California Forum

This economy isn’t helping all Californians. Here’s how we can spread the wealth

California’s economy has improved, as shown by this “Now Hiring” sign at a San Jose Career Fair, but rural inland employment continues to lag the cities and coasts.
California’s economy has improved, as shown by this “Now Hiring” sign at a San Jose Career Fair, but rural inland employment continues to lag the cities and coasts. Bloomberg

California voters are anxious.

The economy is growing, the state budget is balanced and drought worries have receded. Yet according to a recent CalChamber poll, voters believe state leaders are not addressing the issues that truly concern them.

For the first time in three years, the October poll showed, more voters say that California is headed down the wrong track than in the right direction.

How can we encourage upward mobility and spread regional prosperity to those left behind? And how can we mitigate some of the adverse consequences of economic success?

Parents are uneasy about their kids’ futures. Of the 28 percent of voters with children living at home, three out of five agreed their children will have a better future if they leave California and its high cost of living, high taxes and expensive housing.

These voters will elect a new governor this year, replace at least seven constitutional officers and seat at least ten new members of the Legislature. Practicing direct democracy, voters will decide as many as 20 ballot measures influencing the political and economic climate.

Amid this political ferment state officials face persistent economic development challenges.

The great prosperity in the Bay Area and coastal Southern California has not yet lifted rural and inland California. Success enjoyed by well-educated Californians is less apparent to high school dropouts and low wage employees in service jobs.

Unemployment in coastal and metropolitan California is 3.6 percent, but in the rest of California is 7 percent. If they were a separate state, inland and rural California would be the 21st most populous – with the second-highest unemployment rate in the nation.

How can California leaders encourage upward mobility and spread regional prosperity to those left behind? And how can we mitigate some of the adverse consequences of economic success?

First, do no more harm. California has among the nation’s highest taxes and most ambitious laws governing the workplace. Employers and employees alike pay a price to live and work in California. For those who have made the choice, we should not add to their burdens.

Case in point: labor laws that benefit only plaintiffs’ attorneys. The Private Attorney General Act allows class action-like lawsuits over labor code violations, without needing to show any harm (like lost wages), nor any intent by the employer. The Legislature should repeal this law and revisit other mandates that discourage employers from hiring new workers.

Second, allow private developers to build more market rate housing. Last year lawmakers increased housing subsidies, but this will address only a sliver of the shortage. Most lower-middle income families obtain housing as it filters from occupants who buy or rent better or more expensive residences.

To meaningfully take on the housing shortage, the Legislature must tackle local NIMBYism, coupled with reforming CEQA to remove the cloud of litigation over housing projects, kicking the death-by-a-thousand-fees habit, and rolling back anti-commuter policies that distort housing costs in more affordable regions of California.

Third, maintain and expand our economic development infrastructure. California practically invented the modern transportation network and the 20th century water delivery complex. The governor and Legislature took a difficult but important first step adding revenues for road and bridge maintenance and operational gaps.

Elected officials should now explore alternative revenues that do not erode as gasoline usage declines. State leaders should maintain their commitment to a Delta conveyance system and ensure our water storage facilities are in good repair and adequate to meet the next decade’s growth.

Fourth, restore energy affordability. California energy policy is climate change policy. Energy costs are higher here because the state has placed a high premium on reducing air pollutants and greenhouse gas emissions that cause climate change.

While this will not change soon, leaders should remember that these policies can drive up utility bills. The only way to moderate costs while reaching climate goals is to stick to the cap-and-trade program while rejecting new command-and-control regulations, such as further mandates for renewable power generation, banning internal combustion autos, or limitations on driving.

Finally, education is the best tool to improve economic mobility. Besides the weather, California’s greatest competitive advantage is our skilled workers.

But further growth will be limited by our aging and thinning workforce. The Legislature should continue improving state support for higher education to restore our qualitative advantage, and continue investment in high school work-based learning, which allows students to apply their classroom learning in a professional setting to gain real-world experience.

California is a wealthy state with great natural and intellectual resources. It is within the power of state leaders to foster growth for all regions and demographic groups, and improve the chances for children to once again do better than their parents.

Loren Kaye is president of the California Foundation for Commerce and Education, a think tank affiliated with CalChamber. Reach him at loren.kaye@cfcepolicy.org.

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