Are high-wage jobs squeezing lower earners out of Bay Area?

Publication Date
Author
Riley McDermid
Source
San Francisco Business Times

Three new studies show that although California has one of the highest rates of job growth in the country, its cost of housing and high-wage jobs could push lower earners out of the state as they seek someplace more affordable.

The three reports – Current State of the California Housing Market, California Migration and California Employment by Income– were commissioned by San Francisco-based nonprofit Next 10 and prepared by Beacon Economics.

“California has an employment boom with a housing problem,” said Christopher Thornberg, co-author of the reports and founding partner of Beacon Economics. “The state continues to offer great employment opportunities for all kinds of workers. But housing affordability and supply represent a major problem. If we want to attract and keep low- and middle-income families in California, we need to address it.”

That's resulted in California losing more residents between 2007 and 2014 than it gained, with the vast majority being people who earned less than $30,000 and moved to five states: Washington, Oregon, Nevada, Arizona and Texas. At the same time, middle-income households (with combined incomes of $50,000 to $100,000) account for 22.2 percent of people leaving California for other states.

You can see how the report breaks down in our bullet points below.

Noel Perry, founder of Next 10, told the Business Times that the Bay Area in particular could be affected, as low- to mid-income workers find it increasingly hard to make ends meet in a region with sky-high housing prices and long commutes. That could create an exodus to other states that also have metro areas and all that come with them, but at a lower price point. 

Perry said that metropolitan areas like San Francisco and the South Bay rank at the very bottom for housing affordability in the United States — at 173 and 176, respectively — out of a 176 total. That, coupled with an influx of high-wage, educated workers moving to places like the Bay Area, where there's a concentration of high-wage jobs, makes it unlikely to attract all types of workers.

"What's concerning for the future of the Bay Area is that we also have important and growing low-and middle-wage industries, and despite great job prospects and higher that average wages, larger numbers of these workers are having to migrate because of affordability," Perry told the Business Times.

That could mean that a diverse workforce, that includes workers from all tiers of economic status, could be lost in the Bay Area. How that affects the larger business landscape varies, Perry says, but it certainly could restrict the way businesses are able to recruit and retain talent.

"Workers from all industries, ranging from education to healthcare to hospitality, need to know that they, too, have a place in California," Perry told the Business Times. "Places like the Bay Area are at risk of losing the diversity of the workforce, and economies cannot thrive under those conditions."

The reports also takes on the myth that taxes deter people from moving to California, with data showing a net increase in migration of high-wage earners, who are more affected by high tax rates. In fact, California continues to see a net increase in migration from both Alaska and Florida, neither of which has a state income tax.

Here are the top takeaways from the three reports:

California is experiencing some of the highest rates of post-recession job growth in the nation. Between 2009 and 2014, California’s low-wage employment (industries that pay an average of $35,000 or less) expanded by 16.1 percent, resulting in the third-highest growth rate in the U.S., while middle- ($35,000 - $59,999) and high-wage industries ($60,000+) had the 11th highest rate of growth in the nation. In some cases, wages are up to 12.4 percent higher than the national average.

California is attracting high-wage earners with college degrees, bringing in 52,700 residents with Bachelor’s degrees between 2007 and 2014.

Housing costs in California are the highest in the nation. In 2014, California homeowners spent more of their household income on housing costs than homeowners in any other state, and California rental apartments cost 35.7 percent more than the national average. 

California housing remains over-crowded and in short supply. Between 2005 and 2015, permits for only 21.5 housing units were filed for every new 100 residents, less than any other state except for Alaska. In 2014, California had the highest share of renter-occupied housing units with more than one resident per bedroom (13.2 percent).