Income inequality is on the rise in California. In some counties, the disparities are extreme

In Summary

A new analysis found a widening gap between the state's haves and have-nots. Major gains were reported for California's richest residents, modest gains for people with median incomes and losses for the lowest income earners, when adjusted for inflation.  

California is the golden state — at least for those at the top of the income scale. For everyone else, the nickname may apply more to the sun than to money.

That’s one takeaway of an analysis of U.S.Census Bureau data by the California Budget and Policy Center (CBPC), which found a widening gap between the state’s haves and have-nots.

The CBPC analysis found major gains for California’s richest residents, modest gains for people with median incomes, and losses for the lowest income earners, when adjusted for inflation.

Median household income in California, the CBPC reported, increased by 6.4%, from $70,744 in 2006 to $75,277 in 2018, adjusting for inflation. But for the top 5% of households, income grew by 18.6%, from $426,851 in 2006 to $506,421 in 2018, while households in the bottom 20% saw their average income fall by 5.3%, from $16,441 in 2006 to $15,562 in 2018. The analysis was based on the census agency’s latest American Community Survey report.

An increasing gap between rich and poor is not unique to California, as recent data from the U.S. Census Bureau show. From 2017 to 2018, the data indicate, income inequality also widened in eight other states, including Alabama, Nebraska, New Hampshire, Virginia and New Mexico, although in most other states it remained constant. Income inequality is typically measured through the Gini Index, which assigns a score of 0 to indicate perfect wealth distribution within a population and a score of 1 to represent total inequality. In 2018, the overall Gini Index for the U.S. was .485, which was “significantly higher” than its 2017 estimate of .482, the Bureau reported.

The trends in California are especially concerning, said Sara Kimberlin, senior policy analyst at CBPC, given the increases in the cost of living across the state. From 2006 to 2017, the organization found, inflation-adjusted median rent increased by 16% statewide, while median hourly wages for workers fell by half a percent.

“So that’s where the real challenge is that California has to face,” Kimberlin said. “We have two trends moving at the same time: Incomes remaining relatively flat for people in the middle and at the bottom of the income range, while the cost of living is going up.”

In the Bay Area, where the cost of housing has become a topic of national conversation, those tensions are felt acutely, said Megan Joseph, executive director of Rise Together, a regional coalition aimed at reducing poverty in the Bay Area.

The average income for top earners in many Bay Area counties in 2018 was even higher than the state average for the richest households, according to census data. And San Francisco County had the widest income disparity, with the top 5% of households making an average of $808,105, compared with $16,184 for the lowest 20%.

In San Mateo County, the richest earned $810,917 in 2018, while the bottom fifth collected $25,039. Alameda County reflected the statewide average more closely, with those at the top earning $539,883 and the bottom, $20,041.

The CBPC report on the increasing income gap in the state, released on Sept. 26, did not include figures for individual counties.

“The Bay Area feels the income inequalities and the disparity between the numbers at the top and the stagnant wages at the bottom more than most other areas of California because of the cost of living,” Joseph said.

Alongside rising inequality, the data also showed high levels of poverty among Californians. An earlier analysis of census data from CBPC in September — based on the so-called supplemental poverty measure, which takes into account the cost of housing and other expenses — found that roughly 7.1 million people each year could not afford basic expenses between 2016 and 2018.

“We see that just one expense, one emergency of $500 or $1000, throws them over the edge,” said Joseph. “We’re talking about a huge percentage that’s living on the edge and can barely make ends meet.”

Erica Hellerstein is a journalist at The Mercury News in San Jose working for The California Divide, a collaboration among newsrooms examining income inequity and economic survival in California.

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