Digging into the data: How attainable is the California Dream today?

FIRST IN AN OCCASIONAL SERIES

Editor’s note: Is the California Dream still valid? Compared to the rest of the nation, we are expensive – and making ends meet gets tougher for many of us each year. We have the nation’s highest rates for poverty and income inequality and we face a deepening housing-affordability crisis. Our state has an unfunded debt approaching $400 billion for public-employee retirement and billions more for outstanding bonds. Add to that a massive infrastructure backlog. And yet, many argue, Californians are more diverse, safer and better educated than ever.

As a pivotal election nears, the issues gripping the state will shape life decisions about where to live, about raising our families and about choosing our careers.

This story is the first installment of the California Dream project, created by a statewide nonprofit media collaboration focused on issues of economic opportunity, quality-of-life, and the future of the California Dream. Partner organizations include CALMatters, Capital Public Radio, KPBS, KPCC, and KQED with support provided by the Corporation for Public Broadcasting and the James Irvine Foundation. You can share your California dream on Twitter by using the hashtag #CADream.

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By Matt Levin, CALMatters

No one has the exact same definition of the California dream. Ask the 39 million current Californians about what the dream should be, and aside from most of us agreeing that the daily temperature should dip no colder than the mid-‘50s, you’ll likely get 39 million very different answers.

But the so-called “Golden Era” of California—that faded Technicolor image of a magical time in the 1960s when as soon as you crossed the stateline Ronald Reagan would hand deliver you a two-story house and 2.5 children and tiki-themed patio furniture—still seeps into our expectations of life here.

Granted, that vintage California dream was primarily lived out by white families. Discrimination in law and practice made it difficult for people of color, who made up a much smaller proportion of the state population than they do today, to share in that prosperity. And major swaths of California’s current population arrived here well after that “Golden Era” had passed.

Still, half a century later, this…

…bears a striking resemblance to this….

Celebrity endorsements aside, there’s an increasingly pervasive feeling among those of us who actually live here that the California dream is just harder than it used to be. A recent USC Dornsife/Los Angeles Times poll found that only 17 percent of Californians believe the state’s current generation is doing better than previous ones. More than 50 percent thought younger Californians were doing worse.

They’re not wrong.

Over the past four decades, California middle-class incomes have stagnated: The median California family is making only marginally more now than they were in 1980. More than half of Californians born that year made less than their parents did by age 30.

That’s a problem because at the same time, the state’s cost of living has exploded. A house that 50 years ago cost about three times a younger California household’s salary now costs seven times what a younger household earns.

If the past half-century has been rough for middle income Californians, it’s been brutal for those lower on the income ladder. Starting in the late 1970s, California’s poverty rate crept higher than the national average. Now, when cost of living is factored in, we’re the poorest state in the country.

Eulogizing the California dream has developed into its own cottage industry in recent years, with politicians of all stripes promising to restore our glory days. All too often the gloom and doom obscures objective gains the state has made in service of a sepia-toned narrative. Your average Californian is much more likely to get a college education and much less likely to be mugged today than forty years ago. That’s a good thing.

But something is changing, and Californians can sense it. Here’s the data behind how four common California dreams are slipping away.

The dream of being—and staying—middle class[hhmc]

When was the best time to be a middle-class Californian?

Well, the late 1960s and ‘70s were pretty good years. Median family incomes rose steadily in real terms throughout the period, and by 1980 the average household was making 20 percent more than in 1967.

Starting in 1980, incomes for middle-class Californians essentially stagnated. By 2014, the average California family, after adjusting for inflation, was making only 8 percent more than it made three decades ago. While earnings have ticked up since then, the brutal recessions of the early 1990s and late 2000s essentially wiped out entire decades of modest income gains.

“The starkest comparison is between families at the middle and less than the middle with those at the very top,” says Sarah Bohn, research fellow at the Public Policy Institute of California. “We’ve all experienced booms and busts through economic cycles, but over time the highest-income families in the state have really seen a larger growth in their opportunities relative to middle income families.”

That story is by no means unique to California. But it is worse here than in the rest of the country. Incomes for the median family grew at a faster clip over the past 30 years nationwide than in California. And the gap between rich and middle class is higher here than the vast majority of other states.

Stagnating incomes and rising inequality don’t necessarily mean Californians are having a tougher time making ends meet. But the costs of staying middle class, or jumping up the income ladder, are higher than they used to be.

“When you think about what it took to make ends meet in 1967, it’s very different from what it takes to make ends meet today,” said Bohn, who specializes in income inequality trends. “Child care expenses with both parents working, medical out-of-pocket expenses, not to mention other things that are necessities that didn’t even exist in the ‘60s that you really need today.”

The dream of having your children do better than you[hhmc]

Part of the allure of California has always been the possibility of making it to the “1 percent,” whether via the Gold Rush or Hollywood or Silicon Valley. And here the top-earning households are doing better than just about anywhere else in the country.

But inequality could be linked to another disconcerting trend: the inability of younger households to do better than their parents.

Less than half of California children born in 1980 were making more at age 30 than their parents did at their age. That’s the first time that percentage has slipped below 50 percent since the 1940s.

Again, declining income mobility is not just a California story. Younger people across the United States are having a harder time matching their parents’ standard of living. But younger Californians are doing notably worse than their counterparts in some other states—younger South Dakotans and Arkansans, for instance, are much more likely to be out-earning their parents than are young Californians.

The dream of escaping poverty[hhmc]

While middle incomes have stagnated in California over the past four decades, lower-income households have actually seen their earnings drop.

When you factor in the cost of living, California now has the highest poverty rate in the country. We’re worse than states such as Mississippi and Alabama. Roughly one in five Californians now struggle to make ends meet.

That wasn’t always the case. California used to have a lower poverty rate than the national average up until the late 1970s. But poverty in California surged in the 1980s before peaking in the recession of the early 1990s.

The picture would be even bleaker if you eliminated state and federal safety net programs such as food stamps that have expanded significantly in recent years. Without those, nearly 1 in 3 Californians would be poor.

The dream of owning a home[hhmc]

Part of the California dream has always been homeownership. But that dream has become increasingly unattainable in recent years.

“I am very nervous that we are at a point where absent an economic downturn that kind of forces prices to drop, that we are really in an unsustainable situation,” says Carol Galante, director of the Terner Center for Housing Innovation at the University of California, Berkeley. “The lack of ability to save for a downpayment, it’s just becoming unsustainable.”

In 1969, the median sales price of a California house was about $166,000 in today’s dollars. That was about three times the average income of younger California families at the time who might be in the market for a starter home. Today, the average California home sells for over $500,000—seven times a younger family’s earnings.

Aside from the run-up in housing prices of the mid-2000s—when lenient credit standards allowed a record percentage of Californians to own a home—that house-price-to-income ratio is the worst it’s ever been.

Remaining loyal to the Golden State[hhmc]

The California dream is suffering. Yes, in many ways it is harder to live here than it used to be.

But most Californians remain stubbornly loyal to the state.

The same poll that found so many Californians pessimistic about the next generation’s prospects also asked whether they agree with the following statement:

“Overall, I’d rather live in California than anywhere else.”

Seventy percent of respondents said yes.

The California Dream series is a statewide media collaboration of CALmatters, KPBS, KPCC, KQED and KXPR with support from the Corporation for Public Broadcasting and the James Irvine Foundation.

CALmatters is a nonpartisan, nonprofit journalism venture committed to explaining how California’s state Capitol works and why it matters.

This is an edited version of the original story. Find the complete presentation here.

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