Hello xmca crew & particularly Eugene.
I'm pasting an article published in January
9th Los Angeles Times entitled 'California
Income Gap Grows Amid Prosperity.' According
to a number of folks on both sides of the
U.S. Mexican border, the middle class has been
shrinking rather than growing since the 80s.
The January 9th article was the first I saw
that provided some hard evidence to support
that perception. Dump it now if you don't want
to read a fairly lengthy piece! Genevieve
Sunday, January 9, 2000
Home Edition
Section: PART A
Page: A-1
California Income Gap Grows Amid Prosperity
Money: Despite boom in high-tech and other industries,
the poor and middle class are lagging. Deepening
inequalities worry many.
By: MARK ARAX MARY CURTIUS and SORAYA SARHADDI NELSON
TIMES STAFF WRITERS
At the doorstep of a new century, California finds
itself standing in a new Gilded Age, the income gap
between rich and poor wider than at almost any time in
history and magnified by the sudden wealth and lavish
living of a growing elite.
California's super rich haven't been this flush or
freewheeling--and the poor and middle classes haven't
languished this far behind--since the last days of the
Roaring '20s, economists say.
The state's ongoing economic boom, led by high-tech
industries but also fueled by light manufacturing and
agriculture, has concentrated even more wealth at the
very top of the income ladder, according to a study of
earnings by the California Policy Institute and other
scholars. The state's poorest working families,
meanwhile, now bring home 22% less in real dollars
than they did in 1969, the study shows.
"Over the last three decades, we've seen a very rapid
rise in the income gap in California," said Deborah
Reed, an economist with the nonpartisan institute,
based in San Francisco. "We're back at the kind of
income disparities we had in the 1920s and '30s."
The reason the boom hasn't translated into higher
incomes across the board is twofold, economists say.
High-tech doesn't create a vast array of well-paying
factory jobs, and it puts a premium on an educated
work force. And California, more than other states,
has a high concentration of uneducated immigrant
workers.
The growing income divide reveals itself in every
corner of the state even though different engines are
driving California's three regional
economies--Southern California, the Central Valley and
the Bay Area. In Los Angeles County, it is mostly
whites and, to lesser degree, Asians who create and
fill jobs in the computer and entertainment
industries. Meanwhile, the burgeoning service
economy--maids, nannies, cooks, gardeners, retail
clerks--employs more and more immigrants from Mexico
and Central America, economists say.
In the great Central Valley, in the shadow of some of
the nation's wealthiest farming operations, villages
of tar paper shacks rise out of the flat earth like
relics from the sharecropper South. In one forgotten
corner of Tulare County, black and Filipino men and
women live year-round in plywood shanties and old
wooden Southern Pacific boxcars with no running water.
Here, James Dixon sleeps on a 50-year-old mattress
with a sack of rice for a pillow. He draws heat from a
turn-of-the-century stove and goes to the bathroom in
a 1940s outhouse. Weather and wood rats have chewed a
gaping hole in his roof. To keep the ceiling from
falling, he wedges empty Vienna sausage cans into the
crevices as makeshift studs.
"It's not right, what happened to my life," said
Dixon, 96, his threadbare clothes held together with
safety pins. "I worked all my days in the cotton
fields and then cooking on the Union Pacific. I'm not
happy living in this situation. It rains in my house."
A few hours up the road, spilling out of Silicon
Valley's dot-com economy, billionaire Larry Ellison
has built a 22-acre medieval Japanese-style retreat at
a cost of $40 million. His Woodside estate, designed
by a Zen priest, includes a pond filled with purified
drinking water. Ellison, who founded Oracle, the
world's second-largest software company, has
surrounded himself with an 80-foot world-class racing
yacht, a stable of rare cars and a clutch of
airplanes, including an Italian turbojet fighter.
Millionaires Clad in T-Shirts, Running Shoes
At Ferrari and Porsche dealerships, a whole new
clientele glides through the door. It used to be that
Ferrari of San Francisco salesman Brad Goldstone could
spot his prime customer at a glance: a man in his 50s
sporting Guccis and gold chains who was ready to crown
decades of hard work with a $200,000 luxury sports car
that screamed, "I've made it!"
Today, Goldstone's keen eye fixes on a different
moneybags: the twentysomething guy wearing a baseball
cap, T-shirt, running shoes and an ear-to-ear grin.
"They always have the same look on their faces," he
said. "They are giddy, excited. I say: 'Let me guess.
You just went public.' They giggle. And they don't
care what they have to pay."
That Third World poverty and immense wealth exist side
by side in a state so big and manifold is hardly
surprising. Income gaps have defined California and
America since the early days of the railroad and oil
magnates. Back then, unlike today, welfare and other
government programs didn't exist as minimal safety
nets.
But the income gap persists even as the unemployment
rate has dropped below 6% and California has continued
to create more wealth in a shorter period of time than
at any point in the past century.
Although the economic expansion since 1995 has begun
to slow the rate of growth in the income gap, the
disparity between rich and poor continues to widen
faster here than in any other state, experts say.
For the moment, economists say, the boom masks the
growing income gap because it has driven down
unemployment and given many entree to the good life.
But rich and poor are moving in such starkly opposite
directions that signs of discontent have begun to
surface, such as in the recent mayoral election in San
Francisco, where debate centered on skyrocketing rents
and an unequal distribution of wealth, polarizing the
city.
"A lot of my concerns have to do with what will happen
in the next downturn," said Lynn Karoly, senior
economist with the Rand Corp. think tank.
It is then, economists worry, that the inequalities
will grow even deeper. The wealthy tend to be more
cushioned against a downturn but the working poor risk
losing jobs and falling back on a welfare system that
no longer provides the same safety net.
"It is a truism going all the way back to the French
Revolution, that when there are tremendous disparities
in income and wealth, it creates social instability,"
said Stanford Jacoby, a UCLA labor economist.
From 1993 to 1997, the incomes of California's richest
grew at a phenomenal pace while the incomes of the
state's working poor and middle class stagnated or
increased just slightly, according to census and
income tax data. The average income of the top
1%--$845,000--shot up 57% in that period, said Jean
Ross, executive director of the California Budget
Project, a research group. By contrast, the average
income of the middle fifth of California
taxpayers--$24,177--grew by only 1.8%. For the state's
poorest working families, the average income in
1997--$13,000--reflects a 13% drop since 1989 and a
10% gain since 1993.
In Los Angeles County, a recent United Way study
discovered a shrinking middle class: nearly half the
households in 1998 had an estimated net worth of less
than $25,000, while 34% of households boasted a net
worth of $100,000 and above. The study found that even
though the poor were technically making it, they had
lost considerable ground because of the high cost of
living and rent. Children Growing Up in Poverty
Maria Rios, a nurse's aide at a Pasadena retirement
home, and her husband, Gerardo, a house painter, raise
four young children on an income of $24,000 a year,
hovering near the poverty line. It leaves no room for
health insurance, clothes or savings, much less a trip
to Disneyland. Rios, who left Mexico with a
ninth-grade education, yearns to get her GED and start
her own travel agency, but she's too busy treading
water.
"It's getting harder," she said.
From Kern to Merced counties, a 180-mile stretch, more
than one-third of the children live in poverty. The
Fresno Unified School District serves a student body
of 79,000 that ranks as the sixth-poorest in the
nation, behind only cities such as East St. Louis,
Ill., and Detroit.
Californians hitched to high-tech and other growing
industries say the possibilities of the new millennium
appear limitless. Those mired in low-paying service
jobs say their lives seem tolerable only when compared
to that of neighbors or relatives on the other side of
the border or across the sea.
"We live on a little more than $1,000 a month," said
Leon Richardson, an assistant pastor and unemployed
auto body man with four children on welfare.
Living in Tulare County, where the jobless rate never
drops below 12%, it's not easy finding a decent job,
he said. "In the winter months, the bills burden us
down. In the summer, I hustle. I haul trash out of
someone's yard or recycle metal. Somehow, we get by."
*
Like a river of American venture financing, Sand Hill
Road runs two miles between Menlo Park and the brown
hills overlooking Stanford University. The road, known
as the "capital of capital" and lined with the
nondescript office buildings of the new moguls, is the
moneymaking heart of Silicon Valley. More than $22
billion of investment capital, the densest
concentration in the world, sits right here.
At 28, Joe Kraus is emblematic of all that is right
with an economy that rewards innovation, guts and
nerve. A onetime pizza delivery man who graduated with
a political science degree from Stanford, Kraus
founded his company, Excite, an Internet portal, in a
garage with five college buddies in 1993.
"Getting a job seemed boring. My friends and I all
thought we were probably smarter than the people we
would be working for," he said.
Their parents staked them $10,000. This year they
yielded an amazing return: a $6.7-billion merger
between Excite and who-is-at Home. Kraus is worth more than $50
million. By local standards, he still lives rather
modestly. He paid more than $1 million for a
four-bedroom Palo Alto house this year but has yet to
furnish it. And then he bought his Ferrari, a
Maranello model, for which he paid $250,000, more than
sticker price to avoid a 14-month waiting list.
Some of Silicon Valley's most successful entrepreneurs
are immigrants from India, China and Israel who came
here with little more than an education and an
idea--people like Raj Singh.
Born to an impoverished Hindu farming family in
northern India, Singh arrived in 1991 armed with a
negative net worth and degrees in physics and computer
science. This year, he made $350 million off the sale
of two high-tech start-ups he helped found.
At 53, Singh has plunged into another start-up,
working 18-hour days that begin when he signs on to
his home computer at 4 a.m.
"I like the excitement of building and bringing order
out of chaos," he said. "Then I like to move on."
The money is something he hasn't quite gotten used to.
He still drives a 1996 Suzuki Sidekick and his wife,
Swadesh, still goes to work at 7 a.m. each day to
design computer chips. "And she cooks our dinner every
night," he said.
For some, the embarrassment of riches sloshing around
the valley brings with it obligations.
Steve Kirsch, a computer entrepreneur, has given
millions to charity but finds it hard to get other
dot-com moguls interested.
"There is a race in Silicon Valley," he said. "All the
top venture capitalists are in a race to see who can
get to a billion dollars net worth first." Giving
money away, his friends tell him, "means it will take
that much longer to get there." Not Driving a Mercedes
Is Deemed Suspicious
For Dennis and Martha Mendoza, the Silicon Valley
dream was moving their two daughters from a section of
San Mateo where gunshots were fired to a pricier part
of town. But no matter how straight and steady Martha
Mendoza drove her beat-up Oldsmobile on the streets of
her new neighborhood, she kept getting pulled over by
cops. Her husband told her it was the car. Everyone
else, he pointed out, was driving BMWs,
Mercedes-Benzes and Audis. The Mendozas just looked
suspicious.
So they bought a 20-year-old, repossessed Mercedes
sedan with a busted radiator. They paid $500 and
scoured junkyards for parts. "I don't get stopped by
the police anymore," Martha Mendoza said, laughing as
she took a visitor for a ride in her now-gleaming
white car.
Still, the family struggles mightily to live on
$27,000 a year. The Mendozas, natives of Honduras with
high school-level educations, have little hope of
hooking into the new economy and its high-paying jobs.
She works as a part-time caregiver to an elderly,
housebound man. He works 60 hours a week as a driver
for a carrier company that pays no benefits. Rent on
their two-bedroom apartment consumes nearly half their
salaries.
Like generations of immigrants before them, the
Mendozas pin their dreams on their daughters,
10-year-old Denise and 9-year-old Dina. They make a
point of eating out once a month, for the treat of it
and to teach the girls social graces.
"The girls need to know how to behave, what to order
in a nice restaurant, because someday they are going
to have that in their lives," she said.
Twice a week after school, the girls receive private
tutoring through a volunteer group. And their parents
have signed up for a program that matches each dollar
they save with $2 from private donors--to help their
daughters pay for college one day.
"My girls will go to college," Martha Mendoza said.
*
On the vast west side of the San Joaquin Valley, in
the heart of the nation's most high-tech farm belt,
rises the empire of John Harris, one of California's
wealthiest farmers. He's known among growers as "Mr.
E-Mail" and his Web site, www.harrisfarms.com, not
only markets his products but tells the humble origins
of Harris Farms.
Harris, 56, grows cotton, almonds and tomatoes, among
a dozen other crops, breeds and owns some of
California's top racing horses, runs a hotel and
restaurant and moonlights as a cattle baron. His feed
lot along Interstate 5 near Coalinga, just up the road
from his Mediterranean-style Harris Ranch Inn and
Restaurant, is the biggest feedlot in the state,
packing 100,000 beef cattle on 700 acres.
"When you buy our beef, it's got our name on it, not
Safeway's or Ralphs," said Harris, a UC Davis
graduate. "We're proud of what we've built."
In keeping with a more modest expression of wealth on
this side of the mountain, Harris wears Wrangler jeans
and roper boots and drives a mud-caked Ford Explorer.
Most of his 1,500 full-time employees call him John.
And yet he flies to and from Santa Anita racetrack in
his $2-million Pilatus Turbo and rubs elbows with Gov.
Gray Davis and Sen. Dianne Feinstein at political
fund-raisers at his house and hotel. The Harris home
along a majestic stretch of the Kings River is known
as one of the more stunning estates in California, a
6,000-acre ranch with a French chateau-style house
furnished with European antiques.
Harris has heard the rap that big agriculture wastes
water and exploits migrants. But he grows at least
half of his crops using water-saving drip irrigation
and, like a handful of farmers, maintains a
neighborhood on his land where 100 farm laborers and
their families live in modest houses. Private Cessnas,
Tar Paper Shacks
He proudly ticks off the name of workers whose 401(k)
savings plans have amassed tens of thousands of
dollars in the stock market boom.
"Agriculture gets tagged with the 'unemployed farm
worker' but most of the unemployment in this valley
isn't a farm worker problem," he said. "People without
a lot of skills or education choose to live here
because it's cheaper than in Los Angeles or San
Francisco."
Piloting his Cessna 210 from work to home, Harris
flies past the rural community of Teviston in southern
Tulare County. It is not quite a town and not quite a
squatter's village of 650 residents and four churches.
The black sharecroppers are dying off after migrating
here from the South in the 1940s to pick the new
cotton of the West. Their ranks are being replaced by
new farm worker families from Mexico, making better
wages, on their way up the ladder.
The one thing the old-timers and some newcomers share
is the desperation of their housing: broken down
trailers, old buses and tar paper shacks that would be
condemned if located in the city. Paul Boyer, who
helps rural communities upgrade houses and water
lines, says conditions are among the most depressing
he's seen in California. "It doesn't get much worse
than Teviston," he said.
*
The road from immigrant student to wealthy Los Angeles
businessman is lined with toys, at least for
48-year-old Charles Woo, who is part of a growing
economy that serves the poor.
A native of Hong Kong who graduated from UCLA with a
master's degree in physics, Woo worked in the family's
Chinese restaurant in Redondo Beach. Counting receipts
at night, Woo kept thinking there had be a better way.
All those toy helicopters and plastic figurines made
in China needed a conduit to the five-and-dimes in Los
Angeles. Why not act as that go-between?
So the family took $20,000 in savings and opened a
wholesale toy dealership downtown. From Day 1 in 1979,
business boomed. A decade later, he and his brother
opened Megatoys, in what was by then a full-fledged
Toy District. Today, sales have jumped to more than
$20 million a year.
Named the first Asian American to head the Los Angeles
Chamber of Commerce beginning in 2001, Woo earns more
than $500,000 a year. After selling Halloween costumes
and Easter baskets, he is now exploring the business
realm of biomedical research.
He says he doesn't much care for designer suits and
his 1992 BMW is running just fine. He, his wife, Ying,
and two sons live in a 5,000-square-foot home in
Rancho Palos Verdes with a view of Santa Catalina
Island.
Woo, who walks with a crutch because of childhood
polio, donates about $50,000 a year and 15 hours a
week to a variety of causes, including helping
disabled Asians get meaningful jobs.
Woo has a unique vantage on the growing income gap;
his business serves toy stores in the poorest reaches
of the city. He said he is concerned about the
widening gulf and its consequences for the future,
issues he hopes to address in his new chamber role.
But he is optimistic that if the boom continues, the
gap can be bridged.
At his company, for example, a secretary and warehouse
clerk have worked their way up to top managerial and
sales positions. Immigrants, he said, are especially
suited to taking advantage of emerging markets, as
long as they have the right education.
"We take a global view, we walk in a different
community," he said. "We don't feel uncomfortable
because we come from a different culture."
PHOTO: Joe Kraus, 28, who bought a Ferrari after
making millions as
a co-founder of Excite, an Internet portal, unwinds in
employee break
room.
PHOTOGRAPHER: ROBERT DURELL / Los Angeles Times
PHOTO: Diane Jones cooks French fries in trailer she
shares with
her husband in the dirt-poor farm-worker community of
Teviston in Tulare
County.
PHOTOGRAPHER: GINA FERAZZI / Los Angeles Times
Descriptors: CALIFORNIA -- ECONOMY; INCOME; WEALTHY
PEOPLE; MIDDLE CLASS; INDIGENTS; DEMOGRAPHICS;
STANDARD OF LIVING;
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