Why Poverty in California Remains High

By: Caroline Danielson

***Editor’s Note: The following article is one viewpoint on California’s poverty. On October 8, another viewpoint was published in the article, “California’s Poverty Rate Remains High — Why?

Although no metric can perfectly capture the complexity of individuals’ and families’ lives, poverty statistics are critical barometers of economic need, providing a clearly defined standard for diverse stakeholders.

Since 2012, the US Census Bureau has annually released two kinds of poverty estimates, which differ in how they calculate the resources families have on hand to make ends meet. The first set of estimates are known as the official poverty statistics and have been reported annually since the 1960s. Researchers and others widely recognize that official poverty statistics have key limitations — for example, the poverty threshold is the same for a similarly sized family in every state but Hawaii and Alaska. Since 2012, the Census Bureau has also released Supplemental Poverty Measure (SPM) estimates, which update poverty thresholds to reflect typical family expenditures on food, clothing, and housing — and adjust for the varying cost of housing across the nation.

The latest poverty statistics for the nation were published in mid-September. Using the more-accurate SPM metric, California is essentially tied with Florida and Louisiana as the highest-poverty state. Why is this? Factoring in housing costs makes the poverty line in California much higher. For example, the official poverty line for a family of four in 2017 was $24,858, but the SPM line for that same family was 31 percent higher in California, averaging $32,639 (poverty lines differ across metro areas). Outside of California, the difference between the official poverty line and the SPM poverty line averages only 7 percent.

The SPM also includes resources from key social safety net programs — such as the federal and state Earned Income Tax Credits (EITCs) and nutrition assistance programs like CalFresh, school meals, and WIC — that can boost family incomes. For example, California families with children living in poverty according to the SPM had on average $4,565 added to their cash incomes from the safety net resources counted in the SPM. However, on balance these added resources do not outweigh the high housing costs in California that are embedded in the SPM threshold and the additional work and medical expenses that are factored in.

To be clear, California’s SPM rate is declining — from a recent high of nearly 25 percent in 2011 to a low of 18 percent in 2017. A sustained strong economy has helped more families make ends meet, and so have the new state EITC and state efforts to increase participation in CalFresh and other programs. Research by the Public Policy Institute of California outlines possibilities for further expanding tax credits to target reductions in child poverty. Robustly supporting social safety net programs, moderating housing costs, and expanding proven employment and training programs offer other opportunities to improve the well-being of disadvantaged Californians.

Figure title: SPM thresholds are higher than the official poverty line — especially in California

Note: Thresholds are for families of four. Amounts are rounded to the nearest $1,000.

Caroline Danielson is a policy director and senior fellow at the Public Policy Institute of California. Her research focuses on multiple dimensions of the social safety net, including its role in mitigating poverty, program access and enrollment, and the integration and governance of programs. Her work has been published in numerous academic journals, including the Journal of Policy Analysis and the Social Service Review. She holds a PhD in political science from the University of Michigan and a master’s degree in policy analysis from the Pardee RAND graduate school.The opinions in this article are presented in the spirit of spurring discussion and reflect those of the author and not necessarily the treasurer, his office or the State of California.

Written by

Fiona Ma, CPA serves as California’s 34th State Treasurer

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