Why are California pay raises now bigger in the south?

”Survey says” looks at various rankings and scorecards judging geographic locations while noting these grades are best seen as a mix of artful interpretation and data.

Buzz: California pay raises have made a decidedly north-south switch.

Source: My trusty spreadsheet looked at the Employment Cost Index tracking what bosses pay nationwide and in 15 big job markets, including a seven-county Southern California area and a 10-county Bay Area region. This quarterly data dates to the end of 2006.

Topline

Let’s start with 2023’s fourth quarter. Southern California wages rose at a 5% annual rate – the No. 2 hike among the 15 markets. The Bay Area’s 2.8% gain was the lowest of the 15. Raises across the US were up 4.3%.

Details

This north-south gap is part of a somewhat recent trend that’s taken a sharp turn since the coronavirus retooled job markets.

Southern California pay hikes averaged 5.1% in 2020 through 2023 (No. 1 of the 15) vs. Bay Area 3.8% (No. 13). Raises ran 4.2% nationally.

This is a stunning change from 2016-19, a hot time in California’s economy. During these four years, California was a pay leader.

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Southern California salary bumps ran 3.5% a year (No. 1), just ahead of the Bay Area’s 3.3% (No. 2). Nationally, raises averaged 2.7% in the same period. Note how small wage inflation was in the year before the pandemic.

Then think about the 2007-2015 era – essentially a period from the peak of the grand bubble of the mid-2000s through the Great Recession and then its early rebound. That turmoil was not very kind to paychecks.

Bay Area raises ran only 2.5% a year (No. 2 of the 15) while Southern California workers got only 2.1% – No. 7 and tied with the size of pay hikes nationwide.

Bottom line

These pay-hike gyrations support the thesis that the state’s economic engine has moved in a southern direction in recent years.

For example, the south’s Inland Empire created 20% of the state’s new jobs since 2019 – the top share – but comprises only 9% of California’s total employment.

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Note that the Bay Area has more high-paying technology work – 14% of local jobs in computing vs. 6% in Southern California. Yet, pay jumps have been steepest of late in lower-paying service positions – that’s 18% of Southern California workers vs. 15% in Bay Area.

And, yes, we’ll note many Bay Area workers get their shot at riches through stock compensation vs. paycheck bumps.

Still, it’s hard to ignore this geographic flip in California pay hikes.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

Source: Orange County Register