California’s economy remains strong, but the state continues to face challenges that range from cost-of-living realities to technological change. At an event in Sacramento, PPIC president Tani Cantil-Sakauye joined California leaders to discuss the health of the economy and strategies for building an economic future that can benefit all residents.

California’s economy is “surprisingly resilient considering what we’ve been through—from the pandemic to federal policy changes in the past year,” said Sarah Bohn, vice president and director of PPIC’s Economic Policy Center. “We’re relying on our fundamentals and we’re relatively stable.” But Bohn expressed concern about stagnation because “jobs have not been growing quickly, and we need economic growth to expand opportunity.”

Much like the state economy, California’s manufacturing sector looks good, according to Lance Hastings, president and CEO of the California Manufacturers and Technology Association. But Hastings sees distress beneath the surface for the state: “Infrastructure is at the point of breakage,” and California needs to invest in areas beyond roads and bridges. “We need to make investments in our people.”

Lorena Gonzalez Fletcher, president of California Federation of Labor Unions, AFL-CIO, agreed with the assessment of strong state financials but warned that this strength masks worsening income inequality, where “now the bottom is growing” to include more of what was once considered the middle class.

“Californians have serious anxiety about their personal finances and California’s economic future,” Cantil-Sakauye said, sharing findings from a recent PPIC survey. How do leaders reconcile this pessimism against the apparent health of the state economy?

Despite a booming stock market and job growth and earnings that remain in somewhat positive territory, Bohn explained that these “overall aggregate indicators are not reflecting the individual’s experience … the business owner experiences.”

Californians recognize that “not enough revenue is going into local government, into schools, into the public sector,” Gonzalez Fletcher said, which raises anxiety about hard times ahead, shrinking budgets, and the risk of job losses.

Offering a note of optimism, Hastings cited the diversity of California’s economy as a bulwark.  “The nature of our economy now is different than in previous economies… There is not one segment, where if it falters, the whole thing falls apart.”  Sustaining the fourth largest economy in the world, however, will require managing expectations into the future.

Cantil-Sakauye inquired about perspectives on California’s proposed “billionaire’s tax,”  and how it might impact the state. Hastings worried about billionaires relocating and the effect on California’s budget; Gonzalez Fletcher stressed that widening income inequality also must be tackled on a national level.

The role of artificial intelligence continues to drive debate around the future of California’s labor market and whether companies will use AI to cut costs and jobs. Hastings acknowledged that automation and AI “can drive efficiency and safety” but should enable workers. Gonzalez Fletcher highlighted the potential dangers and costs of relying on untested AI solutions, underscoring the need for developing AI that is worker-centered.

“We’re at the early stages of this new technology being deployed,” Bohn said; about 9% of employers currently use AI. To help Californians adapt and build skills for the future, “it’s critical to think about our systems and structures, like in education and the workforce, connecting with key sectors, with business leaders.”

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PPIC’s Speaker Series on California’s Future invites thought leaders and changemakers with diverse perspectives to participate critically, constructively, and collaboratively in public conversations. The purpose is to give Californians a better understanding of how our leaders are addressing the challenges facing our state.

PPIC is a nonpartisan, nonprofit organization. PPIC does not take or support positions on any ballot measure or on any local, state, or federal legislation, nor does it support, endorse, or oppose any political parties or candidates for public office. Any opinions expressed by event participants are theirs alone and do not necessarily reflect any position of the Public Policy Institute of California.