Public Policies Can Reduce Poverty, Boost Economic Opportunity in California

New CBP Report Highlights the Role That Public Investments Have Played in Reducing Hardship, Underscores Importance of Building on Prior Progress

FOR IMMEDIATE RELEASE

SACRAMENTO – With many Californians facing economic challenges in the wake of the Great Recession, a new report from the California Budget Project (CBP) shows the potential for public policies to significantly reduce poverty and connect low-income families with economic opportunity.

Five Facts Everyone Should Know About Poverty discusses how a range of public supports – from Social Security to food assistance to tax credits for working families – have had a major impact in addressing economic hardship over the last half-century. The report also shows that while poverty is high in California – especially compared to that in other states – various policy options exist for reducing poverty and expanding opportunity for low-income families.

“Many Californians recognize that poverty is a serious challenge facing our state. And while there’s a sense that not much can be done about it, poverty is in fact a problem that we can address.” said Alissa Anderson, senior policy analyst at the CBP and author of the report. “It’s a matter of making greater investments in strategies that we already know are helping low-income individuals and families advance.”

The CBP is releasing Five Facts Everyone Should Know About Poverty as part of its new initiative focused on elevating the debate around poverty in California and identifying specific policy approaches for reducing poverty and promoting economic opportunity in the state. This report shows that:

  • Public policies reduce poverty. Between 2009 and 2011, key public supports – including the federal Earned Income Tax Credit (EITC), food assistance, unemployment insurance, and others – lifted an annual average of nearly 4 million Californians out of poverty. This included about 1 million children each year, on average.
  • Most families who are living in poverty have jobs. Poverty is more often due to low-wage work than to a lack of employment. In fact, two-thirds of California families who were living in poverty in 2012 (67 percent) were supported by one or more workers. This large share of “working poor” is partly attributable to a changing California job market in which low-wage jobs are more prevalent than they were a few decades ago. Also, California’s minimum wage – despite being recently increased from $8 to $9 an hour – provides an annual income of just $18,720, which is less than the federal poverty line for a family of three ($19,094) and just onequarter of what the CBP has estimated such a family needs to afford a modest standard of living in California ($74,477).
  • Prior policy choices have made some public supports less effective at lifting families out of poverty. Despite the importance of public policies in reducing poverty, some key public services play a more limited role than they did in prior years. For example, changes to CalWORKs – which provides cash assistance and employment services for low-income families with children – mean that the program offers a lower level of support than it did in prior years. Twenty-five years ago, CalWORKs cash assistance provided a maximum level of support equal to about 80 percent of the federal poverty line. Today, the maximum level of CalWORKs cash assistance – $670 a month for a family of three – is just 41 percent of the poverty line. Furthermore, state policymakers in recent years have made cuts to other core services that help Californians make ends meet, such as cash assistance and in-home care for low-income seniors and people with disabilities, and subsidized child care and preschool.
  • Poverty limits children’s opportunities for future success. More than one in five California children (2.2 million) lived in families with incomes below the federal poverty line in 2012. These children are likely to face significant obstacles to succeeding in school and beyond, often as a result of being exposed to a constellation of challenging conditions during their critical early years: insufficient food and nutrition, crowded or unsafe living arrangements, and little or no access to academic support or educational enrichment activities. Children who are born into poverty are five times as likely as other children to spend at least half of their early adulthood years in poverty. However, the academic achievement of low-income children improves when their families’ incomes are boosted through public programs or tax credits, and some studies suggest that these gains translate into higher earnings and less need for public assistance when children reach adulthood.

The CBP’s report identifies several ways that state policymakers could reduce poverty and expand pathways to economic opportunity. These include creating a state Earned Income Tax Credit that allows low-income families to keep more of their earnings; boosting support for subsidized child care and preschool, which help parents access high-quality care for their children and find and keep jobs; creating a dedicated source of funding to expand access to affordable housing in California; and others.

“Our state can choose to prioritize the kinds of public investments and other policies that significantly reduce poverty,” said Chris Hoene, executive director of the CBP. “This is critical not just to addressing economic hardship right now, but also to fostering shared prosperity and strong communities over the long term, which means giving all Californians access to the essential ingredients of opportunity.”

Five Facts Everyone Should Know About Poverty is available online at the CBP’s website, www.cbp.org.

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The California Budget Project (CBP) engages in independent fiscal and policy analysis and public education with the goal of improving public policies affecting the economic and social well-being of low- and middle-income Californians. Support for the CBP comes from foundation grants, subscriptions, and individual contributions. Please visit the CBP’s website at www.cbp.org.