Californians with Low Incomes Are Hit Hardest by High Costs of Living and Inflation

For many years, high costs of living have made it difficult for many Californians to keep themselves and their families safely housed, healthy, and nourished. Recent high inflation has made it even harder for people to thrive in California communities.

When basic costs go up, Californians with the lowest incomes are particularly likely to struggle to make ends meet. Around 3 in 5 California households with incomes below $50,000 had trouble affording basic expenses in June. And due to past and continued discrimination, about one-half of Black, Latinx, and other Californians of color reported struggling with basic expenses in recent months, compared to about 30% of white Californians.

Policymakers should ensure policies to address recent price increases prioritize the needs of people with low incomes, who were already left out of sharing the state’s pre-pandemic prosperity and who have been disproportionately impacted by the pandemic and inflation.

California workers deserve to be safe, healthy, and thrive. State leaders created COVID-19 supplemental paid sick leave to ensure workers were able to take time off to care for themselves and loved ones while following public health guidelines. This temporary policy lapses once again on September 30, 2022. Without it, many workers may have just three paid sick days a year.

During the early 2022 surge in cases, the number of Californians who reported that they were not working because they had coronavirus symptoms or were caring for someone who did increased by 320% — soaring to nearly 1 million adults statewide.

Without COVID-19 supplemental paid sick leave, workers may have to choose between working while sick and losing pay or even their job. Extending supplemental paid sick leave is critical so workers can care for themselves or family. The state should also require employers to provide 10 paid sick days a year to support workers’ health and safety beyond the pandemic.

Note: This post was updated in July 2022 to reflect changes in state policy proposals.

All Californians — regardless of income, race, or zip code — deserve to feel secure in their ability to put food on the table and make their rent or mortgage payment. Yet high costs of living are straining the budgets of Californians with low incomes, who have long been struggling to make ends meet.

More than half of California households with incomes below $50,000 had difficulty paying for basic expenses such as food, housing, and medical costs in March and April. Black, Latinx, and other Californians of color were more likely to struggle with basic expenses, being more likely to have low incomes due to past racist policies and ongoing discrimination.

Californians with low incomes are hit hardest by the rising costs of necessities. Policymakers should make sure state efforts to give Californians relief prioritize meaningful assistance to these families and individuals, who have long been blocked from opportunities and have been hit hardest by the health and economic impacts of COVID-19.

The purpose of the CalEITC is to reduce poverty among working Californians, but most people get less than $200 from the credit – far too little to achieve this goal. The credit for workers without dependents – who comprise 74% of CalEITC beneficiaries – ranges from just $1 to $255 per year. Plus, the majority of these workers likely don’t qualify for the federal EITC.

This helps explain why 35% of CalEITC-eligible working-age adults without dependents live in poverty – based on the California Poverty Measure – even after accounting for the tax credits and public benefits they get.

Establishing a much larger minimum CalEITC for all eligible workers would help Californians
who are paid low wages better meet basic needs. It would also help make the tax code more
equitable by strengthening a credit that largely benefits Californians of color.