Tuesday, January 20, 2015

The End of the Californian Gold Rush

Governor Jerry Brown, in his State of the State address on January 24, can credit California with overtaking Brazil, Russia and Italy as the world’s seventh-largest economy. “It’s the diversity of the California business environment, from movies to the Internet to agriculture–the incredible array of businesses that make up the state,” Brown told Bloomberg News. The reality is that California’s growth has been due partly to the importation of impoverished foreign immigrants.

Of the 25 major metropolitan areas in 2013, Los Angeles-Long Beach-Anaheim took the booby prize for having the highest poverty rate at 17.6%. California’s overall rate of poverty was also the top contender at 16.8%. Given that the next closet big city poverty rate was New York-Newark-Jersey City at 14.6%. California now ties for the second worst unemployment rate in the United States with Georgia at a 7.2% rate. Almost all Silicon Valley start-ups quickly outsource manufacturing and distribution jobs to other states or overseas.

“African American Californians generally are leaving the state,” said John Powell, professor of African American studies and ethnic studies at the University of California, Berkeley. “The opportunities here – it’s becoming much less attractive.” Powell detailed studies showing that job applicants with “black-sounding” names are less likely to get job interviews than others.

The income gap between African Americans and whites in California has reached its widest point in decades, a trend that reflects a broader, growing chasm between the state’s wealthy and poor. In 1970, shortly after King’s death, California’s white, non-Hispanic families had a median income 50 percent higher than its African American families, according to a Sacramento Bee review of U.S. Census data. Median income today is 80 percent higher for California’s white, non-Hispanic families than for its black families, the latest census figures show. White California families typically earn about $90,000 annually; black families earn about $49,000. In the Sacramento region, black families typically earn $43,500, barely half the $79,500 typically earned by white families.

Sacramento resident Tex Williams finished high school and spent two years in junior college. He said he has applied repeatedly for well-paying jobs in the transportation sector. Instead, he works as a janitor for the Sacramento City Unified School District. He isn’t sure if he’ll ever move up the economic ladder. “It’s hard out there,” said Williams, a black father of three with a mortgage payment. “I’m constantly working to pay the bills.” For blacks and others without a four-year degree, Williams’ experience is common. Many of the solid middle-income manufacturing and construction jobs once available to them have dried up or left California. In their place came a plethora of low-paying service jobs, often temporary. Sarah Treuhaft, deputy director of PolicyLink, a national advocacy group promoting economic and social equity conducted research showing that blacks with the same education level as whites still tend to make less money at their jobs.

“The trend is more opportunities at the top or the really low end” of the job market, said Sarah Bohn, a research fellow at the Public Policy Institute of California. “The middle is where we are seeing a really big drop.”

The minimum wage is scheduled to rise to $10 an hour in 2016, but some advocates say that is not high enough. A full-time job at $10 an hour pays about $21,000 annually. One in six blacks working full-time in California earned less than that in 2013, census figures show. Average rent for a one-bedroom apartment in Sacramento is about $10,000 a year. “You have to make $17 an hour in Sacramento as a single person to sustain yourself,” said Danielle Williams, 29, a community organizer with Sacramento Area Congregations Together.

Before the recession, many black families in California and Sacramento turned to their biggest asset – their homes – as a way of paying debt and generating income. They refinanced mortgages during the housing boom and lost their homes in the subsequent bust at a disproportionate rate. As recently as 2007, 40 percent of California’s black households owned their homes. By 2013, that figure had dropped to 33 percent, or one in three. The drop was even steeper in the Sacramento region, where black homeownership rates fell from 42 percent to 32 percent. Homeownership among whites didn’t fall nearly as fast. The foreclosure crisis that began in 2007 was largely driven by “subprime” lending that charged borrowers exorbitant interest rates. In many cases, mortgage brokers and lenders earned significant fees for selling subprime loans. They tended to focus their attention on lower-income communities with a high number of minorities, households that otherwise struggled to get a loan. Thousands of foreclosures later, many neighborhoods that once had a stable population are dominated by renters. They make monthly payments to landlords who scooped up homes at bargain prices during the housing bust.
“For a lot of people of color, most of their wealth was in their houses,” said Sacramento NAACP President Stephen T. Webb, a veteran real estate broker. “From 2005 to 2009 when we had the predatory lending, they were the ones most affected.”

The consequences of not closing the income gap are that “people start to lose hope,” said Pastor Kevin Brown of Mt. Sinai Missionary Baptist Church in Sacramento “You still see mass incarceration and young men who can’t read in third grade heading toward juvenile hall.” In 2010, black men in California were incarcerated in state prisons at a rate eight times as high as the rate among non-Hispanic whites. Job applicants with a criminal record often have trouble finding good work, which lowers their income

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