California’s economy — long hailed as the fifth-largest in the world — is now being compared to an old British class system. A growing number of analysts warn that the Golden State has become a two-tier economy, split between highly paid professionals and low-wage service workers.
From “The New California” to the New Reality
Forty years ago, journalist Dan Walters set out on a 9,000-mile journey across California to understand its shifting economy. His findings became a 14-part Sacramento Bee series and later a book titled The New California: Facing the 21st Century.
Walters quoted two researchers at the time, Leon Bouvier and Philip Martin, who predicted the emergence of “a two-tier economy with Asians and non-Hispanic whites competing for high-status positions while Hispanics and Blacks struggle for low-paying service jobs.”
“Any objective description of 2025 California,” Walters writes, “would conclude they were right.”
The “Upstairs, Downstairs” Economy
Former Employment Development Department director Michael Bernick recently revisited the issue in Forbes, comparing modern California to the 1970s British drama Upstairs, Downstairs — a series that depicted the lives of wealthy families and the servants who supported them.
According to Bernick, California’s “upstairs” class consists of college-educated professionals in technology and knowledge industries, while the “downstairs” workforce fills low-wage service jobs that sustain the state’s consumer-driven economy.
“This two-tier economy is not new,” Bernick writes. “It has been building for two decades. What’s new is how widely it’s accepted — even among those who claim to champion equality.”
Policy and Hypocrisy
Bernick argues that state leaders — many of whom publicly advocate for social justice — have helped entrench inequality through policies that raise business costs and discourage job creation.
“California’s overclass denounces inequality,” he notes, “but remains silent about the low-wage workers who attend to their daily needs.”
He adds that the Legislature’s “empire of rules and costs” has stifled employers’ ability to create stable, middle-income jobs. Instead, the state has assembled a benefits system that helps residents survive, but not thrive.
The Erosion of the Middle Class
California’s mid-century economy once supported a robust, self-sufficient middle class. That structure has eroded, replaced by a smaller group of high earners and a vast service-based workforce — many of them immigrants.
“It’s one thing to serve others,” Bernick concludes, “and another to serve others from a position of low pay and little authority.”
An Uncomfortable Truth
If solutions are hard to find, Bernick suggests at least starting with honesty:
“The equality politics and rhetoric of the state’s ‘upstairs’ workforce bear little relation to their own entitlement and how California’s economy truly operates.”
Walters agrees — writing that California’s leaders must confront the widening divide if the state hopes to rebuild opportunity for the next generation.
