Part of what has made California great is the fact that many of our state’s industries are at the cutting edge of new frontiers. From Bill Hewlett and David Packard putting together their first machines in a Palo Alto garage, to the film pioneers founding studios in Southern California, to the entrepreneurship of Irwin Jacobs and Andy Viterbi in San Diego, our state’s prosperity has been fueled by the combination of risk-taking visionaries and a highly educated workforce.
Two weeks ago the Public Policy Institute of California (PPIC) released a report that should be a wake-up call for everyone that cares about California’s future.
Looking at long term economic and demographic data, PPIC forecast the kind of jobs that will exist in the state in 2025 and the educational requirements that workers will need. The report forecasts a disturbing and troubling gap. If current trends continue, by 2025 two of every five jobs (41%) in the state will require at least a bachelor’s degree but only 32% of the state’s working-age adults will have achieved that level of education.
In such a situation the market is likely to adjust in a way that will leave California worse off. The state is likely to see slower economic growth and our state’s businesses will be at a competitive disadvantage against those located in states that have a more highly educated workforce. If these problems are not addressed, California will risk losing its edge in leading technology industries and may well suffer a “rust-belt” demise as high-paying jobs and younger workers leave the state.
PPIC pointed to some policy proscriptions – increasing the number of college graduates and ensuring that older workers can get the kind of certification and training that allows them to perform in jobs where college degrees are currently seen as a prerequisite. These seem reasonable and could be wise strategies to pursue to achieve a more competitive California economy.
But the report also highlighted the exceptionally high cost of housing in our state as a root cause of the problem. Whereas California used to be an attractive place to move to for individuals with a college degree, as the authors of the study note, in recent years this trend has reversed. Now more college educated citizens are leaving the state each year compared with the number of college educated citizens migrating to California.
A look at weekend advertisements for open houses paints a stark picture explaining why this is the case. Even given the most recent slump in housing prices, the median price for a condominium in San Diego in April stood at $385,000. According to the “How-Much-Can-I-Afford” calculators at bankrate.com, in order to qualify for a loan to purchase such a property, an applicant would have to have an annual salary of approximately $95,000, in addition to $20,000 for the down payment and no other debt. Those economics do not work for the majority of newly minted graduates from our region’s universities and it is little wonder that they look outside our state to places where the prospect of becoming a homeowner seem less bleak and more attainable.
The housing situation is even worse for those San Diegans that do not have college degrees. Owning a home is almost universally acknowledged as the best long-term investment that an individual can make and the means to a secure future. Homeownership for many of these workers, that do vitally important jobs, is completely unattainable and the inability of our region to enable the private marketplace to produce an adequate supply of workforce housing means that hundreds of thousands of our county’s residents are forced to endure substandard housing options or horrifically long commutes. Countless others must work two or more jobs just to make ends meet in a region where living expenses, principally the cost of housing, are so divergent from wages.
While there are benefits in expanding the capacity of our state’s universities and training programs, if the housing problem is not addressed head on it may well mean that this workforce investment is largely wasted on individuals who, still facing unaffordable housing options, move to other areas for better prospects. Not only will the state’s economic prospects still be bleak, its investment in increasing the number of college graduates will largely go for naught.
It is time that we stop kidding ourselves and acknowledge that the state’s housing crisis is at the root of so many of California’s problems. Rather than gloss over it or accept it as given, policy makers and citizens must get serious and understand that if we don’t address California’s chronic housing affordability problem California will have a much less prosperous future.
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