California, often called the Golden State, is one of the most expensive places in the US. The cost of living here is almost 40% higher than the country’s average. Featuring the nation’s best universities, beautiful national parks, stunning waterfalls, and dense forests, the state has a huge appeal. There is no doubt about this. However, there are more reasons. Why is California so expensive? Here are the top 10 reasons.
Why is California So Expensive?
1. High Cost of Housing
Housing is in high demand in California as it is home to Silicon Valley and many bustling cities including Los Angeles, San Francisco, Santa Barbara, San Jose, etc. Silicon Valley and other cities produce a lot of job opportunities attracting many people across the world. Moreover, local rules and regulations for building new homes are very strict. So, it has the lowest housing permits in the country. The high demand for houses has increased the house rent. The high cost of housing is one of the main reasons for the high living costs in California.
2. High Taxes
California is one of the highest-taxed States. The income tax rate imposed in the state is 9.3% almost 10% more than many states in the US. The high-income people pay more than 13% of income tax. The sales tax rate is 7.25%. The gas tax and property tax are also higher.
3. High Electricity Cost
The cost of electricity has increased by more than 45% in five years in the State. The main reason for the steep incline in the price of electricity is the increase in the demand for energy. Another reason is the extremely high temperature. This has increased the usage of air conditioners in residential buildings and offices. Other reasons are high distribution expenses, recovering wildfire mitigation, incentives given for rooftop solar panels, distribution and transmission upgrades, and scarcity of supply. Unaffordable electricity bills are another important reason for California being so expensive.
read more: Things To Do In Oceanside California
4. High Cost of Groceries and Food
The salaries of workers in farms, supermarkets, and restaurants are high in California. The increased labor costs are a reason for the high cost of groceries and food. Fuel and raw materials are also expensive. Moreover, the major grocery supply chains charge higher prices in the Golden State. The State has many Unionized Grocery Stores that fix costly prices for the products due to special State Regulations. As mentioned earlier, sales taxes are exorbitant. So, you can’t expect to buy groceries at cheaper prices. Ultimately, it results in an expensive cost of living.
5. High Healthcare Costs
The State has a diverse population, a large number of aging people, and many patients with chronic health issues. So, the demand for healthcare is huge. Moreover, the healthcare regulations and regulatory standards in California are strict. The medical treatment given and the equipment are updated. The uninsured population is more when compared to other states because of the complex insurance market and mixed population. The cost of prescription drugs is high. Preventive care is expensive. All these factors skyrocket the healthcare costs.
6. High Transportation Costs
California is a congested state and has the largest average commute time. Larger commute time increases the operating costs of vehicles. Fuel prices are costlier and fuel consumption is higher because of the bad roads. Bad roads also increase the maintenance rate of cars and trucks. More people rely on private vehicles as there is a shortage of public transportation. The increased need for cars, expensive fuel prices, high sales tax, and poor roads are the reasons for high transportation costs in California.
7. High Labor Costs
The minimum wage in California is higher than most of the states in the country. In 2024, it has doubled from $8 to $16. It is many times more than the Federal minimum wage of the US. The working hours per day are eight hours and laborers working more than that have to be given overtime pay. Many high-paying companies are located in the State. Californian businesses pay 15% more wages and salaries than all Western States.
8. Economical Boom
California has been experiencing a boom in its economy for the past few years. The main reason is the growth of technological industries in the Silicon Valley. It is home to many top companies like Apple, Cisco, Intel, Google, Amazon, Adobe, Meta, etc., and many startups. Global trade is expanding. Moreover, it is the hub of the entertainment industry. The tourism industry is booming in the State. It also has many popular universities and other educational institutions. With a sharp economic boom, it is no wonder that California is expensive.
9. High Public Service Investments
There are several reasons for high public service investments in California. The State invests heavily in social welfare schemes and public services. The maintenance of public roads and other government infrastructure is high. Moreover, it is investing a lot in Lithium Valley to make it a global hub for EV batteries and alternate energy projects to reduce carbon emissions. Its booming economy calls for a huge investment in public infrastructures like bridges, roads, ports, railways, and others. High investment in public services and infrastructures increases the cost of living in the State.
read more: Romantic Getaways in California
10. High-Paying Jobs
The State has the largest highly-educated population. They are placed in high-paying jobs in fast-developing industries like technology, entertainment, insurance, banking, and finance. So, the demand for superior-quality education, housing, dining, beauty care, fitness, healthcare, mental wellness, and all specialized services is high. The people look for the best quality in everything and are ready to pay more. Premium rates for all services make the state costly.
Concluding Words
The desirable features of California have both advantages and disadvantages. The services are of top-notch quality. One of the main disadvantages is the exorbitant cost of living. It is expensive in many ways making the State unaffordable for low-income people.
