When we reported that California tax revenues had missed projections by nearly $1 billion in the first four months of the year, we pointed out that one key driver was that over 250,000 residents left the state between 2013-2014 alone, taking that tax base with them.
It turns out that it’s going to get worse before it gets better for California, because as Mercury News reports, state Finance Department statistics show that 61,000 more people have exited California than have moved to the state during a twelve month period ending June 30. The net outward migration was the largest since a net 63,000 people left the state in 2011. “The main factors are housing costs in may parts of the state, including coastal regions of California such as the Bay Area. California has seen negative outward migration to other states for 22 of the last 25 years.” Dan Hamilton, director of economics with the Economic Forecasting Center at California Lutheran University in Thousand Oaks.
“They are tired of the expense of living here. They are tired of the state of California and the endless taxes here. People are getting soaked every time they turn around.” said Scott McElfresh, a certified moving consultant.
The cost of living has increased as the second tech boom has come to the Silicon Valley area, and the region’s soaring housing prices are cited as a key factor driving dissatisfied residents to leave. The higher paying jobs provided by the tech boom have increased the cost of living overall for everyone, but especially hard hit are those that are still in what’s left of the middle class. For those residents, it has become increasingly difficult if not impossible to keep up with the higher cost of living in the area.
“There is a declining middle class in the Bay Area. Widening income inequality can create polarization socially and economically.” Said Christopher Hoene, executive director of the California Budget & Policy Center.
According to Mercury News, in 1989 the middle class accounted for 56% of all households in Silicon Valley, but by 2013, that had fallen to 45.7%.
Lower income residents accounted for 30.3% of Silicon Valley’s households in 1989, and that number grew to 34.8% in 2013. On the other end of the spectrum, upper income residents had 13.7% of the share of households in 1989, and that jumped to 19.5% in 2013. This illustrates the economic divide that has grown in the region, and why many simply can’t afford to keep up with living expenses.
“A lot of middle class jobs have vaporized. The support positions, the assembly line positions, the jobs that paid the middle class, a lot of those have gone away.” said Russell Hancock, president of San Jose-based Joint Venture Silicon Valley.
Skyrocketing costs for housing, food and gasoline along with the area’s insufferable gridlock prompted four-decade Bay Area resident Kathleen Eaton to move to Ohio. “It was a struggle in California. It was a very difficult place to live, it’s a vicious circle” Eaton said, adding “You can’t get ahead. It’s more than the cost of living; it’s the high taxes.”
Eaton and her sister had a $724,000 house in The Villages in South San Jose that they sold before moving to Ohio. Their mortgage payment was $2,200 a month, plus $1,000 for association fees in the community. In Ohio, they were able to pay $300,000 cash for their home.
The same story goes for Priya Govindarajan, a San Francisco resident who is planning to leave the Bay Area with her husband. “My husband’s salary would be in the six figures, but six figures is not enough to cover the rent, day care, and food prices. It all starts to add up.” Priya said.
“I get why people want to live in the Bay Area, I really do. But it is so difficult to live here, especially for people coming here for the first time.” Priya added.
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“This summer, I have booked more business than in any of the other 27 years that I’ve been working. People are packing up and leaving” said McElfresh. We have news for that moving consultant, when the fact that the second tech bubble having burst becomes a reality for more and more of those who live in the Silicon Valley area, his business is going to go through the roof.
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