The fire still engulfing large swaths of Los Angeles has done more than destroy homes, businesses, and livelihoods. It has scorched the whole dream of Los Angeles, part of a downward spiral unfolding for a generation — and cast into severe doubt the city’s ability to host the 2028 Olympics.
Gov. Gavin Newsom’s constant reminders that California’s economy ”leads the nation” as well as being a model for social justice are delusional. To be sure, California has a huge GDP, paced largely by high real estate prices and the stock value of a handful of tech companies, but it is not widely seen as a place for class mobility, and it is slowly ceding its dominance, even in tech-related industries.
In contemporary California, home to four of the world’s seven most valued tech firms, tech bros and real estate speculators occupy what Lenin called “the commanding heights,” while the reality on the ground is far less ethereal. The view from where most Californians reside is revealed in a new study sponsored by Chapman University: “Is California Losing Its Mojo?,” by business professors Marshall Toplansky (Chapman) and Kenneth Murphy (UC Irvine).
Historically, the report notes, California has outpaced the rest of the country in terms of the growth of its goods and services. However, that pace of GDP growth in the state has dropped significantly since 2022, with the measure now lagging when compared with other states. The distribution of jobs and wealth is even more worrisome.
California has been a particularly poor bet for blue-collar professions, such as manufacturing, the traditional path to upward mobility for minorities and non-college educated people. Bureau of Labor Statistics data, analyzed by Lightcast, shows California has lagged far behind places like Utah, Nevada, Texas and Arizona over a decade.
The Chapman paper acknowledges that the state has experienced enough job growth to keep unemployment levels low, but as the report details, most new jobs in California aren’t concentrated in high-wage sectors. Over the last 10 years, 62% of jobs added in California were in lower-than-average paying industries, versus 51.6% for the nation as a whole. In the last three years, the situation worsened, with 78.1% of all jobs added in California coming from lower-than-average paying industries, versus 61% for the nation as a whole.
In a state with high living costs, a dearth of well-paying jobs seems likely to bear responsibility for the state’s out-migration rate and its poverty rate, which the Census Bureau calculates, in its most comprehensive estimate, as 15.4%, one of the highest in the nation. California may be home to a lot of billionaires, but it also is home to nearly 30% of the country’s homeless.
Of course, not everyone has suffered. Besides tech billionaires, who is doing well in California? Older homeowners, for one, whose bottom line has risen as home values increased dramatically. Government workers have also thrived.
Census Bureau data highlighted in the Chapman report show that California public sector job growth over the last decade has been growing at about the same pace as jobs overall in California, but the average annual pay for those government jobs was almost double that of private sector jobs. In other words, the road to the middle class comes not from private employment but from jobs that are funded by taxpayers.
In the past, California cities including San Francisco, San Jose and San Diego all ranked in the top 10 among hubs for “advanced industry” employment — where there’s high investment in R&D and a high percentage of STEM roles. But since 2020, only San Jose remains in the top 25 metro areas for growth in such employment. Today the emerging hot spots are often east of the Sierra: Austin, Texas; Nashville; Indianapolis; Salt Lake City; and Phoenix.
Can California get its mojo back? After all, many of the state’s assets — research universities, leading tech firms and the lifestyle appeal — have not disappeared.
First, Newsom and other state cheerleaders have to stop using the size of the economy as a cover for real problems. Whatever the state’s strengths, as the Chapman report puts it, low-wage jobs overtaking advanced industry work is not sustainable.
The Biden administration emphasized bringing manufacturing back to the U.S., and President-elect Donald Trump promises to do the same, but California misses out on opportunities due to the costs associated with its regulatory regimes.
Consider technologies largely developed and embraced by California, such as EVs and the batteries that run them. Jobs in those manufacturing industries overwhelmingly fall to red states, largely a reflection of such things as easier permitting rules, lower energy costs and less intrusive labor regulations.
Remarkably, Newsom, who feuds with Elon Musk and has taken on the role of the national anti-Trump, has promised that if the next administration in Washington eliminates the federal $7,500 buyer EV tax credits, California will step in with state rebates for the vehicles — with reportedly one exception, Teslas, which happen to be the dominant American brand and the only EVs made in California. The plant in Fremont employs thousands in good manufacturing jobs.
And that’s hardly the end of the self-destructive politicking.
One “advanced industry” where California, and in particular Southern California, still has a leg up is aerospace, and its corollary, defense. The state remains well in the lead in terms of aerospace-related employment, and innovative new firms, such as Anduril in Orange County, seem primed to take advantage of Trump’s emphasis on military spending. In his first term, he increased the defense budget to historic highs.
But is California’s Democratic leadership on board?
Once again, the state’s relations with Musk, Trump “first buddy” and the world’s preeminent space pioneer, would indicate just the opposite. Musk, upset at a California law that allows schools to keep parents in the dark when their children identify as LGBTQ+, decided to move SpaceX’s headquarters from Hawthorne to Texas this year. And just weeks ago, the California Coastal Commission denied SpaceX’s request to increase its rocket launches from Vandenberg Air Force Base; reportedly after commissioners discussed his political views before they voted on the issue. Even Newsom objected.
This is not the way to build a truly inclusive and healthy economy. Gavin Newsom can talk all he wants about California’s bounty, but the road the state’s Democrats have set for us has been profoundly regressive.
This piece first appeared at Los Angeles Times.
Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. He is Senior Research Fellow at the Civitas Institute at the University of Texas in Austin. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.
Photo: Tesla Factory, Fremont, California by Maurizio Pesce via Flickr under CC 2.0 License.
In The Sound of Music, the nuns worry “how do you solve a problem like Maria?” when considering an obstreperous member of their convent. After Donald Trump’s convincing victory in the US election, the Democrats will now be asking themselves: “how do you solve a problem like Kamala?”
Gavin Newsom does not want to play with Donald Trump. So he will huff and puff, and posture for the nation, to make himself – and his state, which is also mine – the righteous Avignon to Trump’s crude Rome.
In the election’s wake, California remains part of the Left Coast, clinging to the western edge of Trump world, more an outlier than a trendsetter. Nearly 60 percent of Golden State voters picked the homegrown presidential candidate, and solid majorities voted “blue no matter who” in other races, as well.
A journey through Los Angeles, the adopted home of Vice President Kamala Harris, offers a masterclass in urban dysfunction. Read more
Good vibrations aren’t a policy platform. While Kamala Harris is campaigning on a promise to create an “opportunity economy,” employers are fleeing her home state of California. Over the past decade, companies from banking to aerospace have decamped from California, taking large numbers of middle-class jobs with them. The Golden State has shed major companies including financial-services giant Charles Schwab, pharmaceuticals supplier McKesson and commercial-real-estate giant CBRE. More recently the exodus has extended to high tech, with the loss of software and hardware giants Hewlett Packard Enterprises, Oracle, Palantir, Tesla and Space X.
Chevron’s decision to relocate its global headquarters is the latest evidence of the Golden State’s increasingly hostile business environment. The company—whose roots in the state run deeper than Apple, Google or even Disney—was the 10th most valuable company in the world 10 years ago. Today it doesn’t even crack the top 25. But managing an oil company in California was like running a whiskey distillery in Utah. One former California-based executive told us that he and his children were ostracized in his community for his employment choice.
Gov. Gavin Newsom, Ms. Harris and other boosters claim the state as a social-justice model, yet California now suffers the nation’s highest poverty rate, the widest gap between middle and upper-middle income earners, tepid job growth, and one of the highest unemployment rates. Adjusting for the state’s sky-high cost of living, nearly 1 in 5 Californians lives in poverty. The Public Policy Institute of California estimates another fifth live in near-poverty. That’s roughly 15 million people in total.
California’s climate policies, while largely irrelevant for global emissions, have chased out large employers like Chevron. A recent report from the California Air Resources Board projects that these policies are directing billions in subsidies to “clean” tech firms whose employees are disproportionately upper-income earners. This is what Holland & Knight’s Jennifer Hernandez calls the “Green Jim Crow.” California’s climate policies drive up the cost of housing, food and electricity while destroying thousands of energy-sector jobs held primarily by black and Latino workers.
Ms. Harris, who embraced California’s climate policies as attorney general and a senator, worked to limit building on the suburban fringe, one reason California now has the nation’s second lowest homeownership rate. A recent study by Knock.com found the median family in San Jose or San Francisco would need 125 years to save the money necessary to make the down payment on a median-priced home; in Atlanta or Houston (where Chevron’s new headquarters is) the figure is 12 years. Not one unionized construction worker can afford to buy a median-priced home in any coastal California county, according to a recent study by economist John Husing.
Is there any chance of this turning around? Last month the Bay Area Council, a centrist business group, called out California’s “misguided policies that make it incredibly difficult to do business here” and urged the state’s policymakers “to take stock of the decisions they’re making that affect millions of families and workers, impact the state budget and have grave consequences for the future economic health of this state.”
All too often companies think they can negotiate some sort of settlement with antibusiness activists. Executives seem more like victims of Stockholm syndrome, in which they seem to mimic the ideology of their tormentors. In 2021 Chevron, under pressure from a climate-change nonprofit, announced that it was investing $10 billion in new renewable-energy projects, three times what the company previously committed to spend. It later pledged support for “the global net zero ambitions of the Paris Agreement” and published targets for reducing the company’s carbon footprint.
But enough is never enough. Instead of accepting the olive branch, California sued Chevron and other major energy companies for, as Mr. Newsom put it, “wreaking havoc on our planet and lying to people about the dangers of fossil fuels.” Meanwhile, Chevron’s California-focused investment decisions failed to pan out. In 2020 it was a more valuable company than Exxon Mobil. Chevron’s market cap today is half of Exxon’s.
As Chevron prepares to refocus on maximizing the value of the company, Texas is poised to reap the benefits. Like much of Texas, greater Houston is gaining people and jobs while both are stagnant or declining in Los Angeles and the Bay Area.
Even as the media embraces the Harris and Newsom narratives about California, people on the ground know better. When hundreds of a state’s most well-established companies pick up and leave, it’s a sign that something is seriously off with the regulatory climate. If California’s leaders fail to address this, more companies will follow Chevron out the door. And if the country adopts the California model this fall, we’ll need a lot more than good vibes to face what’s next.
This piece first appeared at Wall Street Journal.
Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.
Michael Toth is a founding partner of PNT Law, based in Austin, Texas.
Homepage photo: Gage Skidmore via Flickr under CC 2.0 License.
Over the past few weeks, however, lunchbucket Joe from Scranton has been unceremoniously dumped by the Golden State elite — Nancy Pelosi, Adam Schiff, George Clooney and a passel of tech oligarchs — to be replaced with one of their own, Vice President Kamala Harris. But given the chances of a GOP win this year, the Californians have another favorite in the wings, Governor Gavin Newsom, for 2028.
A recent Politico article breathlessly reported on Kamala Harris’s enhanced standing as the newly anointed “favourite daughter” of the Bay Area political cabal, led by Nancy Pelosi, powerful Silicon Valley oligarchs, and progressive Hollywood moguls. But as this group celebrates its most recent political coup against the hapless and outmatched Joe Biden, few are examining what their policy agenda has imposed on my adopted home state. This could spell trouble for Harris in November.
Rather than being able to show real improvements, Harris, California Governor Gavin Newsom and their backers specialise in virtue-signalling, particularly on issues of race, gender and climate. Their regulation-heavy approach has forged a neo-feudal state that now has the highest gaps nationally between the rich and the vast majority of inhabitants, who suffer severe housing shortages and the country’s highest levels of poverty. It’s no wonder, then, that four in 10 Californians are considering an exit.
More revealing, at the elite level, has been the emergence of the tech Right in Silicon Valley. Until this year, liberals such as Harris could rely on California’s uniform backing. But many, including people involved in startups, are beginning to switch sides. Venture capitalist Marc Andreessen, who recently compared California to the declining Roman Empire, has joined Elon Musk and David Sacks in endorsing Trump. In fact, Musk has not only backed Trump but also announced he was pulling both X and SpaceX out of the state.
If this trend continues, California’s political climate could start to change. While that may not happen overnight, the Golden State could lose two or three House seats to the GOP. This should be a warning sign to Harris if she intends on implementing a California plan for the rest of America as president.
Members of the California cabal are only dimly aware of changes taking place outside their bubble. Newsom-backers such as economist Chris Thornberg even claim that the loss of SpaceX — arguably the most important exploration company in the world — is only a matter of a few C-suite jobs and “Elon being Elon”. This repeats earlier claims in the progressive media about the unimportance of 3.8 million net domestic migrants leaving since 2000.
The bigger problem, though, will be when the Harris campaign has to defend her efforts, in both California and the Senate, on open borders, race quotas, banning fracking, wiping out parental rights and the use of fossil fuels. If these policies are increasingly unpopular in California, just imagine how they will be received in Texas, Michigan or Wisconsin, or for that matter in Arizona, Nevada and North Carolina.
To win in November, the Vice President will have to somehow place distance between the failures of her backers and her campaign. If not, we could see the second coming of Trump — their greatest nightmare and the ironic legacy of the cabal’s politics.
This piece first appeared at UnHerd.
Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.
Photo: Kamala Harris during her tenure as Attorney General of California Wikimedia in Public Domain.
Elon Musk has just announced that he will move the headquarters of both SpaceX and X from California to Texas, citing Governor Gavin Newsom’s signing of a new law banning parental notification by school districts of children’s gender identification changes. “The governor of California just signed a bill causing massive destruction of parental rights and putting children at risk for permanent damage,” Musk wrote on X. “If you’re a normal family living in California, get out before it’s too late,” wrote one commenter. Many state residents seem to be coming to a similar conclusion. Read more
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