This report was prepared by Luke Reidenbach, Mark Price, Estelle Sommeiller, and Ellis Wazeter.
Endnotes, notes on methodology, and additional data tables are available in the PDF version.
A strong state economy is one that generates economic gains for families and individuals at all income levels. Unfortunately, income gains in California have flowed primarily to the highest-income households – the top 1 percent – over the past 25 years. Meanwhile, many low- and middle-income households continue to struggle to make ends meet and get ahead.
Widening income inequality is an issue for nearly all metropolitan and rural areas in California. Most Californians live in an area where the top 1 percent has captured most, and in some cases all, of the income gains made since 1989. The highest-income households are doing especially well in regions that have seen substantial economic gains in recent decades, such as the San Francisco Bay Area. These regions have seen the most robust income growth overall, but their gains have been heavily concentrated among the top 1 percent.
This Issue Brief reviews key trends in the “top incomes” of California households in both urban and rural areas. It looks at three metrics: 1) the level of inequality, as measured by the gap between the average incomes of the top 1 percent and the bottom 99 percent; 2) the change in the average incomes of the top 1 percent and the bottom 99 percent since 1989; and 3) the share of total income captured by the top 1 percent since 1989. All three metrics show that California’s income growth has been heavily weighted toward the state’s highest-income residents, especially in the wealthiest regions.
Which California Regions Are the Most Unequal?
The level of inequality varies substantially across California regions. The widest income gaps between the top 1 percent and everyone else are found in the largest and wealthiest urban centers, where the relative economic prosperity has boosted incomes of those at the very top. The San Francisco, Los Angeles, and San Jose metropolitan regions had the three widest gaps in 2013 (Figure 1). In the San Francisco metro area, the average income of the top 1 percent of households – $3.6 million in 2013 – was 44 times the average income of the bottom 99 percent ($81,094). The smallest gaps were in the Vallejo, Riverside, and Yuba City metropolitan areas, where the average income of the top 1 percent was at most 13 times the average income of the bottom 99 percent.
How Have Top Incomes Changed Over the Past Generation?
The growth of top incomes has surpassed the growth of incomes of the bottom 99 percent in nearly all of the state’s regions over the past generation. San Jose and San Francisco have seen the most explosive growth in top incomes since 1989, while inland areas have tended to see slower growth in top incomes. Importantly, in many areas only the top 1 percent saw increases in their average income while the average income of the bottom 99 percent of households actually declined in this period (Table 1).
Top Incomes Represent a Large and Growing Share of Most Regions’ Total Income
The disproportionate growth in top incomes over the past generation means that a rising share of a region’s total income has been captured by this small number of households. With the exception of the Eastern Sierra nonmetro area (i.e., Alpine, Inyo, and Mono counties), all California metro and nonmetro areas saw the income shares of the top 1 percent increase between 1989 and 2013 (Figure 2). The San Francisco metropolitan area now has the highest share of income going to the top 1 percent, with 30.8 percent of the region’s income in 2013 going to the top 1 percent of households. This is nearly double the 1989 share of 15.8 percent.
Despite significant variation across California’s urban and rural areas, nearly all of these areas are far more unequal than they were a generation ago. While the most extreme income disparities are found in the higher-growth metropolitan areas where the ultra-wealthy live, such as Silicon Valley, San Francisco, and Los Angeles, the benefits of economic growth are increasingly concentrated in the hands of the top 1 percent. Meanwhile, the bottom 99 percent of households are falling behind in almost all other regions in California.