Compared to 25 years ago, the incomes of the wealthiest households and others are now further apart, and the region’s middle class is smaller. Much like the greater Bay Area and California as a whole, Silicon Valley is a far more unequal place than it used to be.
The enactment of California’s $15 state minimum wage is, of course, not the final word, as state leaders will be able to make adjustments over time to deal with the current unknowns. The plan to reach $15 by 2022 includes provisions for delaying the scheduled increases if the economy weakens or the state budget is projected to face a deficit, as discussed above. In addition, because the increase will be implemented gradually, policymakers will be able to monitor its effects and make additional adjustments if necessary. For example, it will be important to look at how the minimum wage increase affects lower-cost regions of the state, where the wage hike is expected to have a much greater impact, and also how it affects workers’ access to subsidized child care, which low-paid workers need in order to work.
Budget Proposal Prioritizes Austerity, Lacks Plan for Helping Ensure Broadly Shared Economic Recovery
The CBP’s report shows that even with increased state revenues and a continuing economic recovery that has yet to reach many Californians, the Governor’s proposed budget prioritizes fiscal austerity over investing in broadly shared prosperity. The Governor’s proposal does reflect a focus on policy changes enacted in prior years — such as California’s new K-12 funding formula and the state’s implementation of federal health care reform — that move the state forward in important ways. Yet, while the Governor’s proposal includes long-term plans for paying down budgetary debt and saving for a rainy day, it does not present a similar vision for tackling California’s biggest challenges: still-high levels of unemployment and poverty, widening income inequality, and a safety net severely weakened by years of funding cuts.
A new analysis from the California Budget Project (CBP) looks at how California could create its own state EITC and shows that a refundable state credit could provide an economic boost for more than 3 million households. In addition, a state EITC would help rebalance California’s tax system, under which low-income families currently pay an outsize share of their incomes in state and local taxes, and would also strengthen our state’s social safety net.
While the outlook for California’s jobseekers is considerably better than in recent years, substantial challenges remain. Unemployment remains high in many regions across the state, and persistent weakness in the public sector job market is undermining the overall strength of the economic recovery. Moreover, the current extended period of economic growth follows decades of wage stagnation and Great Recession will not be suffi cient to ensure broad-based economic growth that reaches workers across the wage distribution.
Low-wage and mid-wage workers still earned signifi cantly less in 2013 than before the Great Recession began, after adjusting for infl ation. This wage erosion continues a decades-long trend of widening wage inequality.
Contrary to the oft-repeated claim that high-income Californians pay an unfair amount of taxes, it is actually California’s low-income households who pay the largest share of their incomes in state and local taxes. Given widening income inequality over the last generation, and the ongoing economic challenges facing Californians in the aftermath of the Great Recession, policymakers could take specifi c steps to reduce the regressive nature of California’s system of state and local taxes and to promote economic security for low-income families.
January 8, 2014 marks the 50th anniversary of President Lyndon B. Johnson’s declaration of an unconditional War on Poverty, made during his 1964 State of the Union address. Although poverty remains a reality for millions of Californians, the last half-century has shown the key role that public policies can play in reducing poverty and fostering economic security. With state policymakers set to begin crafting a new state budget, this Budget Brief looks at poverty in the Golden State and discusses some ways that policymakers can help reduce economic hardship and expand pathways to opportunity and advancement.
California’s job market is experiencing a sustained increase in employment as the state continues to emerge from the Great Recession. However, even with unemployment falling, California’s job market recovery has not reached large segments of California’s workers. After more than three years of job growth, the pace of the recovery has been on par with that of previous recoveries in the state, which is bad news for California’s workers given the historic severity of job losses during the Great Recession. A majority of California counties still have unemployment rates in the double digits, and long-term unemployment remains a serious concern: More than two in five unemployed Californians have been searching for work for at least six months. And for those who do have work, this recovery has not yet produced the mix of jobs that would lead to broad-based economic growth. California’s recovery has disproportionately relied on low-wage service industries for job growth, and jobs generally have not returned in occupations that tend to pay wages in the middle of the earnings distribution. These weaknesses in the current recovery mean that challenges facing California even before the recession began, such as wage stagnation and widening inequality, continue today.
. . . examines the growing cost to the state of the EZ tax breaks, looks at who receives these breaks, and discusses current proposals to reform the EZ Program, including those contained in Governor Brown’s May Revision of his proposed 2013-14 budget.
. . . shows that the income gap in California grew substantially in recent decades.
. . . discusses the latest employment trends for California’s women and the need for increased support for key pathways to career advancement and economic security.
. . . provides a comprehensive overview of taxes and tax policy in California.
Overview of Governor’s Proposed Budget and key economic trends
Stuck Between a Recession and a Recovery: California’s Workers Face the Toughest Job Market in Decades
Key trends in employment and earnings