Southern California worker bees are seeing some of the nicest increases in wages since the recession ended. But employers must somehow pay for higher labor expenses, and it appears bosses are opting to raise local prices. Look at April’s consumer price index for the five-county region. Year-over-year, the cost-of-living was up 2.7 percent, the third consecutive month at this level. The last time local inflation was this strong was 2011.
Last April, we highlighted research from Joshua Rauh, a professor at Stanford’s Graduate School of Business, placing America’s state and local pension shortfall at an eye-popping $3.4 trillion. This year, Rauh has crunched the numbers again—and, despite a growing stock market, the situation has not improved. . . The numbers are so grim that it is hard to see how America gets through the next recession and its aftermath without a wave of municipal bankruptcies. Public employee unions have managed to extract promises from state and local governments that are simply impossible to keep. And those governments have been papering over the extent of their obligations with accounting assumptions that are so overly-optimistic as to be deceptive.
California is spending record sums on anti-poverty programs, $19 billion per year more than in 2012. We have the highest poverty rate in the nation, over 20 percent, according to the Census Bureau, when the cost of living is taken into account. But taxpayer-funded programs can never catch up to the problem, because higher taxes are part of the cause of the problem. Where are the jobs that allow people to climb out of poverty and enjoy a rising standard of living, instead of declining wages and never enough money to buy things?
“With parents working two or more jobs to afford housing, they may lack the time to help children with homework or afford after-school enrichment, affecting educational achievement.” If the housing crisis continues, the report predicts, the result will be “a persistent and growing underclass,” while higher-income residents bear the burden of supporting a swelling elderly population.
Earlier this month four economists released a study of income trends based on an under-used data source, Social Security wage records. These earnings reports are submitted by employers for the purpose of calculating workers’ tax payments and, eventually, Social Security benefits. The income amounts are quite accurate and cover a full career of wage income. The new study confirms that average male earners have seen scant wage gains over the past generation. The study also turned up a surprise. When we combine the earnings trends for men and women, the rise in inequality appears much slower than when we examine trends among each sex separately.