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Why California’s Nation-Leading Poverty Rate Actually Fell During The Pandemic

A photo of a sign on a window of a storefront that says "Help wanted." Also on the window are posters for coronavirus safety measures. On the other side of the glass is the blurry outline of a person wearing a face mask.
A "Help Wanted" sign is posted on the window of a business.
(Frederic J. Brown
/
AFP via Getty Images)
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According to new U.S. Census Bureau statistics, California — once again — has the highest poverty rate of any state in the country.

However, despite the heavy economic toll of COVID-19, the state's poverty rate actually fell last year.

Why? Largely because of federal aid.

“Federal stimulus payments and unemployment insurance kept millions of citizens out of poverty,” said Caroline Danielson, senior fellow at the Public Policy Institute of California.

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“We can see that those programs really did make a big difference,” she said.

California’s Housing Costs Keep It The Highest-Poverty State In The Nation

The census measures poverty in a few different ways. Its supplemental poverty measure takes into account regional cost of living, as well as the effects of government aid.

Using this approach, California consistently has the highest poverty rate in the country — eclipsing states such as Mississippi, Florida and Louisiana.

And 2020 was no different. The latest supplemental poverty measure puts California’s poverty rate at 15.4%. No other state had a higher rate (though the District of Columbia came in at 16.5%).

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Unaffordable housing costs are primarily to blame for California’s nation-leading poverty rate.

“California is a state that has relatively high wages. It has relatively well-supported safety net programs,” Danielson said. “But we are not keeping up in terms of making housing affordable for all families.”

Federal Aid Lifted Millions Out Of Poverty

But today’s census numbers show California’s poverty rate declining in 2020 by nearly two percent compared to 2019.

This mirrors a nationwide trend: Despite widespread job losses and business closures, poverty rates actually decreased during the pandemic because of dramatic expansions in the social safety net.

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Congress passed multiple rounds of federal aid that boosted state unemployment benefits by as much as $600 per week, and sent stimulus checks to millions struggling to make ends meet.

In California, that aid helped offset the worst unemployment crisis in generations. Millions of low-income workers across the state lost jobs last year, and L.A.’s unemployment rate briefly soared above 20%. Some workers still haven’t been able to find a job.

Still, some found themselves better off compared with 2019, when California’s unemployment rates were hitting record lows.

Danielson said, “We've learned that during crises, government can take action that actually can avert poverty increases.”

What questions do you have about business and the economy in Southern California?
David Wagner focuses on Southern Californians getting left behind in an economy beset by soaring unemployment, pandemic-related business closures and high housing costs.