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Mon, May

California’s Broken Diversity Promise

GUEST WORDS

LATINO ECONOMIC STRUGGLES - Few states are more ostentatious in their concern for racial equality and minority uplift than California. The Golden State leads the nation in promoting racial reparations, doggedly supports affirmative-action quotas, and pays students to teach educators about implicit bias. From his first day in office, Governor Gavin Newsom has deemed addressing inequality a “moral imperative” in his fight for “a California for all.”

A new report from Chapman University’s Center for Demographics and Policy, to which we both contributed, suggests the state is falling short of these lofty ideals. We and our coauthors demonstrate how California’s Latinos, who account for nearly 40 percent of the state’s population and over half of its residents under age 18, lag significantly behind their peers in rival states like Texas and Florida in terms of incomes, homeownership, and education. California’s policy agenda, with its dual focus on welfare expansion and climate alarmism, has undermined the economic potential of the state’s Latinos—and undercut the governor’s promises.

The problems start at the aggregate level. California has the nation’s highest unemployment rate and slowest pace of job growth, along with a huge structural budget deficit. California creates middle-income jobs—critical for Latinos seeking to climb the income ladder—at among the lowest rates in the country. Over the past decade, the state has lost 1.6 million above-average-paying jobs, and 85 percent of its new positions have been in the lower-paying service sector.

Here the aspirations of both Latino entrepreneurs and workers could be crushed. The Small Business Regulation Index ranks California’s as the worst business climate for small firms, which disproportionately harms Latinos, whose businesses tend to be smaller and less capitalized. California’s recently mandated $20 minimum hourly wage for fast-food workers, for example, may help some individual Latinos, but it could both reduce total employment and threaten the livelihoods of smaller franchisees, many of whom are minorities.

Latino residents also are particularly vulnerable to California’s war on the carbon economy. Hispanics make up well over 90 percent of the state’s agricultural workers, more than 50 percent of its construction workers, and roughly 30 percent of its oil and gas workers—precisely the kinds of jobs that California’s green agenda disfavors.

For Latinos in California, the impact of that agenda shows up most clearly in the logistics industry. As Chapman University Business School professor Marshall Toplansky notes, Hispanics make up roughly 50 percent of California’s transportation workers, the highest percentage of any state. The Golden State’s green mandates, which encourage shipping companies to pursue rapid electrification, will likely send shippers to other ports. Electric trucks, with their huge batteries, can cost over $400,000 per vehicle; they cannot run long hauls without stopping for lengthy charging periods, undermining the economics of a trucking fleet.

These and other “carbon-neutral” policies threaten the economic security of lower-income and blue-collar Latinos. California’s “Scoping Plan for Achieving Carbon Neutrality,” outlining the state’s green-energy agenda, concedes that these efforts will cause households in aggregate to lose $600 million in income through 2035. Those losses will not be distributed evenly, as households making less than $100,000 per year—a disproportionate number of them Hispanic—will lose a total of $4.1 billion in income. Residents making more than $100,000, by contrast, will gain $3.5 billion. The state’s carbon-neutrality gambit—which will fail to reduce global greenhouse gases meaningfullyhurts lower-income and minority households the most.

While California’s climate policies are ruinous, its housing policies pose an even greater threat to Latinos’ economic fortunes. Despite an ever-growing array of state housing initiatives, California’s construction industry now reports a ten-year low in permits and lags far behind those of major rivals such as Nevada, Arizona, Texas, and Florida. California’s increasingly stringent “CalGreen” building-code costs, fees, and exactions, which can exceed $150,000 per unit, make new construction prohibitively expensive. The state’s high housing prices force Latinos and other low-income residents to pay a higher share of their income for housing than the national average and to live in crowded conditions, particularly in the Latino mega-center of Los Angeles.

The CalGreen code and other state policies have shut some Latinos out of the housing market. In 2021, only 45.4 percent of the state’s Hispanics were homeowners, compared with 63.6 percent of its non-Hispanic whites. In 2022, demographer Wendell Cox analyzed Census data and found that 45.9 percent of Latino households in California owned their homes, compared with 51.1 percent nationally. Indeed, the Hispanic homeownership rates in other heavily Latino states—Texas (59.2 percent), Florida (55.4 percent) and New Mexico (over 70 percent)—are all significantly higher than those of the Golden State, which ranks third-lowest in the nation on that metric.

California’s high housing costs, combined with the fact that Hispanics nationally hold over half of their total wealth in real estate, help explain the state’s large racial wealth gap. While the state’s median Latino household income is $75,698, this figure diminishes to $50,499 when adjusted for cost of living. A 2022 studyby the Urban Reform Institute found that nine of the bottom 15 metros for Latino economic progress are in California. Los Angeles, the largest Latino metro, ranks at number 105 out of 107. Latinos did much better in other areas in the sunbelt, including Texas and Florida, as well as in the Great Plains.

Latinos represent about half of Californians living in poverty. Historically, education has provided a critical boost to people from lower income backgrounds. Many Latinos, in California and elsewhere, come from impoverished rural communities with low educational attainment, face language barriers, and are unfamiliar with the U.S. education, financial, and civic systems.

Providing education could therefore aid Hispanics’ economic prospects. But in California, that hasn’t happened. Despite some gains at the college level, according to the state’s latest testing results, only 21 percent of Latino fourth-graders met or exceeded proficiency standards in English, while only 19 percent did so in math, according to the National Assessment of Educational Progress. Latino students scored on average 27 points lower in math than white students, a performance gap not significantly different from that in 2000—almost a quarter-century ago.

Overall, Latino students in Florida and Texas outperformed California. Some 41 percent of Florida’s fourth-graders and 38 percent of Texas’s fourth-graders scored at or above proficiency level in math, rates significantly better than those of their California counterparts. Florida’s Latino fourth-graders’ average score was 17 points lower than that for white students—troubling, but still 10 points higher than California Latino students’ average score. These numbers spell potential trouble for California’s workforce, which is about 37.3 percent Latinotoday and growing.

These climate-, housing-, and education-policy failures have yielded clear signs of discontent. According to a 2022 NALEO Educational Fund poll, nearly half (48 percent) of California Latinos regarded the rising cost of living as one of their paramount concerns in the election. Given recent surges in Latino voter turnout—between 2000 and 2020, it nearly tripled in California, surging from 1.6 million to 4.5 million—these developments could have significant electoral consequences.

The key question is not which party California’s Latinos embrace, but whether such voters will support an agenda that addresses their aspirations. Golden State Latinos need to reject the “luxury beliefs” of the wealthy, nonprofits, and public employees on climate, housing, and education. Instead, they should support leaders who share their values and are determined to deliver a more prosperous future for them.

(Joel Kotkin is a presidential fellow in urban futures at Chapman University and the author, most recently, of The Coming of Neo-feudalism: A Warning to the Global Middle ClassSoledad Ursúa is a finance professional and elected board member of the Venice Neighborhood Council. This article was featured in City Journal.)