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California’s Top Export Continues to Be Its Middle Class

In the latest update by the IRS for the period of 2013 to 2014, California exported a net 57,900 citizens, whose average incomes were $7,100 higher than the state’s average.

The Internal Revenue Service (IRS) just released its July 1, 2013 to June 30, 2014 migration data, which “approximates the number of individuals” who moved between states in the U.S.

California was the third largest net exporter of citizens behind Illinois (82,000) and New York (126,800). In total, 30 states and the District of Columbia experienced net domestic losses between 2013 and 2014.

But California was number one in exporting the highest income spread. California’s average income per person is $36,100, which equates to about $17.00 per hour. But the average citizen that migrated out of the state had an average income of about $43,200, or $21.00 an hour. Consequently, California is losing a big chunk of its upper middle class consumers and taxpayers.

According to Hoover Institution research fellow Carson Bruno, who studies California’s political and policy landscape, “Not only are Californians leaving the state in large numbers, but the people heading for the exits are disproportionately middle class working families — the demographic backbone of American society.”

The only reason that the Golden State achieved a net population gain was the  approximately 170,000 mostly illegal/undocumented immigrants streaming into California. The state is now home to more than 10 million immigrants, and about one in four of the foreign-born population in the U.S. now lives in California.

Foreign-born residents also represent more than 30 percent of the population of seven California counties: Santa Clara, San Francisco, Los Angeles, San Mateo, Imperial, Alameda, and Orange. And about half of the children in California have at least one immigrant parent.

Texas had the highest net domestic migration in the 2013 to 2014 period, with 229,300. Florida was ranked second in net domestic migration, with 114,400 — which was nearly 4 times as large as third ranking South Carolina (30,100). Colorado followed closely, at 29,500 net domestic migrants, with Washington placing fifth with 27,000.

Carson Bruno comments, “[W]hile there is a narrative that the rich are fleeing California, the real flight is among the middle-class.” His reveals documents that working middle-class young professional families, California has an extraordinarily high cost-of-living:

  • The median California home value per square foot averages 2.1 times higher than Arizona, Texas, Nevada, Oregon and Washington’s;
  • California’s energy costs are about 1.5 times higher than neighboring states; and
  • The Golden State now ranks sixth nationally for state-local tax burdens.

Bruno notes that the national average for the percent of middle-class households that used more than 30 percent of their income to cover rent was 31 percent. But for California, over the last decade, the percentage of rent “cost burdened” jumped from 38 percent to over 53 percent.

The average percent of “cost burdened” with a payment of more than 30 percent of income to buy a home in the United States is about 40 percent. But in California, the percent with a mortgage that are “cost burdened” is over 66 percent.

Demographer Joel Kotkin of Chapman University agrees: “California’s middle class is being hammered,” he writes. Catkin notes that state home ownership declined from 59 percent in 2009 to 54 percent today. Despite being one of the states with the highest rates of home ownership in the 1950s, California now ranks second from the bottom, ahead of only New York.

Bruno acknowledges that Governor Jerry Brown is correct when he claims that California has added 2.3 million jobs since 2010. But Bruno’s data demonstrates that the vast majority of the supposed economic gains amounted to low-paying service jobs. In the traditionally high-paying middle class job bastions of construction, finance and manufacturing, employment is still below the 2007 levels, before the Great Recession.

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