Op-ed: CA’s dream of economic diversity is dying

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California is increasingly dependent on the financial fortunes of a handful of tech giants, according to Zocalo commentator Joe Mathews. As other industries fade, there is a dearth of opportunity. Photo by Shutterstock.

California has long been one of the most diverse states in the country with more than 70 large ethnic communities, from Irish and Ethiopian to Guatemalan and Korean. But Zocalo Public Square commentator Joe Matthews says the Golden State is becoming less varied, and one key way has to do with its economy.

Opinion column by Joe Mathews:

California is rapidly losing its diversity. So why aren’t we hearing more about it? 

Because the diversity we are losing is not in our demography but in our economy. 

A new report, “Restoring the California Dream,” from Joel Kotkin and Marshall Toplansky at Chapman University outlines a confluence of economic threats facing California, and raises questions about our collective lack of commitment to diversity, as well as equity and inclusion, when it comes to the jobs and businesses that keep California working.

California, drunk on wealth and tax revenues from big tech companies, is ignoring declines in the garment business, aerospace, manufacturing, and housing — all former pillars of our once diverse economy. Our manufacturing and industrial weakness represents a missed opportunity now. With global supply chains broken, industrial jobs are returning to the U.S., but other states are reaping the benefit. 

Declining economic diversity means a declining variety of jobs and opportunities. Most worryingly, jobs are disappearing in the better-paying sectors of the economy, like professional services (lawyers, accountants, consultants). Even our innovation economy is slumping, compared to Washington and Utah, the report says.

Those shifts reflect not just declining diversity, but also a loss of equity. That’s equity in the sense of ownership. California firms, including Tesla, Oracle, and Hewlett-Packard, have moved their headquarters out of state, and the speed at which such relocations are happening has been accelerating. Tech firms are locating more new projects elsewhere, like Intel’s $20 billion Ohio investment. 

Many California watchers, including your columnist, have previously dismissed corporate departures from California by pointing to the state’s unparalleled ability to birth new companies. But there are signs that our entrepreneurial energy is diminishing. The Bay Area’s proportion of venture capital, that very Californian mode of investing, is falling compared to the rest of the U.S. 

And California’s higher education systems, the inspiration of so much of our innovation, are expanding less rapidly than universities elsewhere, and have failed to produce enough graduates to meet state needs, the report notes.

If you’re seeking the equity that comes with owning your own home, California is a very hard place to find it. In every age category, home ownership in California is lower than the national average. 

This lack of equity represents a failure of inclusion: middle-class and working-class people struggle to keep a foothold here. Four California areas — Ventura, LA, San Jose, and San Diego — rank among the bottom 10 regions nationally in well-paying blue-collar jobs, the report says.

The percentage of people who leave the state remains small. Most departures are from LA, which accounts for more than half of all the net domestic outmigration from the state. 

Here’s the real problem: Very few people are coming here. By some measures, California is the least attractive state for new residents. Both domestic and international migration to California trail that of other states.  

When you adjust the metrics to compare California to other states, our high costs translate into the nation’s worst poverty. The Chapman report says that in 2019, cost-adjusted incomes for Latinos and African Americans were lower in California than nationally. And in perhaps the report’s most devastating statistic, real incomes for California’s African Americans are lower than those of African Americans in Mississippi.

It's long been conventional wisdom that poorer or less educated people are leaving California, and new arrivals are wealthier and better educated. But that may be changing. The Chapman report, crunching Internal Revenue Service figures, finds that for the last five years, California’s out-migrants and in-migrants have had roughly equal incomes. 

When people leave California, they can’t find a place with our weather and natural beauty because no such place exists in this solar system. But the study notes that in Denver, Austin, Nashville, and other cities, people are finding the same cultural diversity that California offers — along with diverse employment opportunities, inclusive economies, and more opportunity to build equity through homes and businesses. 

In the face of such trends, California needs a real strategy for convincing more people to move to our state. For that to happen, DEI can’t just be a slogan for corporations, schools, and governments. It must be an everyday economic reality.

Joe Mathews writes the Connecting California column for Zócalo Public Square.




Chery Glaser


Darrell Satzman