California: Who’s Leaving? Who’s Coming?

The latest news out of California is that the state has actually achieved a budget surplus that is billions larger than expected—$3.8 billion more than forecast back in January. Good times for the spend-happy state legislature, and the next Democratic governor who will love to be able to pass out goodies upon taking office next January. As the Sacramento Bee comments: “It’s an irresistible pot of money for lawmakers who want to bolster programs for the homeless, higher education and lower-income families.”

What can account for this bounty? Is this evidence that the California blue state model “works”? As is well known, California is experiencing significant out-migration, and it has been going on for over a decade—the first period since the Gold Rush in 1849. Now I’ve joked that California is not sending its best to other states: we’re sending hipsters, trust fund brats, Silicon Valley and Hollywood trash, and some, I assume, are good people.

But what do we really about who is moving out and who is moving in? A new report on migration from a left-of-center outfit, Next 10, is very revealing: middle class and low income people are moving out of California in droves, while upper income people and fancy professionals are moving in. Here are the general numbers:

California experienced negative net domestic migration of 1,090,600 from 2006 to 2016. In other words, 1,090,600 more people moved out of California to other states than moved in from other states.

Have a close look at the income gradations in this chart:

What you can clearly see is that low income and working class households are moving out, while upper income people are moving in. And since California’s income tax system is skewed to upper incomes, this is one reason why state revenues are holding up so well. That very think slice of high income people depicted in the last several years of this chart provide a disproportionate share of state income tax revenue.

A second pass at the data shows that the people moving out are also less educated—in other words, the kind of working class people Hillary calls “deplorable” or “not dynamic and forward-looking”:

The report doesn’t shrink from noting the role of the high cost of housing—and the scarcity of new housing construction:

Despite negative net domestic migration, California is continuing to attract new residents, individuals coming to California are primarily concentrated in high-wage occupations, which enable them to better absorb the state’s high cost of living. The majority of California’s outbound migrants tend to earn less than $30,000 annually. . .

Migration trends also show that the middle class is being priced out of the state. . .  High housing costs have made California an increasingly difficult place for lower-income residents with less education to maintain their quality of life, while many middle-income residents are having trouble moving from renting to homeownership. . .

It appears that California’s high cost of living and housing costs, particularly for middle- and lower-income residents, play a large role in decisions to move into or out of the state. This is in contrast to Texas, which has been able to accommodate workers at all income levels. On net, over 423,000 residents who earn less than $30,000 left the Golden State, while Texas experienced a net increase of 358,000 in that same income bracket.

The report notes that California is simply not building enough housing. This comparison to Florida is especially telling:

The Census Bureau estimates that for all of 2017, roughly 112,000 housing permits were issued in California, making it the best year in a decade in terms of permit volumes. In other words, seven and a half years after the Great Recession and into the third longest expansion in United States’ history, the State permitted roughly the same number of hous- ing units as it did in 1998, when it had 6.5 million fewer residents. California is permitting roughly the same number of housing units as Florida. From 1992 to 2017, data from the Census Bureau show that Florida has issued more residential permits than California in all but three years during that 25-year period. This means that California, which has, on aver- age, 18 million more residents, is building slightly less housing than Florida.

Finally, even these liberals can’t help but note that the state’s revenue system is vulnerable to the income cycles of the very rich:

California’s tax structure may require reform, because streamlining the tax code, broadening the tax base, and lowering tax rates would probably bolster the state’s economy.

The top recipient state for the low and middle-income people leaving California is Texas. Liberals who claim to be on the side of the poor and middle class fall suddenly mute when it is pointed out that when poor and middle-class working people vote with their feet, they vote for a deep red state that liberals deplore.

The point is clear: California is now just a playground for rich and affluent professionals, and a lower class that cuts their lawns and cleans their kitchens.

See also this news story on the contribution of rising crime and homelessness as factors in the exodus.