The Shine Is Off The Golden State

As the rest of the nation booms, some Californians fall behind

Stephen Scully has been unemployed for two and a half years. His last job was assembling databases for an oil company. But Scully, who never finished high school, can't seem to snag even an entry-level high-tech job near his home in Redwood City, Calif. "I've found it difficult to get into the job market," says Scully, now enrolled in a local program getting training in computer-systems administration. Living amid the overall prosperity of Silicon Valley, Scully, 48, adds that "it was discouraging and depressing knowing a good job was out there and not being able to get it."

It's folks like Scully who lie at the heart of a nagging problem in California. Although it's home to Silicon Valley and other hotbeds of high-tech growth, segments of its population have become worse off economically and are falling behind the rest of the nation.

EXPENSIVE, TOO. A study to be released on Sept. 3 by the California Budget Project, a liberal research group in Sacramento, says those on the lowest rungs in the state have experienced a decline in the median income for a family of four over the past 10 years. Meanwhile, similar groups in the rest of the nation have had increases. While the dot-com boom of Silicon Valley and San Diego has hiked productivity and wages for millions of workers around the nation, it hasn't done the same for some 20% of the state's population.

Over the past 10 years, the hourly wage of California's low-wage workers has fallen 7.5%, to $7.05. But low-wage workers nationally are earning $7.35 an hour, or 5.6% more, according to the study. The fraction of Californians earning poverty-level wages--below about $17,000 a year--is 28.7%, compared with 26.8% nationally. And median income for a family of four in the state has dropped 1.9% over the past decade, to $55,209. Meanwhile, family income nationally has risen 4.6%, to $56,061.

Adding to the pain, California's rising cost of living, particularly housing costs, makes it that much harder for those on the bottom wage rungs. The state's median home price has risen 20% in the past five years, to $221,520. Only 37% of Californians can afford a median-price home, compared with 55% nationally.

What accounts for the decline? Jean Ross, who wrote the study, says the findings reflect "the fact that while we've regained the number of jobs we lost in the aerospace build-down, those jobs haven't been replaced by ones with comparable wages." The biggest factor: The tech jobs haven't made up for the loss of good-paying manufacturing jobs. According to the study, about 34% of workers in Los Angeles County--where much of the aerospace industry was based--earned poverty-level wages, compared with 17.6% in the Bay Area.

HIGH-TECH MYTH. Yet Ross adds that even in places like Silicon Valley, growth in tech jobs has been slower than growth in lower-paying ones. What have proliferated are entry-level service jobs. Industries that pay low wages, such as apparel manufacturing and retail, have grown in the state to tap into the flow of immigrants willing to work cheaply.

That's one reason why other states that envy California shouldn't think that attracting high-tech jobs alone will bring prosperity. On top of that, California has an oversupply of poorly skilled workers with less than a 10th-grade education to take those low-wage jobs. In part, that reflects the effects of heavy immigration, particularly from Latin America. Many lack the training to help them move up into the technology field, where workers are sorely needed. "There's a mismatch between the skills of some and the high-end jobs," says Doug Henton, president of Collaborative Economics, a consulting firm.

Of course, it's hardly a static situation. Opportunities Industrialization Center West, the nonprofit that runs Scully's training course, is seeing overwhelming demand: Eight hundred applicants turned out for 100 slots available in its newest computer-services course, says Sharon Williams, the executive director. "Students feel this is their ticket into the New Economy," she says. If they succeed, they might help California's low-wage workers keep up with the rest of the nation.