Americans constitute 45 percent of the total population—as the model for future race relations. State attorney general Xavier Becerra has sued the Trump Administration numerous times over immigration policy. The state proclaimed itself to be a sanctuary to all kinds of refugees and migrants; it has already provided driver’s licenses to some one million undocumented aliens, and it has granted free health care to illegal residents. Meanwhile San Francisco, the paragon of wokeness, has moved to allow noncitizens to vote in local elections.

All this may make progressives feel better about themselves, but if the state’s leaders were to look at how people of color are actually doing, they would see something that resembled apartheid South Africa or the pre–Civil Rights South. California, as gubernatorial candidate and environmental activist Michael Shellenberger has suggested, is not the “most progressive state” but the “most racist one.”

Hispanics and African Americans do worse in California than almost anywhere else in the country. Based on cost-of-living estimates from the Census Bureau, 28 percent of African Americans in the state live in poverty, compared with 22 percent nationally. Fully one-third of Latinos, now the state’s largest ethnic group, live in poverty, compared with 21 percent outside the state. Over half of all Latino households can barely pay their bills, according to a United Way study—a figure which rises to 80 percent for undocumented Latinos. “For Latinos,” notes long-time political consultant Mike Madrid, “the California Dream is becoming an unattainable fantasy.”

In the past, poor Californians, whether from the Deep South, Mexico, or the Dust Bowl, could count on the education system to help them advance. But now California has among the lowest reading scores for eighth graders in the nation, and Latino academic achievement is generally lower in California than in the rest of the country. Educators, however—particularly in minority districts—seem more interested in political indoctrination than results. Among the fifty states, California ranked forty-ninth in performance for poor, largely minority, students. San Francisco, the epicenter of California’s woke culture, suffers the worst scores for African Americans out of all counties in the state.

Given meager earnings and the high cost of housing and rent, many minorities are forced to live in deplorable conditions. Out of the 331 zip codes that make up the top 1 percent of overcrowded zip codes in the United States, 134 are found in southern California, primarily in greater Los Angeles and San Diego, and are mostly concentrated around heavily Latino areas such as Pico-Union, East Los Angeles, and Santa Ana in Orange County.

Not surprisingly many minorities, especially African Americans, are considering fleeing the state. In a recent University of California, Berkeley poll, 58 percent of African Americans expressed interest in leaving the state, more than any ethnic group, including whites. Some 45 percent of Asians and Latinos are also considering a move out. These residents may appreciate the state’s celebration of diversity, but increasingly find the state inhospitable to their needs and those of their families.

The Oligarchic Mentality

California’s tech oligarchs may be famously woke, but they do not seem to be greatly concerned by the enormous gaps in class and race in their backyards. The Giving Code, which reports on the charitable trends among the ultrarich, found that between 2006 and 2013, 93 percent of all private foundation giving in Silicon Valley went outside the area. Much of what is given goes to global causes like mitigating climate change, protecting the environment, or fighting diseases in developing countries. Better to be a child in an African village, a whale, or a tree than someone forced to live in their car across the street from Google.

This reflects the oligarchs’ remarkable level of narcissism, elitism, and self-regard. As Thomas Piketty has observed of some nineteenth-century industrialists, the tech oligarchs believe that the rise of technically trained people would “destroy artificial inequalities” in favor of highlighting “natural inequalities.” They justify their position by embracing the notion that they are not just creating value but working to “change the world.” This makes them—unlike the merely profit-oriented old managerial aristocracy or the grubby corporate speculator—intrinsically more deserving of their wealth and power.

These tech oligarchs do not oppose huge class divisions; rather, they embrace what Aldous Huxley called “a scientific caste system,” in which they stand at the apex. In some ways, this reflects the realities of the current tech business, which relies not on a wide range of skills but on a small cadre of elite “talent.” This is very different from the demands placed on managers in more traditional businesses who had to cope with not only other managers, but also marketers, technicians, warehouse workers, and salespeople. In some fields, such as manufacturing and energy, they often confronted unionized workers who could advocate for their own rights. In contrast, tech firms are rarely unionized.

The Road to Oligarchic Socialism

Rather than fight inequality, the oligarchs are seeking ways to accommodate it. Gregory Ferenstein, who interviewed 147 digital company founders, says most believe that “an increasingly greater share of economic wealth will be generated by a smaller slice of very talented or original people. Everyone else will increasingly subsist on some combination of part-time entrepreneurial ‘gig work’ and government aid.” These oligarchs generally don’t even expect their workers or consumers to achieve greater independence through the traditional avenues of owning houses and starting companies. If anything, they tend to push what might be called an anti-materialist point of view that emphasizes “meaningful community” on a global scale but rarely speaks of upward mobility.

Ferenstein suggests that many oligarchs, in contrast to business leaders of the past, seek to secure their future by creating a radically expanded welfare state. Indeed, the former head of Uber, Travis Kalanick, Y Combinator founder Sam Altman, Mark Zuckerberg, and Elon Musk all favor a publicly funded guaranteed annual wage—in part to help allay fears of potential insurrection arising from the effects of “disruption” on an exposed workforce. In a sense, the oligarchs have embraced the old aristocratic notion of what Marx called a “proletarian alms bag” by having taxpayers provide not just guaranteed wages but free health care, free college, and housing subsidies. This alms bag may need to be made even larger after the disruption of much of the middle- and working-class economies in the wake of Covid-19.

This oligarchic socialism differs dramatically from the mixed capitalist system that emerged after the Second World War, which was based on increased upward mobility and increased consumption for the masses. In the world envisioned by the oligarchs, the poor would become ever more dependent on the state, as their labor is devalued by regulatory assaults on the industrial economy, as well as by the greater implementation of automation and artificial intelligence. Even those lucky enough to work for the oligarchs will face a severely restricted future. Unable to grow into property-owning adults, these workers will subsist on subsidies and what they can make through gig work; to combat boredom, they can enjoy what Google calls “immersive computing” in their spare time.

The Alliance with the Clerisy

To cement their dominion, the oligarchs have made political alliances with other groups, notably those who dominate California’s increasingly one-party system. This has made them critical allies of California’s progressives, with whom they have made common cause on a host of issues, from gender rights to immigration to climate change.

This alliance between the oligarchs and California’s clerisy—university professors, senior bureaucrats, and nonprofits—drives the state’s powerful green agenda. Oligarchic firms such as Google and Apple have embraced the basic thrust of the state’s climate policies. Time magazine, for example, which is owned by Salesforce founder Mark Benioff, recently named the Jeanne d’Arc of the Greens, Greta Thunberg, its Person of the Year.

Unlike most Californians, Benioff and other oligarchs can afford their environmental radicalism; their businesses do not depend primarily on affordable energy or large pools of moderately skilled workers. Similarly, the clerisy, cloistered in powerful institutions like academia, the media, or government, are largely insulated from the ill effects of the regulatory regime, which include higher energy and housing prices.

California’s green regulators maintain that the implementation of ever stricter rules related to climate will have only a small impact on the economy, a contention that even some environmental economists, such as Harvard’s Robert Stavins, find dubious. Indeed, a recent analysis by attorneys David Friedman and Jennifer Hernandez demonstrates in detail how California’s draconian anti–climate change regime has exacerbated economic, geographic, and racial inequality. Among the primary impacts of climate regulations, as laid out by Friedman and Hernandez, has been the elimination of historically well-paying jobs in fields such as manufacturing, energy, and home building—all key employers for working- and middle-class Californians.

Ironically, California’s efforts to save the planet have actually done little more than divert greenhouse gas (GHG) emissions to other states and countries. Since 2007, when the Golden State’s “landmark” global warming legislation was passed, note Friedman and Hernandez, California has accounted for barely 5 percent of the nation’s GHG reductions, and the state ranks a mediocre fortieth in per capita GHG reduction over the past decade. As Friedman and Hernandez demonstrate, state policies may be increasing total GHG by pushing people and industries to states with less mild climates.

Given that, in 2010, California accounted for less than 1 percent of global GHG emissions, the disproportionately large reductions sought by state activists and bureaucrats would have no discernible effect on global emissions under the terms of the Paris Agreement. “If California ceased to exist in 2030,” Friedman and Hernandez note, “global GHG emissions would be still be 99.54 percent” of where they would be otherwise.

A State of Delusion

Even if it does little for the planet, the state’s climate alarmism serves an important political purpose. Like medieval clerics pointing to the heavens for every problem, California’s leaders use climate change to excuse virtually every failure of state policy. During the 2011–17 California drought, Governor Jerry Brown and his minions blamed the climate for the dry period, but avoided taking blame for insufficient capacity for storage that would have helped farmers. And when the rains came back and reservoirs filled, negating their narrative, little attempt was made to save water for the inevitable next drought.

Similarly, in the case of the recent wildfires, Gavin Newsom and his claque in the media blamed changes in the global climate. But it had at least as much to do with green resistance to controlled burns and brush clearance than anything happening on a planetary scale; attempts to impose such fuel controls had been vetoed by Brown and are opposed by the greens and their allies at media outlets like the Los Angeles Times.

Climate alarmism is also useful to cloak the political failures of local politicians like LA mayor Eric Garcetti. Given his city’s mind-boggling congestion, rampant inequality, massive rat infestation, and ubiquitous homeless camps, it’s no surprise that he would rather talk about becoming chair of the C40 Cities Climate Leadership Group. And climate activism may even provide the rationale for the ambitious Governor Newsom to run for president.

Unlike traditional businesses, the tech oligarchs not only endorse but even profit from the state’s incessant climate virtue signaling. Renewable energy may be expensive and unreliable, but state policy enriches the tech oligarchy’s green energy investments, even when their efforts—like the Google-backed Ivanpah solar farm—fail to deliver affordable, reliable energy. In contemporary California, results matter less than supposed good intentions.

Is There a Way to Counter the New Feudalism?

Until now, the alliance of the oligarchs with the progressive clerisy, almost unanimously supported by the media, has been all but immune from challenge. Yet there exist in this alliance what Marxists might call fundamental “contradictions” that could eventually undermine the cozy arrangement between the rapacious capitalists of the Valley and their militant progressive allies.

This can be seen in growing conflicts between the oligarchs and the state’s increasingly assertive Left. The youth activists now at the forefront of the anti–climate change movement may be less willing to tolerate the oligarchy’s personal excesses than previous generations of environmental advocates. After all, if the world is on the verge of a global apocalypse, how can the luxurious lifestyles of those flying their private jets to discuss this “crisis,” like Leonardo DiCaprio or the heads of Google, be tolerated?

Unlike gentry progressives, increasing numbers of climate activists marry green values with explicit socialism. Many endorse the view of Barry Commoner, one of the founding fathers of modern environmentalism, that “Capitalism is the earth’s number one enemy.” There’s even a growing socialist movement among tech employees in Silicon Valley, many of whom have little chance of replicating the opportunities for wealth accumulation enjoyed by prior generations in the Bay Area.

The class dimension has become more evident in the increasingly progressive-dominated, veto-proof legislature. The recently passed Senate Bill 5, concerning contract labor, is a direct threat not only to tech firms like Uber and Lyft, but to companies in everything from media to trucking who subcontract services from smaller companies and individuals. And proposals for higher income and other taxes will also certainly hit the tech workforce. In response to such changes, some tech firms have already started shifting employment to other states. In fact, according to Bureau of Labor Statistics estimates, several states—Idaho, Tennessee, Washington, and Utah—are now growing their tech employment more rapidly than California.

Another threat to the new feudal order lies in the simmering resentments of the state’s now largely forgotten middle and working classes. Only 17 percent of Californians, according to one recent survey, believe the state’s current generation is doing better than previous ones; more than 50 percent think Californians 18–30 years old are doing worse than older cohorts.

These resentments may not be articulated but they definitely lie beneath the surface. More Californians feel the state is headed in the wrong direction than the right one, according to a recent poll by the Public Policy Institute of California, a number that reaches above 55 percent in the inland areas. Nor is support for the current political regime particularly deep. Voters dislike the state legislature even more than President Trump.

There’s even—despite the almost unceasing media hype—a growing reaction against the state’s draconian climate policies. Attempts to ban natural gas, for example, have elicited opposition from 110 cities, with a total population of over eight million. The California Chamber of Commerce and the three most prominent ethnic Chambers—African American, Latino, and Asian Pacific—have joined the opposition.

Increasingly in California, as in other parts of the world, previously sacrosanct climate change policies risk a class-based backlash. Some of this opposition also arises from civil rights organizations, who are finally awakening to the impact climate extremism has on their constituents. Recently, some two hundred veteran civil rights leaders sued the California Air Resources Board on the ground that state policies are skewed against the poor and minorities.

But perhaps the biggest threat to California’s emerging feudal order may be financial. As even Jerry Brown noted, the Johnny-one-note tech economy could stumble, a possibility made more real by the recent $100 billion drop in the value of privately held “unicorns.” Already over two-thirds of cities in California do not have any funds set aside for health care and other retirement expenses. The state also suffers a trillion-dollar pension shortfall, as has been noted by former Democratic state senator Joe Nation. Overall U.S. News places California forty-second in fiscal health among the states, despite the tech boom.

What California needs today is not some imagined return of Reaganite conservatism—that ship long ago sailed over the horizon—but a policy agenda that, first and foremost, serves the basic interests of state residents by expanding opportunity across both classes and geographies. Those of us concerned about a better future for the next generation may be discouraged, but it is hard to accept that, with all our great resources and culture of innovation, a way cannot be found to restore the state’s once proud reputation as an incubator of aspirations and fulfiller of dreams.

This piece originally appeared in American Affairs Volume IV, Number 2 (Summer 2020): 62–77.

Photo credit: Mike Licht, via Flickr under CC 2.0 License

Highest Salaries for Software Developer Remote Work (Metro Areas)

Wendell Cox — Fri, 12 Jun 2020 20:29:01 -0400

COVID-19 lockdown and social distancing strategies have led to a huge increase in the number of people working at home (working remotely). According to Gallup, by mid-April, 62% of US employees were working at home. Further, Gallup found that about half of the remote workers preferred to continue working from home, with another quarter interested in remote working out of pandemic fears.

Companies are listening. By the end of the year, Columbus, Ohio based Nationwide Insurance will replace 16 of its 20 locations with remote working, as it moves to a “hybrid” model where employees go to the office only in four locations. Twitter, Microsoft, Google, Canada’s Shopify and Amazon are making remote working arrangements permanent or extending them. Salesforce is allowing employees to work at home through the rest of the year. Facebook says that at least half of its employees will work from home within 10 years.

Facebook: Leaving Silicon Valley Means Lower Salaries

The high cost of living, particularly in the Silicon Valley could induce many employees to move to lower cost metropolitan areas to substantially improve their standards of living, imagining what their Silicon Valley salaries could buy in lower cost markets like Cincinnati or Greensboro. However, Facebook CEO Mark Zuckerberg announced that employees who decided to work remotely, but left Silicon Valley, would be paid salaries reflective of their new residences, rather than their previous higher salaries.

This may have been a blow to some considering a move, especially those who might not understand the extent to which consumer economics have become distorted in Facebook’s home state, California. From time to time, I encounter California residents who think that California’s higher costs of living — the result of its higher housing costs — are compensated for by it higher incomes. This is a myth of profound proportions, as will be shown below

Excessively High Cost of Living in Silicon Valley

Software developers are highly paid, with a national median salary of $107,500. Silicon Valley software developer salaries are the highest. In the San Jose metropolitan area (Santa Clara and San Benito counties), software developers had a 2019 median salary of $141,600, according to US Department of Labor Bureau of Labor Statistics (BLS) data. In the San Francisco metropolitan area (Alameda, Contra Costa, Marin, San Francisco and San Mateo counties) the median salary for software developers was $141,000. This is considerably higher than the national median software developer salary of $107,500. Among the 107 metropolitan areas with 500,000 or greater population, only one (Seattle) is less than $20,000 below the two in Silicon Valley metropolitan areas (Figure 1).

The Biggest Gains from Remote Working Outside Silicon Valley

But in the Silicon Valley, the purchasing power of the high salaries is effectively discounted by 40% or more by hyper-inflated costs of living. (Figure 2). In both San Jose and San Franciscothe purchasing power of software developer salaries is well below the national median. When adjusted for purchasing power, only one of the metropolitan areas among the top 10 in nominal salary remains in the top ten (Seattle) (Note).

The purchasing power of the median software developer salary is higher than Silicon Valley in nearly all of the largest metropolitan areas outside California. This article provides data on the 10 most financially remunerative in comparison to the Silicon Valley.

In top ranked Winston-Salem, NC, the median software developer purchasing power adjusted salary was $121,600, well above the $76,700 in San Jose and the $85,500 in San Francisco. While Winston-Salem is not known as a tech hub, it is less than 90 minutes by car away from the Research Triangle, between Durham and Raleigh.

San Antonio, TX has the second highest salary, at $117,500, just ahead of Seattle. San Antonio is conveniently located where the Texas hill country begins, about 90 minutes from tech hub Austin, where software developers have a median salary about $15,000 less, when adjusted for purchasing power.

Seattle, WA is ranked third at $115,000, and might be considered the nation’s second leading software development hub, by virtue of its 3.72 LQ for software developers (location quotient, which measures the extent to which the share of an occupation’s employment in an area exceeds or trails the national average), trailing only San Jose’s 7.5.

Greensboro, NC ranks fourth, at $115,900 (a few dollars less than Seattle after rounding) and is one hour away from the Research Triangle, and only 90 minutes away from Charlotte, NC-SC.

Fifth ranked Atlanta, GA has a median software developer salary of $115,700, and is by far the largest metropolitan area among the top ten. Atlanta is now ranked 9th in population and at its strong growth rate could exceed Philadelphia in its 2020 Census population.

Melbourne, FL is ranked 6th at $114,800 is the only Florida metropolitan area in the top 10, and is located less than 90 minutes away from Orlando.

Colorado Springs, CO is ranked 7th at $113,900 and is less than 90 minutes from Denver, a tech rich metro where the purchasing power of a software developer is about $15,000 less.

Tech hub Raleigh, NC is ranked 8th at $113,800 and shares part of the Triangle Research Park with adjacent Durham. Raleigh is the fourth fastest growing metropolitan area among the 107 (since 2010).

Charlotte, NC-SC has the 9th highest software developer median salary, adjusted for purchasing power, at $113,700. Charlotte is the largest metropolitan area between Washington and Atlanta, and the fourth fastest growing metropolitan area among the 107 (since 2010).

The tenth highest purchasing power adjusted median salary for software developers is in Cincinnati, OH-KY-IN. Cincinnati has one of the lowest costs of living in the nation --- six median priced houses can be purchased for each in San Jose. Granted, incomes are higher in San Jose, but not that much. House prices in San Jose, adjusted for incomes, are three times that of Cincinnati.

Three of the nation’s Census Divisions were not represented in the top 10. But each has metropolitan areas offering substantial salary gains to Silicon Valley software developers.

In the West North Central, St. Louis, MO-IL has a purchasing power adjusted salary of $111,200 (ranked 15th). Birmingham, AL has a purchasing power adjusted salary of $104,900 (ranked 32nd). Worcester, MA-CT, in the New England Census Division, has a purchasing power adjusted salary of $104,900 (ranked 34th).

Higher Standards of Living

The advantages of such a move could be substantial. The greater purchasing power of the new salary would enable a better standard of living. Purchasing a house could be far easier.Transportation expenses would be reduced or eliminated. Remote workers would have, on average, about one more hour free each day, without having to drive to work and more if they had commuted by transit. However, this is not to suggest that there will be a rush of software developers to leave the state.

Yet, 2.4 million more people have moved out of California than moved in over the past two decades. The pace could accelerate since more people and more companies have learned during the lockdowns that productivity can even improve when work becomes remote. There are plenty of lower cost alternatives, with higher standards of living. This could alter our understanding of the geography of tech growth in the coming years.

Note: The purchasing power of salaries is calculated using the cost of living index from the Urban Research Institute (URI) 2020 Standard of Living Index. Purchasing power is calculated using data from the US Bureau of Commerce, Bureau of Labor Statistics, the American Community Survey and the National Association of Realtors. The data includes most taxes on consumers, such as sales taxes, real estate taxes and gasoline taxes. The data excludes federal, state and local income taxes.

Photograph: Salesforce Tower, San Francisco (by author).

Coronavirus: Why California's Small Businesses May Not Survive

Joel Kotkin — Thu, 04 Jun 2020 20:29:01 -0400

Whatever the medical benefits achieved from the prolonged coronavirus lockdown, California’s small business community will be suffering severe symptoms, likely for decades to come. The state’s small entrepreneurs, particularly in poorer areas, face major readjustments and perhaps obliteration, a situation further complicated for some by damage stemming from the protests over the killing of George Floyd.

These small firms were already in parlous shape before COVID-19. Despite the immense wealth generated in Silicon Valley and among real estate speculators and the entertainment elite, most of the state’s growth in recent years was in low-end service businesses. As a result, 80% of all jobs created in the state over the past decade paid less than the state median income and half of those well under $40,000, according to Marshall Toplansky, a researcher at Chapman University.

California COVID-19 death rates are far lower than states in the Northeast, but our bifurcated economy is deeply vulnerable to declines in service businesses, and particularly in hospitality, retail and restaurant sectors. Roughly 90% of businesses surveyed this month by BizFed, a Los Angeles County organization of business groups, have been severely affected and nearly half have seen their revenue drop over 50%.

Before the pandemic, California’s boosters and leaders could convince themselves that the state had developed a new progressive and sustainable economic model. COVID-19 and the economic downturn have stripped away the glitzy facade, as our unemployment rates now surpass the national average, worse even than New York, the epicenter of the U.S. coronavirus outbreak. It’s particularly bad in Los Angeles, where less than half of residents now hold jobs. L.A. County has lost over 1 million jobs to the pandemic and suffers an unemployment rate higher than any of the major California urban counties.

Southern California’s greater economic vulnerability reflects, in part, its unusual exposure to some of the hardest-hit industries, notably tourism and hospitality as well as international trade. But the economic damage caused by more than two months of lockdown is spreading to industries that depend on selling goods outside the region — such as apparel and medical equipment — and the entertainment industry, which according to recent estimates may have already lost over 100,000 jobs.

If consumers are slow to resume their pre-coronavirus activities, many small firms already struggling with the state’s business regulations and high taxes may be tempted to head elsewhere. Joseph Vranich, a relocation expert who recently moved his own business from Irvine to Pittsburgh, has identified 2,183 publicly reported California disinvestment events between 2008 and 2016. However, experts in site selection generally agree that at least five relocations take place without public knowledge for every one that does.

The places with the biggest gains from California are in Texas, Nevada and Arizona. Between 2000 and 2013, California was the source of about one-fifth of all jobs that moved to Texas — 51,000 jobs.

Perhaps most immediately threatened, however, will be small businesses that focused largely on serving local residents. Take restaurants. The vast majority of the state’s more than 90,000 restaurants are owned and operated by independent proprietors, employing 1.4 million food service workers, according to the California Restaurant Assn. It generates more sales tax ($7 billion annually) than any other industry and some 60% are owned by people of color. Unless the state finds ways to help, 20% to 30% of these restaurants will never open again, the association has predicted.

Like small businesses across the country, many of these firms have not been able to access federal funds to withstand the downturn. Washington’s bailout program, even some Republican economists admit, has been tilted in favor of Wall Street and larger firms. Particularly excluded, note local advocates, have been smaller, often immigrant-run businesses which lack strong bank relations. They also often lack savings and much of their business is cash-based. Still others are owned and operated by noncitizens, some of them undocumented people.

In many neighborhoods, there is widespread concern that local owners of small shops, apartment buildings and commercial properties won’t be able to hang on and will be taken over by outside investors with no tie to the area. The need for social distancing protocols has worked against small stores that rely heavily on personal contact with customers and can’t make up all of their revenues through online sales. Some already see this trend as accelerating gentrification that was happening before the coronavirus.

“The business owners are scared,” suggests Mirabel Garcia, who works on micro-loans for the East L.A.-based Inclusive Action for the City. “They are worried they will not be able to hold on against Wall Street and the big investors.”

California will emerge from this crisis, but what kind of state will it be? The power of the tech oligarchy — the biggest winners during the coronavirus crisis — will likely further their hegemony. But the reality for most in the business sector will be far less grand: empty stores, broken dreams, defaulted mortgages and less opportunity for the kinds of entrepreneurs who created California’s century of economic dynamism.

In this economic crisis, state government needs to look out for the interests of grassroots entrepreneurs. This includes helping smaller firms adjust to new social distancing requirements and providing technical assistance so they can better compete with megastores or Amazon. It also means protecting small business owners against nuisance lawsuits related to coronavirus claims. Measures like California’s Assembly Bill 5, which seeks to greatly limit contract work, should at least be suspended at a time of record unemployment.

Given California’s deepening budget problems, rooted in huge state costs and pensions, the state cannot afford to prop up deserted business and millions of unemployed workers. There’s only so much that can be done to curb the inevitable “creative destruction” caused by the pandemic.

But entrepreneurs are, if nothing else, resilient. If they are given enough help to survive, they will eventually adjust to the new realities, and find new ways to thrive to the benefit of all Californians.

“It breaks my heart to see all the empty stores,” said Vivian Bowers, who runs her family’s dry-cleaning business, which has been in South Los Angeles for 63 years. “But entrepreneurs are tough. At this business we have survived numerous recessions and two riots. Give people a chance and they can come back.”

This piece first appeared at Los Angeles Times.

Photo credit: Nick Papakyriazis via Flickr under CC 2.0 License.