State Leaders Must Do More to Promote Economic Security and Opportunity
Nearly 8 million Californians — 1 in 5 state residents (20.6 percent) — cannot adequately support themselves and their families. This is according to new Census figures released this morning based on the Supplemental Poverty Measure (SPM), a more accurate indicator of economic hardship than the official poverty measure. California also continues to have the highest poverty rate in the nation based on the SPM.
The new Census data also show that:
- California’s high housing costs are a key obstacle preventing more people from getting ahead. The SPM improves on the official poverty measure by better accounting for differences in the cost of living across the US. When California’s high housing costs are factored in, a much larger share of the state’s population is living in poverty: 20.6 percent under the SPM, compared to 15.0 percent under the official measure. Accounting for housing costs boosts California’s poverty rate to the highest of any state, up from 17th highest under the official poverty measure.
- Public investments improve the lives of millions of Californians. The SPM factors in a broader array of resources that people use to meet their basic needs, making it possible to gauge the extent to which public investments reduce poverty. Major federal and state programs — including Social Security, CalFresh food assistance, and tax credits for working families, such as the federal Earned Income Tax Credit (EITC) and child tax credit — lifted an estimated 4.9 million Californians, including 1.4 million children, above the poverty line each year, on average, between 2009 and 2012. Without these critical investments, millions more Californians would be struggling to get by.
California’s Leaders Can Do More to Promote Economic Security and Opportunity
The new poverty figures out today underscore the urgent need for California’s leaders to do more to help individuals and families who are struggling. In particular, the SPM shows that while public investments help to reduce hardship, they need to go further in a high-cost state like California where a majority of low-income residents spend over half of their incomes on housing. Policymakers can increase economic security and opportunity in our state by investing in good jobs, affordable housing, and a strong safety net; making it easier for people to save for emergencies and build a secure retirement; and allowing more families to access high-quality, affordable child care, preschool, and higher education so that children and youth have greater opportunities to move up the economic ladder. Prioritizing these types of investments would allow more people to fully contribute to our communities and economy and would lay the groundwork for a more prosperous future for California.
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About the Census Bureau Data Released Today
The state-level figures released today reflect average annual poverty rates during a three-year period, from 2013 to 2015.
The SPM addresses a number of shortcomings of the official poverty measure. One is the fact that under the official measure, the income threshold for determining who lives in poverty is the same in all parts of the US. For example, a parent with two children was considered to be living in poverty in 2015 if their annual income was below about $19,096, regardless of whether they lived in a low-cost place like rural Mississippi or a high-cost place like San Francisco. The SPM better accounts for differences in the cost of living by adjusting the poverty threshold to reflect differences in the cost of housing throughout the US.
Another shortcoming of the official poverty measure is that it fails to factor in the broad array of resources that families use to pay for basic expenses. The official measure only counts cash income sources, such as earnings from work, Social Security payments, and cash assistance from welfare-to-work programs. It does not take into account noncash resources, such as food or housing assistance, and it fails to consider how tax benefits, such as the federal EITC, increase people’s economic well-being. The SPM improves on the official measure by including these resources. It also better accounts for the resources people actually have available to spend by subtracting from their incomes what is needed to pay for necessary expenses, including work-related expenses, such as child care; medical expenses, such as health insurance premiums and out-of-pocket costs; and state and federal income and payroll taxes.
Although the SPM provides a more accurate picture of economic hardship in California, it does not indicate how much people need to earn to achieve a basic standard of living. Measures of what it actually takes to make ends meet in California show that families need incomes several times higher than the poverty line to afford basic necessities.