PROSPERITY FOR ALL

 

Summary

• California has the highest rates of poverty and inequality in the United States as a result of the state’s tax and regulatory policies.

• We need economic growth that is broadly shared and does not disproportionately benefit the wealthiest Californians.

• We can create good jobs and end poverty by embracing automation, keeping and attracting manufacturing, lowering energy prices, and raising the minimum wage.

• As one of the nation’s richest states, California should also aim to have the lowest rates of poverty and inequality.

 
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Problem

California has the highest rate of poverty and inequality when our high cost of living is accounted for, according to the Census Bureau. In Los Angeles, the cost of housing has risen four times faster than incomes since 2000. Of the large states, California is the most unequal in terms of well-being, education, and other measures.

The high cost of living is driving good jobs and employers like Toyota out of state to places like Portland, Oregon and Austin, Texas, which are building new homes twice as quickly
as the Bay Area. As that happens, the chance of capturing good manufacturing jobs declines.

Manufacturing job growth rebounded only 4 percent in California where it rebounded 9 percent nationally. California attracted just one-quarter of the manufacturing investment as the rest of the United States, despite having the largest manufacturing sector in the nation.

Energy is more expensive in California than in most of the rest of the U.S. Expensive energy hurts poorer Californians directly and drives manufacturers out of the state. Electricity prices rose five times more between 2011 and 2017 in California than they did nationally, so that today we spend 60 percent more than the rest of the nation.

High-paying manufacturing jobs are being replaced by lower-paying service jobs. A California manufacturing worker makes $96,711 per year compared to state average of $58,628. Los Angeles over the last decade lost 89,000 good manufacturing jobs that paid twice as much as service sector jobs.

California is hostile to manufacturing. California manufacturers pay nearly 100 percent more for electricity than manufacturers pay nationally. “California is not a competitive place for a manufacturing company,” concluded a report that surveyed manufacturers. “Costs, regulations, permitting delays, a lack of incentives, high labor costs and a high tax rate among other factors make it very difficult for manufacturers to do business in California.”

California remains home to over one-third of the nation’s poorly treated farmworkers — about 500,000 people. Most are undocumented and many are denied a decent wage and basic rights. Farmworkers suffer a death rate seven times higher than other private sector workers, and 80 percent of farmworker women say they’ve suffered sexual harassment including rape.

The right of workers to quit their jobs and seek a new one is denied to seasonal Latin American farmworkers and South Asian H1B computer programmers alike. The reason is because quitting would require leaving the country.

More than 4,600 Californians died from opioid overdoses in 2016, the second most of any any state. Meanwhile, in San Francisco, drug company McKesson’s CEO personally earned $700 million over the last decade as he turned a blind eye to the massive diversion of his company’s opiate drugs to the black market.

The autonomous vehicle revolution is arriving and it will soon impact California’s 346,660 professional drivers. Of those, 130,640 are heavy and tractor-trailer truck drivers.

 
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Solution

California should seek “high-road” of high-productivity, high growth, and high wages focused on exports. The traded (export) sector of the economy produces most of all GDP gains despite being one-third of the economy.

California should make it easier for manufacturers by streamlining permitting and regulation and other incentives. Despite declines, manufacturing still comprises one-tenth of California’s economic output, which is ten times more than agriculture and employs eight percent of the workforce.

We must embrace the automation revolution (including autonomous vehicles) which could either destroy jobs and worsen inequality or create good jobs and reduce inequality. What’s clear is that the revolution is coming: analysts estimate that the global market for AVs alone will be $42 billion in 2025. California is uniquely positioned to benefit from it thanks to California-based AV leaders Google, Uber, and Apple.

AVs could radically reduce traffic accidents. In just California alone, over 3,500 people die each year in traffic accidents. More people are dying annually, which may be due to higher use of mobile devices while driving. Experts predict AVs could reduce road accidents by 90 percent, according to one firm’s research. Beyond lives saved, reducing accidents could save $190 billion annually.

AVs could reduce travel times and increase efficiency in many ways. Nearly one third of cars in San Francisco at any given time are trying to park. Los Angeles and San Francisco today have the first and fifth highest congestion rates, respectively, in the world. AVs could increase significantly mobility for everyone, including the elderly, minors, and the disabled at lower cost than existing public transit.

AVs could allow policymakers to reduce street parking thereby allowing more space for movement and encourage the adoption of roving robot cars.

California should learn from Germany’s vocational education and technical apprenticeship programs. In 2005, Germany reformed its educational system to allow students to gain more real world experience in vocational education. The reforms worked. The percentage of Germans in the 20s without formal employment qualifications dropped by nearly four percentage points. Today, most German students ages 16-20 have a chance to gain workplace training in addition to classroom learning.

We must raise the minimum wage to abolish poverty and make automation cost-effective. It should be done gradually to give industries the time needed to make the investments in automation they need to make.

California should impose a “local sourcing” requirement on automobile companies that sell in-state, just as it imposes fuel efficiency standards on them. This worked to help attract manufacturing to the American South.

California should support a revitalized agricultural industry including accelerating animal-free meat production and the more widespread use of drones.

We need a grand bargain on immigration. This starts withprotecting equal rights for all workers who are here while also regulating the border and implementing an “e-verify” system that puts the burden of verification on the employer.