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Growing pains in Valley

Central Valley's population boom hasn't translated into an economic boom. A study to be released today by the Great Valley Center, a Modesto think tank, gives further weight to what many economists have been saying for years: Central Valley growth doesn't equal prosperity.

While the Central Valley's population is growing at a faster pace than the rest of California's, the 19-county region badly trails much of the state in most socioeconomic indicators. The Valley's unemployment rates are higher and its per capita incomes are lower, according to the study. The study is based on a variety of economic surveys conducted in recent years.

Meanwhile, the population explosion has actually hurt the one indicator in which the Valley shined: its housing affordability. Although housing in the Valley is still more affordable than coastal California, the gap is narrowing. "The population boom is not solving things economically for much of the Valley," said Don Schwartz, the study's manager.

Immigration, high birth rates and the drift of commuters from the Bay Area and high-cost coastal areas are fueling the Valley's population explosion. Its population is expected to increase 24 percent between 2000 and 2010 vs. 15 percent for all of California, the report said.

But the Valley isn't creating jobs quickly enough to keep pace, the report said. Although unemployment rates have fallen, they're still more than 4 percentage points higher than the rest of the state.

Of the 10 U.S. metro areas with the worst unemployment in 2003, six were in the Valley.

And many of the jobs being created are in low-wage service industries like retailing, Schwartz said, while low-wage agriculture remains the region's bread and butter.

"We're still largely agriculturally based," Schwartz said. "It tends to be on the low-wage side. We haven't diversified in ways that are as economically beneficial as we need. That's why we are still the way we are."

The Great Valley Center, an 8-year-old think tank founded by ex-Modesto Mayor Carol Whiteside, is facing its own economic hard times. It recently cut its annual budget in half, to $3 million.

Housing affordability in the Valley has dropped as prices have soared. In 1999, some 54 percent of the Valley's households could afford a median-priced house vs. 37 percent statewide. In 2004 the Valley's affordability index fell to 30 percent. The state's fell to 19 percent.

In addition, apartments are increasingly out of reach for Valley residents. The study said nearly 50 percent of Valley residents can't afford to rent a median-priced, two-bedroom apartment.

In terms of per capita income, the Valley is actually falling further behind the rest of California. The state's per capita income jumped 25 percent from 1997 to 2002, while the Valley's rose only 19 percent.

If the Valley were a state, it would rank 48th in the nation in per capita income, ahead of West Virginia, Arkansas and Mississippi, according to the study.

Most experts believe the Valley's poorly educated work force has been a crucial obstacle to economic diversification. The new University of California campus under construction at Merced will likely improve matters but won't solve the Valley's socioeconomic problems by itself, Schwartz said.

"Certainly the university will help, but we don't see it as a panacea for the region. There needs to be more than hoping a single university will change the fortunes of an entire region," he said.

The study showed that the Sacramento region, encompassing El Dorado, Placer and Sacramento counties, remains the economic oasis of the Valley, with lower unemployment and higher incomes.

"Economically, it's distinctly different in many ways from the rest of the Valley," Schwartz said. But Sacramento isn't "as strong economically in many ways as other parts of California," trailing the Bay Area and Los Angeles in measures such as income.

About the writer: The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com.