Are California pay raises keeping pace with inflation?

Inflation rates and paychecks don't sway in uniform patterns.

We all complain about California’s surging cost of living, and it’s a legitimate beef. The state is no stranger to the nation’s worst bout of inflation in four decades.

Yet far less time is spent discussing the relatively generous raises handed out by many bosses – with some of that income boost coming to workers who switch employers.

Yes, all the economic gyrations created by the pandemic make one’s head spin. The fluctuations generated some tough times for shoppers while producing relatively good times for certain workers.

My trusty spreadsheet, after peeking at government jobs and price stats for the four years ending in June 2023, found that wage gains in California exceeded the inflation rate.

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California’s statewide consumer price benchmark showed 18% inflation in 2019-23. Meanwhile, the Golden State’s average annual wage jumped by 23% to $84,400 for 18 million workers statewide.

However, there are more than a few “buts” in this equation. Like inflation rates and paychecks don’t sway in uniform patterns. Let me explain …

Geographical gaps

Staying ahead of the cost of living is a fairly local challenge.

Inflation is by no means universal, looking at a map. The state’s price index tracks four regions with noteworthy differences in inflation rates.

Prices are up 22% in the Inland Empire since 2019, 19% in San Diego, 17% in Los Angeles-Orange County and 15% in San Francisco.

Then we’ll note the varying swings in paychecks – and hiring patterns – across the state. Look at the six largest job markets, ranked by pay hikes …

San Diego: 28% raise to $78,600 for 1.5 million workers.

San Jose: 27% raise to $170,900 for 1.1 million workers.

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Inland Empire: 24% raise to $58,200 for 1.7 million workers.

San Francisco: 23% raise to $122,100 for 2.4 million workers.

Los Angeles-Orange County: 20% raise to $76,100 for 6.1 million workers.

Sacramento: 20% raise to $72,100 for 1.1 million workers.

Professional differences

A Californian’s ability to beat inflation also depends on what they do for a living.

For example, folks providing services have been in heavy demand. Consider the varied California wage jumps within key job niches, ranked by size of pay increases …

Personal services: 27% raise since 2019 to $52,500 for the industry’s 560,000 workers.

Manufacturing: 26% raise to $121,800 for 1.3 million workers.

Professional services: 25% raise to $115,200 for 2.8 million workers.

Leisure and hospitality: 23% raise to $37,400 for 2 million workers.

Financial activities: 23% raise to $123,300 for 819,000 workers.

Trade, transportation, and utilities: 23% raise to $65,600 for 3.1 million workers.

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Information: 21% raise to $226,800 for 554,000 workers.

Education and health services: 21% raise to $63,600 for 3 million workers.

Government: 21% raise to $86,600 for 2.6 million workers.

Natural resources: 17% raise to $45,900 for 451,500 workers.

Construction: 17% raise to $83,100 for 912,000 workers.

Timing

Broadly speaking, most pay hikes came in the early days of the pandemic era. The cost of living has been a more recent problem.

The typical California worker enjoyed a 20% raise in 2020-21 vs. 5% inflation.

But in 2022-23, wage increases ran 4% statewide vs. 13% inflation.

Other quirks

Consider some curious pay raise variations tracked nationwide by the Atlanta Fed.

Youth wins: Workers aged 16-to-24 got 44% pay hikes in 2019-23 vs. 20% for those 25 to 54 and 12% for the 55-plus flock.

Size matters: The quarter of workers with the lowest wages got the biggest raises – 24% over four years. Those who were paid the most received the smallest hikes at 15%.

Loyalty doesn’t pay: The wage increases of job switchers added up to 22% from 2019 to 2023. Those who stayed put got only 16%.

Bottom line

So the paycheck of a young, low-paid personal services worker from San Diego – who changed jobs – likely grew faster than inflation.

Meanwhile, wages of an older, well-paid construction worker from Sacramento – who remained loyal to their boss – probably failed to keep up with the cost of living.

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Now that’s a sort of cartoonish mashup of California pay patterns of 2019-23 and their relationship with inflation. But it’s also an snapshot of the odd reality.

Which Californians can say their paychecks have outrun inflation is a very diverse group.

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