State Policymakers Must Do More to Ensure the State’s Economy Works for Everyone

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. Nearly 6 million Californians, including almost 2 million children, lived in poverty in 2015 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, 15.3 percent of Californians had incomes below the official poverty line in 2015, 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, more than 1 in 5 California children lived in poverty last year (21.2 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 fact that millions of people lived in families that could not adequately support themselves in 2015 — six years after the end of the national recession — underscores the need for California to do more to ensure that all people can share in our state’s economic progress. This report highlights key findings from the data released today and outlines specific steps policymakers can take to increase economic security and opportunity in California.

Figures Based on Official Poverty Measure Understate Hardship in California

Although the newest Census figures show that poverty remains unacceptably high, they understate the number of Californians struggling to get by because they reflect an outdated measure of poverty. Figures released earlier this week based on an improved measure – the Supplemental Poverty Measure (SPM) – show that nearly 8 million Californians, 1 in 5 state residents (20.6 percent), could not adequately support themselves and their families, on average, between 2013 and 2015. California also stands out as having the highest poverty rate in the nation based on the SPM.

This report, however, focuses on the official poverty measure because this measure provides a comprehensive look at state poverty trends and poverty rates for specific groups.

Children — Particularly Children of Color — Are Especially Hard Hit by Poverty

The data released today show that although children make up less than one-quarter of California’s population (23.4 percent), they account for nearly one-third of those living below the official poverty line (32.3 percent). Furthermore, black and Latino children are about three times as likely as white children to live in poverty. Nearly one-third of black children (31.0 percent) lived in poverty in 2015, as did more than 1 in 4 Latino children (28.5 percent), compared to just 1 in 10 non-Latino white children (10.3 percent). If the official poverty rate for black and Latino children were equal to that of white children, nearly 950,000 fewer California children would live in poverty, and the state’s child poverty rate would be cut in half.

Research Strongly Supports Boosting Families’ Incomes to Improve Children’s Life Chances

All parents want a strong future for their children, but parents who struggle with inadequate incomes often face challenges in creating a better life for their kids. Research strongly supports making greater public investments to boost families’ well-being so that all children — including those whose families have historically faced the greatest barriers to opportunity — can have a stronger future. Compelling evidence from national studies shows that supplementing low-income families’ incomes can increase children’s life chances. Even modest increases in the incomes of low-earning families have been linked to improved health, greater academic achievement, and higher future earnings for those families’ children. The research also suggests that increases in income matter most during children’s first few years of life when their brains are developing rapidly, making them particularly vulnerable to the damaging effects of poverty.

State Leaders Can Strengthen California’s Future by Improving Children’s Opportunities

California’s future largely depends on children whose entire lives will be shaped by the extent to which our state invests in their education, health, and well-being. That’s why California’s leaders, together with parents and teachers, share in the responsibility for ensuring that our state’s children have the opportunity to reach their full potential. State policymakers can improve children’s life chances by:

• Making sure that parents earn enough to support a family. Most families in poverty work, which means that low-wage jobs and not enough work hours prevent many people from getting ahead. California’s recent commitment to gradually raise the state’s minimum wage will restore decades of wage erosion, but policymakers should do more to help workers create a more secure future. Helpful steps would include strengthening California’s new tax credit for low-earning working families, the CalEITC, and giving workers the right to fair scheduling In addition, California could do more to protect people from predatory lending practices that often trap low-income borrowers in a cycle of debt.
• Helping parents to afford high-quality child care so that they can work. High-quality, affordable child care is out of reach for many California families. The typical single mother would have to spend at least half of her income to afford center-based child care for two children in nearly every county in the state, according to our Women’s Well-Being Index, and California falls far short of providing enough affordable child care slots for families that need them. At a minimum, state policymakers should develop a multi-year plan for restoring all of the subsidized child care slots eliminated by budget cuts beginning in 2007-08. However, fully addressing families’ need for affordable child care will require a significant and sustained investment in a much bolder approach that aims to provide all families with access to high-quality child care and preschool.
• Helping families to afford decent housing. The majority of low-income households in California spend over half of their incomes on rent making it difficult to afford other necessities and save for the future. Policymakers could begin addressing this problem by better targeting state spending on housing assistance to people who need it most. Currently, California spends 45 times as much on the mortgage interest deduction — a tax benefit that primarily benefits households with six-figure incomes — as it does on the state’s renters’ tax credit, which provides extremely limited assistance primarily to moderate-income renters.
• Making sure that families can count on a strong safety net when they experience hard times. A majority of adults will face economic hardship for at least one year during their prime working years, and nearly half will turn to a major safety net program for help. This fact underscores the importance of making sure that our public supports allow people to meet their basic needs during tough times as well as prevent children from suffering the lasting consequences of poverty. Policymakers could begin to shore up California’s safety net by strengthening CalWORKs, the state’s welfare-to-work program, which has suffered from years of disinvestment. Helpful steps would include 1) raising grants so that CalWORKs at least lifts children out of deep poverty, 2) eliminating the “asset test” to qualify for CalWORKs assistance, which discourages low-income families from saving, and 3) restoring the maximum amount of time that parents can access welfare-to-work services to 60 months in order to increase their chances of securing stable employment.
• Allowing families to save and build a more secure future. Nearly half of workers ages 25 to 64 are projected to struggle to make ends meet in retirement — a problem that partly reflects inadequate access to job-based retirement plans. State policymakers are on the verge of taking an important step to help more workers prepare for a secure future. Pending approval by the Governor, a bill passed by the Legislature last month would create a voluntary, portable retirement account for workers without access to workplace savings plans. As a next step, policymakers should shore up workers’ earnings and reduce pay disparities so that more people are better able to save for the future.

All Californians have a stake in policies that give children the chance to succeed, but children cannot thrive unless their families thrive. By investing in policies that increase families’ well-being, policymakers can create a stronger future for California’s children — and for all of us.

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.