Dan Walters

By Dan Walters
July 9, 2016 – 4:44 PM

  • State’s $2.5 trillion economy now world’s sixth largest
  • However, recovery from recession has downside
  • Income gap widens, state moves toward two-tier society

The revelation that California’s $2.5 trillion economy is now the world’s sixth largest is a source of tub-thumping pride for the state’s politicians.

However, as economists explore California’s seemingly powerful emergence from the Great Recession over the last half-decade, they have discovered some troubling trends.

The recovery is geographically and sociologically uneven and widens the “income inequality” gap between those in upper and lower income brackets.

“Pre-tax cash incomes in California have been diverging for decades, and economic cycles have reinforced the longer-term trend,” a new study by the Public Policy Institute of California concludes.

“Top incomes are 40 percent higher than they were in 1980, while middle incomes are only 5 percent higher and low incomes are 19 percent lower.”

Taxes, which fall most heavily on those in the upper brackets, and “safety net” programs that aid those at the bottom of the income scale narrow the income gap somewhat, the PPIC study found, but California still has one of the nation’s highest levels of disparity.

The PPIC data underscore the decline of California’s once-dominant industrial economy, a rich source of middle-income jobs, and the emergence of a post-industrial economy, rooted in trade, services, technology and communications, that widens the gap.

“At the low end, accommodation and food service jobs have grown 23 percent since the low point of the downturn, but these jobs offer only around $16 per hour, on average,” PPIC says. “Job growth in the highly skilled professional service sector … has also been strong; wages in this sector are around $36 per hour.”

“Across the state, income inequality is at least 9.9 percent higher today than it was in 2007, just before the recession,” PPIC added.

As the income gap has widened, it’s left California with a shockingly high rate of poverty, when its high cost of living, particularly for housing, is included.

To read expanded column, click here.