California Still Has The Nation's Highest Poverty Rate (Blame Housing Costs)
By many measures, California's economy is doing great. State unemployment is at a record low. Nearly 3 million jobs have been created since early 2010. If California were its own country, it would have surpassed the UK earlier this year to become the world's fifth largest economy.
But still, nearly one in five Californians live in poverty. That includes 7.5 million residents, more than in any other state. According to statistics released Wednesday by the U.S. Census Bureau, no other state has a higher poverty rate than California's. Only Florida and Louisiana come statistically close.
But how can so much poverty exist in such a booming economy? The long, complicated answer has to do with the federal government's different methods for measuring poverty. The short answer? California's high housing costs.
TWO DIFFERENT WAYS OF DEFINING POVERTY
The Census Bureau puts out two nationwide measures of poverty each year: the official measure and the supplemental measure. According to the official measure, California isn't doing so bad. Its poverty rate comes out to 13.4 percent, not far from the 12.9 percent national average.
But the official poverty threshold revolves around the inflation-adjusted cost of food in 1963. It treats households in Los Angeles the same as households in Jackson, Mississippi. As a result, people who study poverty in California tend to look past the official poverty rate, because it doesn't account for differences in the cost of living between states.
"We know that the amount of money you actually have to pay to afford housing is very different in different parts of the United States," said Sara Kimberlin, a senior policy analyst with the California Budget and Policy Center.
Kimberlin calls the supplemental poverty measure "more reliable" because it does account for basic expenses that can vary widely from state to state, like costs for housing, child care, utilities and health care. Under the supplemental measure, California's poverty rate jumps to 19.0 percent, significantly higher than the national average of 14.1 percent.
WAGES HAVEN'T KEPT UP WITH RENTS
Housing costs are largely to blame for California's consistently high poverty rate, according to poverty experts. Since 2006, Californians have seen median rents increase by 13.2 percent, while their median annual earnings have only grown by 4.1 percent.
"It's no secret to people who live here that the cost of housing is insurmountable for many families," said Jessica Bartholow, a policy advocate with the Western Center on Law and Poverty.
More Californians may be working now than during the depths of the recession, said Bartholow, but they may no longer be employed in middle class jobs.
Meanwhile, their rents have continued to rise, to the point where almost a third of the state's renters are spending more than half their income on housing. Kimberlin said California policymakers hoping to address poverty need to address housing costs.
"Even though the economy may be doing better overall," Kimberlin said, "at the level of individual families, it's not enough to have a job if your wages don't pay the rent."
EARLY SIGNS OF PROGRESS?
California's poverty rate may be high. But it is going down.
Last year, the Census Bureau reported a supplemental poverty rate of 20.4 percent for California. Bartholow suspects higher pay among California's low-income workers may help explain the drop to 19.0 percent seen this year.
"Here in California, we are on a path to $15 an hour," said Bartholow. "I would expect that the increase in the number of people above the poverty line is a direct reflection of the changes to the minimum wage."
Kimberlin noted that the supplemental poverty measure also accounts for financial support from government programs, including California's recently expanded earned income tax credit for very low-income earners. Without those supports, she said California's poverty rate would be even higher.
"Those are the kinds of investments and policies that will show up in California's supplemental poverty rate, and will help bring it down," Kimberlin said.
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