Making Ends Meet: How Much Does It Cost to Support a Family in California?

State and National Leaders Must Do More to Promote Economic Security and Opportunity

New Census figures released today show that millions of people in California continue to struggle to get by on extremely low incomes in spite of our state’s recent economic gains. More than 5.5 million Californians, including almost 1.8 million children, lived in poverty in 2016 based on the official poverty measure. In addition, poverty remained more widespread last year than it was in 2007 when the national recession began. Specifically, 14.3 percent of Californians had incomes below the official poverty line in 2016, down from a recent high of 17.0 percent in 2012, but still well above the state poverty rate in 2007 (12.4 percent). Also, roughly 1 in 5 California children lived in poverty last year (19.9 percent), down from a recent high of 23.8 percent in 2012, but still well above the child poverty rate in 2007 (17.3 percent).

The latest Census figures also show that there are stark differences in people’s economic well-being across California’s counties. The 2016 official poverty rate ranged from a low of 6.5 percent to a high of 25.6 percent across the counties, while the official child poverty rate ranged from 5.2 percent to 37.9 percent. More than 1 in 5 people lived in poverty in nine counties, most of which are in the Central Valley (see Map 1). Additionally, more than 1 in 5 children lived in poverty in 16 counties, including six counties — again, most in the Central Valley — where over 30 percent of children were in poverty (see Map 2).

Map 1

Map 2

Download the data for the maps above.

Although the Census figures published today show that poverty remains high, they understate the extent of hardship in California because they reflect an outdated measure of poverty. Census figures released earlier this week based on an improved measure — the Supplemental Poverty Measure (SPM) — which accounts for the high cost of housing in many parts of the state, show that roughly 8 million Californians per year, 1 in 5 state residents (20.4 percent), could not adequately support themselves and their families between 2014 and 2016. Under this more accurate measure of hardship, California continues to have the highest poverty rate of the 50 states.

The new Census poverty figures underscore the need for state and national leaders to do more to ensure that all people can share in our state’s economic progress. Specifically, policymakers should:

• Reject steep cuts to economic security programs that help families make ends meet and get ahead. A majority of adults will experience economic hardship for at least one year during their prime working years, and nearly half will turn to a major public support, such as SNAP food assistance (CalFresh in California), to get back on their feet. These supports not only lift millions of Californians out of poverty each year, but also help children succeed over the long-term, according to research. Yet federal policymakers have proposed slashing critical supports that promote economic security and opportunity. If enacted, these cuts would drive California’s already high poverty rate even higher and threaten the future of our state’s children. People in communities all throughout the state would likely be harmed.
• Help families afford decent housing. With housing costs far outpacing many families’ earnings in recent years, it has become increasingly challenging for people with low incomes to keep a roof over their heads. Over half of California renters are housing “cost-burdened,” meaning that they pay more than 30 percent of their income toward housing, and nearly 30 percent are severely housing cost-burdened, spending over half of their income on housing. Since housing costs are most families’ biggest expense, addressing the housing affordability crisis is key to broadening economic security in California. The Legislature is considering a package of bills that would take important first steps toward addressing this crisis through policies that are designed to increase housing supply, including production of affordable units. Given the large scale of the housing crisis, additional strategies outside of the housing arena will also continue to be critical to help families with low incomes pay for basic necessities like housing.
• Make sure workers earn enough to support themselves and their families. Most families in poverty work, which means that low pay and not enough work hours are key barriers to economic security and opportunity. California has recently made important strides to bolster workers’ economic well-being. For example, the state last year committed to gradually raise the state’s minimum wage to $15 per hour by 2023, and the lowest-paid workers in our state have already seen their hourly earnings increase significantly. California also created and then subsequently expanded the California Earned Income Tax Credit (CalEITC) — a refundable state tax credit that helps low-earning workers pay for basic necessities. Policymakers could build on this progress by increasing the size of the CalEITC and making sure that workers get the full benefit of the rising minimum wage by instituting practices that help part-time workers access additional work hours.

State and National Leaders Must Do More to Promote Economic Security and Opportunity

Around 8 million Californians — roughly 1 in 5 state residents (20.4 percent) — cannot adequately support themselves and their families, according to new Census figures released this morning based on the Supplemental Poverty Measure (SPM). This measure paints a more accurate picture of economic hardship than the official federal poverty measure in part because it better accounts for the state’s high cost of living (see note below).

The new data show that California continues to have the highest poverty rate among the 50 states largely due to high housing costs. This fact underscores the need for California to do more to increase access to affordable housing in order to promote greater economic security in the state. The new Census data also tell a cautionary tale about the potential impact of policies being pursued by federal policymakers. President Trump and congressional leadership have proposed slashing critical supports that help families afford basic necessities like food and housing, and that lift millions of people above the poverty line each year. If signed into law, these proposals would undoubtedly drive California’s already unacceptably high poverty rate even higher. Given this fact, California’s congressional representatives should reject steep cuts to vital public supports and instead prioritize policies that increase people’s economic security and opportunity.

California’s High Housing Costs Drive Up the State’s Poverty Rate

With 20.4 percent of state residents struggling to get by, California ranks first among the 50 states based on the SPM.[1] California’s No. 1 ranking largely reflects the state’s high housing costs. Unlike the official poverty measure, the SPM accounts for differences in housing costs across the US, and when these costs are factored in, a much larger share of the state’s population is living in poverty: 20.4 percent under the SPM, compared to 14.5 percent under the official measure. In fact, California’s poverty rate rises to the highest among the 50 states under the SPM, up from 16th highest under the official poverty measure.[2]

Housing costs are extremely high in many parts of California. Fair market rent for a modest two-bedroom apartment is more than $1,500 per month in the areas where nearly two-thirds of Californians live. At the same time, monthly rent affordable to a full-time worker at the state minimum wage is only $546 per month, which is less than the fair market two-bedroom rent anywhere in California. Thus there is no part of the state where a single mother with a minimum-wage job can expect to afford an apartment with a bedroom for herself and for her children.

Housing affordability is a problem throughout California, even in areas where housing costs are lower, because incomes are also lower in these areas. Statewide, more than half of renter households pay more than 30 percent of their incomes toward housing, making them housing cost-burdened, and nearly a third of renter households are severely cost-burdened, paying more than half of their incomes toward housing.

Given the crisis of housing affordability throughout the state, it is important to pursue policies that can help slow down rising housing costs and facilitate production of more affordable housing. State policymakers are currently considering a package of bills that would take an important step toward addressing this problem by increasing the production of housing and streamlining the local review process for certain housing projects in places that have not met their “fair share” housing goals. These measures would represent important first steps in providing some relief to families struggling to afford housing, a challenge that California will need to continue working to address in coming years.

Federal Policy Proposals Threaten to Plunge More Californians Into Poverty

The fact that around 8 million Californians struggle to get by — several years after the national recession ended — highlights the need for policies that allow more people to share in our recent economic gains. Yet the policies being pursued by President Trump and congressional leadership would decimate critical public supports that help struggling families and individuals make ends meet, inflicting serious hardship on millions of people.

Indeed, some of the proposed cuts target supports that are proven tools for reducing poverty. For instance, the Supplemental Nutrition Assistance Program (SNAP) — CalFresh in California — lifted around 800,000 Californians, including about 400,000 children, above the poverty line each year, on average, between 2009 and 2012. In addition, the federal Earned Income Tax Credit (EITC) and child tax credit (CTC) lifted nearly 1.4 million Californians, including roughly 700,000 children, out of poverty. Moreover, these supports not only help families get by day to day, but also may provide longer-term benefits to children. Research shows, for example, that food assistance, working-family tax credits, and other supports that help families afford basic needs help children to do better in school and increase their earning power when they grow up.[3] Given these facts, federal policymakers should reject any proposal that would weaken these vital public supports.

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Note About the Census Bureau Data Released Today

The state-level figures released today reflect average annual poverty rates during a three-year period, from 2014 to 2016. 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 2016 if their annual income was below about $19,300, 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. For example, the SPM poverty line for a parent with two children living in a renter household in the San Francisco metropolitan area was about $29,500 in 2016 — considerably higher than the poverty line based on the official measure.

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 Earned Income Tax Credit (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.

After incorporating these improvements over the official poverty measure, the SPM produces a more realistic picture of poverty in California: the state’s SPM poverty rate was 1.4 times the official poverty rate between 2014 and 2016 (20.4 percent versus 14.5 percent, respectively).

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 official poverty line to afford basic necessities.

Endnotes

[1] Florida ranks second among the 50 states with 18.7 percent of state residents living in poverty based on the SPM between 2014 and 2016, followed by Louisiana where the poverty rate was 18.4 percent.

[2] In addition, the SPM poverty rate is higher than the official poverty rate for most major demographic groups in California. See Alissa Anderson, A Better Measure of Poverty Shows How Widespread Economic Hardship Is in California (California Budget & Policy Center: October 2016).

[3] See Arloc Sherman and Tazra Mitchell, Economic Security Programs Help Low-Income Children Succeed Over Long Term, Many Studies Find (Center on Budget and Policy Priorities: July 17, 2017).