Tag Archive for: outmigration

California’s Economy is Weaker Than it Looks

Whisper it, but the $45 billion surplus Gavin Newsom has projected for California next year isn’t quite what it seems. In fact, the bulk of that surplus is largely due to the earnings of a few giants such as Google, Apple and Meta (formerly Facebook), as well as a handful of IPOs.

This inconvenient truth hasn’t stopped the Governor from proposing a record-high $286.4 billion budget that will focus on education, health spending for undocumented residents, and expanding the state’s already massive social spend.

Indeed, even with a surplus, the state legislature seems determined not to lower taxes but to raise them. Newsom plans to implement a single payer health care system funded by massive new taxes on business and higher income revenues, raising what is already the nation’s highest rate. On top of that, the legislature seems ready to impose other wealth taxes on the very rich who keep the state afloat.

Yet the reliance on the elites — the 1% who account for half the state’s income tax — could prove troubling once the current stock market boom ends, and the IPO picture darkens. The state tax and regulatory regime has already kneecapped most other sectors of the economy, including both blue collar industries like manufacturing, energy and construction. And much of this has been accelerated by a growing exodus of companies, including such iconic firms as Tesla, Oracle, HP Enterprises, Charles Schwab, Bechtel, Parsons Engineering, and others. Meta has reportedly purchased thirty-three floors in an Austin high rise.

Despite professing to be the start-up capital of America, California’s leaders simply ignore or dismiss any notion of economic peril. But the reality is stark: this is a state that suffers the country’s highest cost-of-living adjusted poverty rate, the largest gap between the middle class and the rich, among the most crowded housing, and the second lowest homeownership rate. Post-pandemic it also has the nation’s highest unemployment rate.

These facts are rarely discussed in the predictably pro-Newsom media. The party line is that such attacks reflect the political bias of Right wing “haters”. Yet what California needs is not media or academic shills, but a willingness to confront the state’s emerging neo-feudal structure that, amid unprecedented wealth, has done little for most residents. Only a course correction, and change of consciousness, can restore the state to its former greatness.

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 Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Homepage photo: Gage Skidmore, via Flickr under CC 2.0 License.

Feudal Future Podcast – The Metaverse Explained

On this episode of Feudal Future, hosts Joel Kotkin and Marshall Toplansky are joined by American entrepreneur, Rony Abovitz, and Charlie Fink, AR/VR consultant and professor of Chapman University to discuss the metaverse and what the future holds in a digital world.

California is a Bastion of Innovation Marred by Deep Inequality. Is That America’s Future?

Everyone seems to be California dreaming these days. Much of America, particularly its red parts, see California as a hopeless dystopia best understood as everything the nation should avoid. Meanwhile, for the progressive Left and many around Joe Biden, California is the Mecca, a great role model being attacked by jealous reactionaries.

As in so many cases, both sides have a piece of the truth.

To be sure, despite the many well-documented problems, California still has an impressive economy that will shape the country’s and the world’s economic future—through the entertainment, space, critical software and social media industries and international trade. A spirit of experimentation and innovation persists across the state and fuels this industriousness.

Sadly, along with new technical and cultural innovations, the everyday reality outside the glamor zone presents a prospect as cautionary as it is aspirational, a harbinger of innovation marred by massive social inequality.

For the parade of startups and youthful billionaires coexists with the country’s highest cost-of-living adjusted poverty rate, the largest gap between the middle class and the rich, the most crowded housing and second lowest homeownership rate.

California once projected the essence of our common national dream. Today, its leaders increasingly see it as a kind of post-America, with its own racial, gender and environmental standards. It’s an approach welcome in Malibu or Palo Alto, but most Californians are left coping with the nation’s worst homeless crisis and rising crime. A ride on Highway 33 through the impoverished expanses of the Central Valley reveals a vast and bleak landscape of abandoned cars, dilapidated houses and threadbare shops.

The pandemic has accelerated California’s class divide, vastly enriching the tech elite and financial oligarchs but leaving California with the nation’s highest unemployment rate and making it the second hardest place to find a job.

Silicon Valley was once among the most egalitarian regions in the nation; today, as it has become more aggressively woke and taken to massively funding progressive Democrats, it has become one of the most segregated places in the country, what CityLab has described as “a region of segregated innovation.”

Times may be flush for venture capitalists and serial tech entrepreneurs, but they’re not so great for those who clean their own buildings and work in the food service industry. Nearly 30 percent of Silicon Valley’s residents rely on public or private financial assistance. African Americans and Latinos have seen declines in real incomes. The one percent pay roughly half of the state’s income tax and windfalls from IPOs fund the state’s ultra-generous pensions and an ever expanding welfare state—and yet, none of this creates good jobs.

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Feudal Future Podcast – Restoring the California Dream

Joel and Marshall discuss how we can restore the California dream, stopping the outflow of millennials and families headed for states that now offer better opportunity than California.

Feudal Future Podcast – Cities of the Future

On this episode of Feudal Future, hosts Joel Kotkin and Marshall Toplansky talk with Cullum Clark and Austin Williams about the future of cities and what it will take to build the new world.

Own Nothing and Love It

From the ancient world to modern times, the class of small property owners have constituted the sine qua non of democratic self-government. But today this class is under attack by what Aristotle described as an oligarchia, an unelected power elite that controls the political economy for its own purposes. In contrast, the rise of small holders were critical to the re-emergence and growth of democracy first in the Netherlands, followed by North America, Australia, and much of Europe.

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The Great Office Refusal

The pandemic has cut a swath through our sense of normalcy, but as has been the case throughout history, a disastrous plague also brings opportunities to reshape and even improve society. COVID-19 provides the threat of greater economic concentration, but also a unique chance to recast our geography, expand the realm of the middle class, boost social equity, and develop better ways to create sustainable communities.

Driven partly by fear of infection, and by the liberating rise of remote work, Americans have been increasingly freed from locational constraints. Work continues apace in suburbs and particularly in sprawling exurbs that surround core cities, while the largest downtowns (central business districts, or CBDs) increasingly resemble ghost towns.

This shift has made it more practical for individuals and particularly families to migrate to locations where they can find more affordable rents, and perhaps even buy a house. But such a pattern may be countered by investors on Wall Street, who seem determined to turn the disruption to their own advantage by gearing up efforts to buy out increasingly expensive single-family homes, transforming potential homeowners into permanent rental serfs and much of the country into a latifundium dominated by large landlords.

We are in the midst of what the CEO of Zillow has called “the great reshuffling,” essentially an acceleration of an already entrenched trend of internal American migration toward suburbs, the sunbelt, and smaller cities. Between 2019 and 2021 alone, a preference for larger homes in less dense areas grew from 53% to 60%, according to Pew. As many as 14 million to 23 million workers may relocate as a consequence of the pandemic, according to a recent Upwork survey, half of whom say they are seeking more affordable places to live.

This suggests that the downtown cores of U.S. cities will continue to struggle. Since the pandemic began, tenants have given back around 200 million square feet of commercial real estate, according to Marcus & Millichap data, and the current office vacancy rate stands at 16.2%, matching the peak of the 2008 financial crisis. Between September 2019 and September 2020, the biggest job losses, according to the firm American Communities and based on federal data, have been in big cities (nearly a 10% drop in employment), followed by their close-in suburbs, while rural areas suffered only a 6% drop, and exurbs less than 5%. Today our biggest cities—Los Angeles, New York, and Chicago—account for three of the five highest unemployment rates among the 51 largest metropolitan areas.

The rise of remote work drives these trends. Today, perhaps 42% of the 165 million-strong U.S. labor force is working from home full time, up from 5.7% in 2019. When the pandemic ends, that number will probably drop, but one study, based on surveys of more than 30,000 employees, projects that 20% of the U.S. workforce will still work from home post-COVID. 

Others predict a still more durable shift: A University of Chicago study suggests that a full one-third of the workforce could remain remote, and in Silicon Valley, the number could stabilize near 50%. Both executives and employees have been impressed by the surprising gains of remote work, and now many companies, banks, and leading tech firms—including Facebook, Salesforce, and Twitter—expect a large proportion of their workforces to continue to work remotely. Nine out of 10 organizations, according to a new McKinsey survey of 100 executives across industries and geographies, plan to keep at least a hybrid of remote and on-site work indefinitely.

The shift of work from the office to the home, or at least to less congested spaces, threatens the strict geographic hierarchy of many elite corporations. Some corporate executives, like Morgan Stanley’s Jamie Dimon, are determined to force employees back into Manhattan offices, like it or not. It’s now a common mantra among like-minded executives, especially those connected to downtown office development, that workers are “pining” to return to the office. Some have even threatened employees who do not come back in person with lower wages and decreased opportunities for promotion, while offering to reward those willing to take the personal hit of coming back on-site every day.

Read the rest of this piece at Tablet.


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 Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Photo credit: Steven Zwerink via Flickr under CC 2.0 License.

Gavin Newsom Won His Recall. What’s Next for California?

What started as a lark, then became an impossible dream—a conservative resurgence, starting in California—ended, like many past efforts, in electoral defeat. With his overwhelming victory in the recall election, California governor Gavin Newsom and his backers have consolidated their hold on the state for the foreseeable future.

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Progressives Have Ruined California

The very idea of a recall vote seemed absurd at first in California, this bluest of US states. Yet Californians’ surprisingly strong support for the removal of Democratic governor Gavin Newsom has resulted in precisely that, with the vote scheduled for 14 September. This reflects a stunning rejection of modern progressivism in a state thought to epitomise its promise.

Some, like the University of California’s Laura Tyson and former Newsom adviser Lenny Mendonca, may see California as creating ‘the way forward’ for a more enlightened ‘market capitalism’, but that reality is hard to see on the ground. Even before the pandemic, California already had the highest poverty rate and the widest gap between middle and upper-middle income earners of any state in the US. It now suffers from the second-highest unemployment rate in the US after Nevada.

Today, class drives Californian politics, and Newsom is peculiarly ill-suited to deal with it. He is financed by what the Los Angeles Times describes as ‘a coterie of San Francisco’s wealthiest families’. Newsom’s backers have aided his business ventures and helped him live in luxury – first in his native Marin, where he just sold his estate for over $6million, and now in Sacramento.

California’s well-connected rich are predictably rallying to Newsom’s side. At least 19 billionaires, mainly from the tech sector, have contributed to his extraordinarily well-funded recall campaign, which is outspending the opposition by roughly nine to one.

There is little hiding the elitism that Newsom epitomises. In the midst of a severe lockdown, he was caught violating his own pandemic orders at the ultra-expensive, ultra-chic French Laundry restaurant in Napa.

Newsom insists California is ‘doing pretty damn well’, citing record profits in Silicon Valley from both the major tech firms and a host of IPOs. He seems to be unaware that California’s middle- and working-class incomes have been heading downwards for a decade, while only the top five per cent of taxpayers have done well. As one progressive Democratic activist put it in Salon, the recall reflects a rebellion against ‘corporate-friendly elitism and tone-deaf egotism at the top of the California Democratic Party’.

Much of this can be traced back to regulatory policies tied to climate change (along with high taxes). These policies have driven out major companies – in energy, home construction, manufacturing and civil engineering – that traditionally employed middle-skilled workers. Instead, job growth has been concentrated in generally low-pay sectors, like hospitality. Over the past decade, 80 per cent of Californian jobs, notes one academic, have paid under the median wage. Half of these paid less than $40,000.

Read the rest of this piece at Spiked.


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.

California Fleeing

Some longtime Californians view the continued net outmigration from their state as a worrisome sign, but most others in the Golden State’s media, academic, and political establishment dismiss this demographic decline as a “myth.” The Sacramento Bee suggests that it largely represents the “hate” felt toward the state by conservatives eager to undermine California’s progressive model. Local media and think tanks generally concede the migration losses but comfort themselves with the thought that California continues to attract top-tier talent and will remain an irrepressible superpower that boasts innovation, creativity, and massive capital accumulation.

Reality reveals a different picture. California may be a great state in many ways, but it also is clearly breaking bad. Since 2000, 2.6 million net domestic migrants, a population larger than the cities of San Francisco, San Diego, and Anaheim combined, have moved from California to other parts of the United States. (See Figure 1.) California has lost more people in each of the last two decades than any state except New York—and they’re not just those struggling to compete in the high-tech “new economy.” During the 2010s, the state’s growth in college-educated residents 25 and over did not keep up with the national rate of increase, putting California a mere 34th on this measure, behind such key competitors as Florida and Texas. California’s demographic woes are real, and they pose long-term challenges that need to be confronted.

Source: Derived from U.S. Census Bureau Estimates

Source: Derived from U.S. Census Bureau Estimates

The state has suffered net outmigration in every year of the twenty-first century, but its smallest losses occurred in the early 2000s and the years following the Great Recession, when housing affordability was closer to the national average. Home prices have risen since then—and so have departures. Between 2014 and 2020, net domestic outmigration rose from 46,000 to 242,000, according to Census Bureau estimates.

The outmigration does not seem to have reached a peak. Roughly half of state residents, according to a 2019 UC Berkeley poll, have considered leaving. In Los Angeles, according to a USC survey, 10 percent plan to move out this year. The most recent Census Bureau estimates show that California started falling behind national population growth in 2016 and went negative for the first time in modern history last year.

The comforting tale that only the old, bitter, and uneducated are moving out simply does not withstand scrutiny. An analysis of IRS data through 2019 confirms that increasing domestic migration is not dominated by the youngest or oldest households. Between 2012 and 2019, tax filers under 26 years old constituted only 4 percent of net domestic outmigrants. About 77 percent of the increase came among those in their prime earning years of 35 to 64. In 2019, 27 percent of net domestic migrants were aged 35 to 44, while 21 percent were aged 55 to 64. (See Figure 2.)

Source: IRS data

Source: IRS data

To be sure, the largest increase in net domestic migration was among those aged 65 and over. But the second-largest increase came in the 25 to 34 categories—with the state’s exorbitantly high cost of living the likely culprit.

Read the rest of this piece at City Journal.


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.

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, a Senior Fellow with the Frontier Centre for Public Policy in Winnipeg 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.

Photo: Beatrice Murch, via Flickr under CC 2.0 License