How California Can Support Workers and Families With the CalEITC

Every Californian deserves to be able to put food on the table, pay the rent, and support their families. But millions of people across California struggle to make ends meet every day. The recent rapid rising cost of goods, food, and fuel coupled with continued increases in housing costs further strain family budgets.

Having a job does not guarantee economic security for Californians. Low pay relative to the high cost of living, particularly high housing costs, prevents many Californians from being able to support themselves and their families. This is especially true for LGBTQ+ Californians, for whom workplace discrimination is common, and for young people just entering the workforce, as well as for Latinx Californians and other workers of color, women, and immigrants, who face discrimination and continue to be segregated into low-paying jobs.¹ The acronym “LGBTQ+” is a collective acronym for lesbian, gay, bisexual, transgender, queer or questioning, and other sexual and gender identities. The addition of the “+” indicates inclusion of other identities not encompassed by “LGBTQ,” including but not limited to those who identify as intersex, nonbinary, and asexual.

State leaders can build an inclusive California where all people have the resources they need to pay for basic needs by adopting policies that:

• increase low wages
• improve jobs
• expand worker bargaining power
• address workplace and other discrimination 
• invest in public supports that target cash and other resources to people with low incomes.

A key and proven way to improve people’s and families’ economic security is by strengthening California’s refundable income tax credits. California’s largest of such credits — the California Earned Income Tax Credit, commonly known as the CalEITC — helps around 4 million workers put food on the table and pay for other necessities for themselves and their families. Increasing the amount of cash provided through the CalEITC is one simple, effective way state policymakers could help more Californians in working families meet basic needs and thrive.

1. Increasing the CalEITC Would Help More Californians in Working Families Meet Basic Needs

State leaders can ensure that all Californians have the resources they need to pay for basic needs through policies that boost workers’ wages and improve jobs, as well as by investing in public supports that help families and individuals make ends meet. California’s Earned Income Tax Credit — the CalEITC — is one promising tool that policymakers can use to help achieve this vision. This credit targets cash payments to millions of workers who earn little from their jobs, helping them to pay for basic needs like food, clothing, and diapers for themselves and their families.

California’s EITC is modeled after the federal EITC, which has increased families’ financial security for decades, and is linked to long-term benefits for children, including:

• better health and school achievement
• higher educational attainment, and 
• increased employment and earnings when children become adults.

More broadly, cash payments targeted to people with low incomes — whether delivered through tax credits or other forms — reduce poverty, help families afford their basic expenses, increase the number of households getting enough food, and are linked to other benefits, such as improved mental health.²For example, rates of material hardship, food insufficiency, and adverse mental health symptoms fell in the months following passage of the American Rescue Plan Act in March 2021, which included large cash payments to most US households. See Patrick Cooney and H. Luke Shaefer, Material Hardship and Mental Health Following the COVID-19 Relief Bill and American Rescue Plan Act (University of Michigan, May 2021). In addition, the US poverty rate, as measured by the Supplemental Poverty Measure, declined in 2021 for children and working-age adults largely because of cash payments provided through the federal EITC, Child Tax Credit, and Economic Impact Payments. See John Creamer, Poverty in the United States: 2021 (US Census Bureau, September 2022), 16, and Sara Kimberlin and Mauricio Torres, Q & A: How Did Public Supports Lower Poverty in 2021? What the Latest Census Data Reveal About Ending Poverty in California (California Budget & Policy Center, September 2022).

2. Investing in the CalEITC Would Promote Racial and Gender Equity

Investing in the CalEITC would help to promote racial and gender equity in California by targeting cash to Californians of color, immigrants, and women. Californians of color, immigrants, and women experience workplace discrimination, are blocked from economic and career advancement opportunities, and are frequently forced into low-paying jobs that fail to provide economic security.³See Marina Zhavoronkova, Rose Khattar, and Mathew Brady, Occupational Segregation in America (Center for American Progress, March 29, 2022) and Danyelle Solomon, Connor Maxwell, and Abril Castro, Systematic Inequality and Economic Opportunity (Center for American Progress, August 7, 2019). About 3 out of 4 California workers who are likely eligible for the CalEITC are people of color, including about half who are Latinx, 11% who are Asian, and 7% who are Black.⁴Budget Center analysis of US Census Bureau, American Community Survey public-use microdata,  using an income tax simulation model developed for the California Poverty Measure, a joint project of the Stanford Center on Poverty and Inequality and the Public Policy Institute of California. Microdata were downloaded from IPUMS-USA (University of Minnesota, www.ipums.org). Based on CalEITC in tax year 2019, adding ITIN filers, who became eligible for CalEITC in tax year 2020. In addition, about 35% of California workers who likely qualify for the credit are immigrants and 52% are women.

Viewed another way, about one-quarter or more of Latinx, Black, and American Indian or Alaska Native workers are likely eligible for the CalEITC, as well as about one-fifth of Pacific Islander workers. In addition, about one-fifth of immigrant workers are likely eligible for the credit and about half (54%) of Californians who are likely eligible for the credit live in families that include immigrants. This means that a large investment in the CalEITC would especially benefit these workers, helping to narrow racial and ethnic income inequities.

Although estimates of CalEITC eligibility among LGBTQ+ Californians are not available,  investments in the CalEITC would likely benefit LGBTQ+ individuals. National and California data show that transgender people have particularly high poverty rates.⁵M. V. Lee Badgett, Soon Kyu Choi, and Bianca D.M. Wilson, LGBT Poverty in the United States: A Study of Differences Between Sexual Orientation and Gender Identity Groups (UCLA School of Law Williams Institute, October 2019).The analysis is based on data from 35 states. The study also finds that for nearly all sexual orientation and gender identity groups, people of color had significantly higher poverty rates than white people. See also Soon Kyu Choi, M. V. Lee Badgett, and Bianca D. M. Wilson, State Profiles of LGBT Poverty in the United States (UCLA School of Law Williams Institute, December 2019). Recent California data also show that LGBTQ+ individuals overall have been more likely to struggle to pay for basic expenses during the pandemic than cisgender straight Californians.⁶Budget Center analysis of US Census Bureau, Household Pulse Survey data collected July 21, 2021 to August 8, 2022. One factor that contributes to economic hardship among LGBTQ+ individuals is workplace discrimination, which is a common experience for LGBTQ+ workers.⁷A recent study found that about 1 in 10 had experienced discrimination in the past year and nearly half had experienced unfair treatment at work at some point in their careers. Brad Sears, et al. LGBT People’s Experiences of Workplace Discrimination and Harassment (UCLA School of Law Williams Institute, September 2021).

3. Investing in the CalEITC Complements the Minimum Wage and Existing Public Supports

Further investments in the CalEITC would help supplement the earnings of Californians working in occupations and industries that typically pay at or around the state’s minimum wage. The most common occupations among workers likely eligible for the CalEITC include but are not limited to:

The median hourly pay for these occupations ranged from a low of $14.72 for farmworkers, $15.21 for personal care aides, and $15.34 for retail salespeople to a high of $23.56 for construction workers. Even full-time, year-round work at these hourly pay rates would provide an annual income well below what many families and individuals need to afford basic living costs throughout California, necessitating additional investments in public supports to boost workers’ incomes.

Investing in the CalEITC would also complement the minimum wage by increasing the incomes of workers earning less than a full-time, year-round minimum wage salary.⁸California’s minimum wage in 2022 is $15 per hour for workers employed at businesses with 26 employees or more. For smaller businesses it is $14 per hour. Several cities and counties throughout California set a higher local minimum wage. These Californians include workers who cannot find full-time jobs, as well as those working part-time while attending school or because of childcare problems or caregiving obligations.

Providing increased support to workers with low incomes through a refundable tax credit like the CalEITC also complements other important public supports available to help individuals and families meet their basic needs, like CalFresh food assistance and Medi-Cal health coverage. Support received through tax credits generally does not interfere with eligibility for other types of public supports, helping to ensure that boosted investments in the CalEITC would result in an overall increase in resources available to families to meet basic needs.

4. Increasing the Amount Californians Receive Through the CalEITC Will Improve Economic Security

California led the nation in establishing a unique state earned income tax credit in 2015, and California leaders have made important investments in the CalEITC in recent years, extending the credit to many Californians who were originally excluded from it.⁹The CalEITC was innovative from the very beginning. Unlike other state EITCs, the CalEITC was designed to target the most support to Californians with incomes well below the federal poverty line, specifically by providing larger credits to workers with extremely low earnings. In addition, California was one of the first states in the nation to expand its state EITC to people excluded from the federal EITC, such as workers who file taxes with Individual Taxpayer Identification Numbers (ITINs) and workers ages 18 to 24 or over 64 who are not supporting children. Policymakers could further strengthen the credit by increasing the amount of money individuals and families receive. A larger, more meaningful CalEITC would help millions of Californians who earn little from work better meet basic needs.

California has the potential to deliver sizable cash payments via the CalEITC to Californians with low incomes. But currently most people who receive the credit get very small payments. Nearly 8 in 10 CalEITC recipients — about 2.7 million workers in total — got less than $200 in 2021. This included about 1.5 million workers (43%) who got less than $100 from the credit.¹⁰Such small credits are especially problematic given that the majority of Californians who benefit from the CalEITC are not likely eligible for the federal EITC currently. CalEITC recipients who are excluded from the federal credit are 1) workers ages 18 to 24 or over age 64 who are not supporting children in their homes, 2) immigrants who file their taxes with ITINs, and 3) workers who are not supporting children in their homes and who earn $16,480 or more if filing as single or $22,610 or more if filing as married, joint return. In tax year 2021, policymakers expanded the federal EITC to many previously excluded individuals ages 19 to 24 and over age 64, but only for one year. See Chuck Mar, Another Tax Day Message for Congress: Time to Expand EITC for Adults Without Children (Center on Budget and Policy Priorities, April 12, 2022).

5. Increasing the Minimum CalEITC Would Provide a More Meaningful Credit to Many Californians

California has always been at the forefront of efforts to innovate how a state EITC can help workers better meet basic needs, and state leaders can continue to build on this progress by increasing the amount of money the CalEITC provides.

One effective way to do this would be to increase the minimum CalEITC — currently just $1 — so that it guarantees a much larger credit to eligible Californians. Raising the minimum credit to $300 would benefit the majority of CalEITC recipients — 88% of whom currently receive credits under $300. If state leaders increased the minimum credit to $500 it would benefit nearly all CalEITC recipients — 94% of whom currently receive credits less than that amount.

Increasing the minimum credit would also start to “flatten” the CalEITC, making it more like a guaranteed income and like California’s Young Child Tax Credit and the new Foster Youth Tax Credit, both of which provide a $1,000 payment to nearly all eligible tax filers.

A key advantage of flattening the CalEITC, aside from guaranteeing a larger credit for many workers, is that it would make the credit easier to administer and open the door to opportunities to simplify claiming of the credit and potentially to provide it to some Californians automatically. For example, if the minimum CalEITC were set at $500, then nearly all workers with very low incomes would be guaranteed a $500 credit, as previously noted.¹¹Nearly all workers with low incomes who are not supporting dependents would qualify for the $500 credit since this exceeds the current maximum CalEITC of $276 for these workers. The only workers who would qualify for less than $500 would be those with earnings close to $30,000, assuming that the minimum CalEITC would be structured like the Young Child Tax Credit and Foster Youth Tax Credit. This would make it much easier for the Franchise Tax Board (FTB) to use Employment Development Department earnings data from W-2 forms to identify many workers who would likely qualify for a credit of exactly $500. Once identified, these workers could be contacted to ensure they claim the credit, or perhaps in some cases they could be automatically sent the credit without having to file a complete tax return.¹²For example, FTB could explore whether it’s feasible to automatically send the minimum CalEITC to people who filed their state taxes and appeared eligible for the minimum CalEITC based on EDD earnings data but didn’t claim it. This might be simplest to do for workers without dependents, who comprise the majority of people eligible for the credit. FTB estimates that nearly 1 million recent tax filers who appeared eligible for the CalEITC did not claim it, highlighting the need to directly reach out to these filers to boost take-up of the CalEITC. See Franchise Tax Board, Report On the Study to Increase the Number of Claims for the California and Federal EITC (January 2022), 41. Currently, it would be difficult for FTB to automatically provide workers with the exact credit they qualify for based on EDD earnings data because the size of the CalEITC credit varies significantly depending on workers’ earnings. In a study conducted in 2021, FTB found that out of 755,000 households participating in a Department of Social Services program that could be matched to EDD W-2 earnings data, 28% of the time EDD earnings data were more than $500 above or below the wage income reported on tax returns. (EDD does not have complete earnings information for all workers. For example, it does not have information about earnings from self-employment.) This means that FTB would significantly over- or underestimate the CalEITC for many people if it tried to predict the credit workers are eligible for based on their W-2 earnings under the current structure of the CalEITC, since relatively small differences in workers’ earnings can result in significant differences in the size of the credit they are eligible to claim. However, if all workers without dependent children and annual earnings between $1 and $25,000 were eligible for $500 from the CalEITC, it would be far easier for FTB to predict the exact credit owed to many workers. FTB would simply need to identify workers who likely earned less than $25,000 annually.

Increasing the minimum CalEITC could also boost take-up of the credit. Although it’s difficult to determine an exact participation rate for the CalEITC, it is likely that many Californians who are eligible for the credit miss out on it each year.¹³It’s difficult to determine a precise participation rate because the exact number of eligible workers is not known. The total number of workers eligible for the CalEITC can only be estimated using non-tax data sources, such as US Census Bureau data, which requires making assumptions about who is likely eligible for the credit. Budget Center analysis of Census data, using a tax model developed for the California Poverty Measure (a joint project of the Stanford Center on Poverty and Inequality and the Public Policy Institute of California), shows that the estimated number of potentially eligible CalEITC filers has been substantially larger than the number of CalEITC claims each year, reinforcing FTB’s finding that many eligible workers likely do not receive the credit. FTB estimates that around 1 million tax filers who appeared to be eligible for the CalEITC failed to claim it in recent years. However, this number likely includes some filers who did not actually meet all CalEITC eligibility criteria, and FTB does not have data on people who were eligible for the credit and did not file taxes. In addition, researchers found that roughly 440,000 CalFresh households who were likely eligible for the CalEITC did not claim it in 2017. John Islen, et al., CalEITC Falls Far Short of Its Full Reach: Measuring the CalEITC Take-up Gap Among CalFresh Enrollees (California Policy Lab, July 2021). One study that estimated CalEITC participation among eligible households participating in CalFresh in 2017 found that 78% of households that missed out on the credit were adults without children who were eligible for an average CalEITC of just $82 to $85.¹⁴Specifically, 76% of those who missed out on the CalEITC were single adults without children who were eligible for an average credit of $85, while 2% of those who missed out were married adults without children who were eligible for an average credit of $82. John Islen, et al., CalEITC Falls Far Short of Its Full Reach: Measuring the CalEITC Take-up Gap Among CalFresh Enrollees (California Policy Lab, July 2021), p. 6.

Similarly, research on federal EITC participation finds that workers without qualifying children — who by definition qualify for small credits — are less likely to claim the EITC, as are workers who qualify for small credits based on their earnings, regardless of how many children they have.¹⁵See, for example, Dean Plueger, Earned Income Tax Credit Participation Rate for Tax Year 2005 (Internal Revenue Service: 2009) 182-183. It’s plausible that workers eligible for very small credits, who generally are not required to file tax returns, find that they cannot justify the effort to file their taxes just to claim such a small credit, suggesting that increasing the credit could help to boost take-up, ensuring that these state resources intended to help working Californians actually result in more income for these workers and their families.¹⁶Jeanne Harriman, Chief Financial Officer, Franchise Tax Board, pointed out at a recent legislative hearing that people who are eligible for the CalEITC but do not claim the credit may find that they cannot justify the significant time and effort to file their taxes because the size of the CalEITC is so small. Assembly Revenue and Taxation Committee, Unclaimed Credit: Examining the CalEITC and Increasing its Utilization by Working Californians (October 3, 2022). Flattening the credit to facilitate simplified claiming or automated payments could also help ensure that more eligible workers receive the credit and benefit from these resources.

5. State Leaders Can Build an Inclusive California with the CalEITC

With the right policies, state leaders can build an inclusive California where all people have the income they need to pay for basic needs. Further investing in a proven policy like the CalEITC is one simple way to bring the state a step closer to achieving this vision. Providing a larger, more meaningful credit would help around 4 million workers and their families put food on the table and better afford other necessities. And it would particularly benefit people of color, immigrants, LGBTQ+ individuals, women, and young adults who are frequently stuck in low-paying jobs that fail to provide economic security, as well as put young adult Californians on more stable financial footing as they are beginning their careers.

Providing increased support to workers with low incomes through a refundable tax credit like the CalEITC also complements the state’s minimum wage and other important public supports that help individuals and families meet their basic needs. By maximizing the resources Californians have to live, learn, work, and invest in the state they call home, state leaders can help ensure that boosted investments in the CalEITC help workers and families meet basic needs and thrive in their schools, workplaces, and communities.

Every Californian deserves to be able to meet their basic needs for housing, food, and other necessities. But millions of people in California struggle to make ends meet every day – including young people with jobs, for whom a job does not guarantee economic security.

Low pay and unstable work make it especially difficult for young adult Californians to make ends meet as they may be working part-time while going to school, just starting off their careers, or blocked from educational and workplace opportunities that lead to higher-paying jobs.

California’s young workers should not be left on their own to build economic security as they seek opportunities for good-paying jobs. California can build an inclusive state where generations of young people can live, work, and thrive across the state. Young workers need state leaders to implement policies that:

• increase low wages
• improve the quality of jobs
• expand worker bargaining power
• address workplace and other discrimination
• invest in public supports that ensure young adults can meet their basic needs.

One way state leaders can support young workers is by ensuring they have access to tax credits such as the California Earned Income Tax Credit, or CalEITC, and by increasing the amount of cash provided through those tax credits.

For Young Adults Especially, a Job Does Not Guarantee Economic Security in California

Young adult Californians are especially unlikely to be able to meet their basic needs despite working, according to data from the California Poverty Measure. Among working Californians ages 18 to 24 (excluding college students living independently who are supported by their parents), about 1 in 5 do not have enough resources to afford basic needs – roughly twice the share of workers ages 25 to 64.¹Budget Center analysis of US Census Bureau, American Community Survey public-use microdata developed for the California Poverty Measure, a joint project of the Stanford Center on Poverty and Inequality and the Public Policy Institute of California. Microdata used to construct the California Poverty Measure were downloaded from IPUMS-USA (University of Minnesota, www.ipums.org).

In part this reflects the fact that young adults, and particularly Black and Latinx youth, are more likely to be paid low wages. More than 3 in 4 Californians ages 18 or 19 and nearly half of workers ages 20 to 29 were paid low wages in 2021, compared to around one-quarter of older workers.²UC Berkeley Labor Center, Low-Wage Work in California Data Explorer (May 12, 2022). In addition, national data show that average wages tend to be lower for Black and Latinx young adults compared to all youth, highlighting how discrimination and structural racism block many young people of color from economic stability early in life.³Natalie Spievack and Nathan Sick, The Youth Workforce: A Detailed Picture (Urban Institute: July 2019) and Natalie Spievack For People of Color, Employment Disparities Start Early (July 25, 2019). Data limitations mean it is often not possible to reliably show the diverse range of experiences among Asian Americans and Pacific Islanders. But national studies show that income and poverty rates and hourly wages vary widely among the diverse communities who identify as Asian or Pacific Islander. Asha Banergee, Understanding Economic Disparities Within the AAPI Community (Economic Policy Institute: June 7, 2022) and Cy Watsky, The Economic Reality of the Asian American Pacific Islander Community Is Marked by Diversity and Inequality, Not Universal Success (National CAPACD and Prosperity Now: November 2020). In addition, many Asian and Pacific Islander Californians report experiencing workplace discrimination and wage theft – particularly those with low incomes. PRRI and AAPI Data, The Working Lives and Struggles of Asian Americans and Pacific Islanders in California: Findings from the 2019 AAPI California Workers Survey (November 18, 2019).

Working Part-Time Involuntarily or to Accommodate Life Situations Leads to Low Earnings for Many Young Adults

Some youth are only able to work part-time because they need to accommodate life situations – such as only being available to work hours that do not conflict with school schedules – while others are stuck in part-time jobs involuntarily because they cannot secure full-time work.⁴Young adults in California are about twice as likely to work part-time as older adults. More than half of California workers ages 16 to 24 were employed part-time, on average, from 1994 to 2021, which was more than twice the rate of part-time work for workers ages 25 to 54. Economic Policy Institute analysis of Current Population Survey microdata from the US Census Bureau. Young California workers are nearly twice as likely as older workers to work part-time involuntarily.⁵On average, California workers ages 16 to 24 were nearly twice as likely to work part-time involuntarily as adults ages 25 to 54 from 1994 to 2021. This means they wanted and were available for full-time work, but were working part-time because they could not find full-time jobs. Economic Policy Institute analysis of Current Population Survey microdata from the US Census Bureau.

They are also more likely to experience periods of unemployment and change jobs more frequently than older workers, which can reduce their annual earnings. National data show that Black and Latinx young adults are especially likely to be underemployed, defined broadly as being unable to secure a job, despite being available to work, or working part-time involuntarily because they cannot find full-time work.⁶ Economic Policy Institute, State of Working America Data Library, Underemployment by Race and Age (2022). These data reflect a measure of underemployment that includes people who work part-time involuntarily plus people who are not working, but want a job, are available for work, and searched for employment within the past year.

Investing in the CalEITC Would Boost the Economic Security of Young Workers

Many policies are needed to address work conditions and workers’ needs to ensure California doesn’t lose a generation of young people who want to establish lives and careers in the place they call home. But young Californians can’t change the job market or job conditions alone. One concrete step that state leaders can take to help build pathways to economic security for young Californians is to expand and increase tax credits such as the CalEITC, which has helped millions of workers earning low wages pay for their basic needs.

Investing in the CalEITC would boost the incomes of young people as they are just entering the workforce, helping to put them on more stable financial footing as they work and go to school or begin their careers. Nearly one-third of Californians who receive the CalEITC are under age 25 – around 1 million Californians in total. The CalEITC is particularly important for these young adults because the overwhelming majority of them are currently excluded from the federal EITC and they typically get limited assistance from other public supports.⁷The federal EITC currently excludes workers under age 25 who are not supporting children in their homes. Just 5% of California workers ages 16 to 24 lived with their own children in 2019, according to the US Census Bureau, American Community Survey, suggesting that most young adult workers do not qualify for the federal EITC. In tax year 2021, the federal EITC was extended to many of these workers – those ages 19 to 24, excluding those attending school at least part-time. But this expansion expired after one year. The exclusion of young childless workers from the EITC “is based on the assumption that young adults receive familial support in their transition to adulthood, which is untrue for many and disproportionately unlikely for young people of color.” Amelia Coffey, Gina Adams, and Heather Hahn Young People and Tax Credits: The Earned Income Tax Credit and Child Tax Credit (Urban Institute: February 2021), p. 8. Young adults without children also generally do not qualify for major public supports unless they are disabled and unable to work, and benefits they do qualify for are typically limited. Gina Adams, Heather Hahn, and Amelia Coffey Stabilizing Young People Transitioning to Adulthood: Opportunities and Challenges with Key Safety Net Programs (Urban Institute: February 2021).

Young adults ages 18 to 24 would especially benefit from increasing the CalEITC because most of them currently qualify for very small credits. This is because the CalEITC provides very little support to people without dependent children, and the vast majority of young adults are not supporting children in their homes.

Californians without dependent children qualified for a maximum credit of just $255 from the CalEITC in tax year 2021 – an amount that would not even cover one-fifth of one month’s rent for a studio apartment in Los Angeles.⁸Fair Market Rent (FMR) for a studio apartment in Los Angeles in 2022 was $1,384. FMRs are published annually by the US Department of Housing and Urban Development and are broadly representative of typical rent paid within a metropolitan area.

The CalEITC Can Be Especially Meaningful for Young Adult Workers of Color

Most California workers under age 25 who are likely eligible for the CalEITC are people of color. This includes about 58% who are Latinx, 9% who are Asian/Pacific Islander, and 6% who are Black.⁹Due to data limitations, it is not possible to present reliable estimates for Pacific Islander individuals alone or for American Indian or Alaska Natives. Budget Center analysis of US Census Bureau, American Community Survey public-use microdata, using an income tax simulation model developed for the California Poverty Measure, a joint project of the Stanford Center on Poverty and Inequality and the Public Policy Institute of California. Based on CalEITC in tax year 2019, adding ITIN filers, who became eligible for CalEITC in tax year 2020 Viewed another way, young Black and Latinx workers are especially likely to qualify for the CalEITC, likely reflecting the fact that these workers are more likely to be paid low wages.

Specifically, about half of Black workers ages 18 to 24 likely qualify for the CalEITC, as do about half of Latinx workers ages 18 to 24. In addition, about 2 in 5 white workers in the same age group likely qualify for the CalEITC, as do more than one-third of Asian/Pacific Islander young workers.

This means that an investment in the CalEITC would benefit around 1 in 2 Black and Latinx working young adults, and around 1 in 3 Asian and Pacific Islander and 2 in 5 white young workers.

California Can Help Generations of Young Adult Workers Build Economic Security

California’s young workers want to live and work in their communities and should be able to count on access to economic pathways in the state they call home. But having enough money to make ends meet and securing a good-paying job during the ages of 18 to 24 can be a challenge for many Californians who may be managing school, trying to start careers, and blocked from educational and workplace opportunities.

State leaders can ensure young California workers are not on their own to build economic security by:

• adopting policies that push low wages
• improving job quality
• addressing workplace and other discrimination
• strengthening public supports that help young adults meet their basic needs.

Investing in tax credits such as the CalEITC that specifically benefit young workers is one important step policymakers can take to help generations of Californians meet basic needs and thrive in their communities.

Support for this report was provided by the Conrad N. Hilton Foundation.

Californians are working hard every day, supporting their families and contributing to our communities. But simply having a job does not guarantee economic security in California. Many people live in poverty even with a job.

Californians need good-paying jobs, economic opportunities, and resources to build a life for themselves and their families to thrive. State leaders can build an inclusive California where all people have the resources they need to pay for basic needs and no one is left on their own to make ends meet.

Most Californians in Poverty Live in Working Families

No person — regardless of age, zip code, race, or gender — should struggle to make ends meet. But many Californians are struggling and far from thriving — even though they have a job. About 8 in 10 Californians who can’t afford basic needs live in working families, according to data from the California Poverty Measure.¹This data point excludes individuals in families that include only seniors. Budget Center analysis of US Census Bureau, American Community Survey public-use microdata developed for the California Poverty Measure, a joint project of the Stanford Center on Poverty and Inequality and the Public Policy Institute of California. Microdata used to construct the California Poverty Measure were downloaded from IPUMS-USA (University of Minnesota, www.ipums.org).

Race, gender, or any other individual characteristic should not affect people’s ability to make ends meet. Yet Latinx Californians in working families, as well as immigrants and women in working families, are more likely to be unable to afford basic needs.

About 1 in 5 Latinx Californians (19%) couldn’t make ends meet despite living in working families, compared to 14% of all individuals in working families.²Data limitations mean it is not possible to reliably show the diverse range of experiences among Asian and Pacific Islander Californians, but national studies show that income and poverty rates vary widely among the diverse communities who identify as Asian or Pacific Islander. See for example, Cy Watsky, The Economic Reality of the Asian American Pacific Islander Community Is Marked by Diversity and Inequality, Not Universal Success (National CAPACD and Prosperity Now: November 2020). In addition, 18% of immigrant Californians in working families did not have enough resources to afford basic needs, compared to 12% of people who are not immigrants, while 14% of women in working families could not afford basic needs, compared to 12% of men. Young adult workers were also especially likely to struggle to meet basic needs.

Racist and Sexist Policies and Practices Keep Many Californians in Low-Paying Jobs

Economic inequities for workers in California reflect the culmination of centuries of racist and sexist policies together with ongoing discrimination and biases that have led to the segregation of people of color and women into low-paying jobs.³Marina Zhavoronkova, Rose Khattar, and Mathew Brady, Occupational Segregation in America (Center for American Progress: March 29, 2022); Danyelle Solomon, Connor Maxwell, and Abril Castro, Systematic Inequality and Economic Opportunity (Center for American Progress: August 7, 2019). These low-paying jobs fail to provide the economic stability and security that all people deserve. In California in 2021, more than 2 in 5 Latinx workers (42%), one-third of Black workers (33%), and 35% of immigrant workers were paid low wages, compared to 30% of all workers.⁴UC Berkeley Labor Center, Low-Wage Work in California Data Explorer (May 12, 2022). Low-wage work is defined as being paid less than two-thirds of the median full-time wage for all workers, which was $18.02 in 2021. It is not clear from the source whether all of the differences in percentage of workers paid low wages are statistically significant. In addition, 34% of women were paid low wages, compared to 26% of men.

Understanding Poverty and Workplace Discrimination for LGBTQ+ Individuals

Wage data for LGBTQ+ individuals are extremely limited, pointing to the need for more public investment in equitable and inclusive data collection.⁵The acronym “LGBTQ+” is a collective acronym for lesbian, gay, bisexual, transgender, queer or questioning, and other sexual and gender identities. The addition of the “+” indicates inclusion of other identities not encompassed by “LGBTQ,” including but not limited to those who identify as intersex, nonbinary, and asexual. A cisgender person is a person whose gender identity aligns with the sex they were assigned at birth. However, national and California data show that transgender people have particularly high poverty rates.⁶M. V. Lee Badgett, Soon Kyu Choi, and Bianca D.M. Wilson, LGBT Poverty in the United States: A Study of Differences Between Sexual Orientation and Gender Identity Groups (UCLA School of Law Williams Institute: October 2019).The analysis is based on data from 35 states. The study also finds that for nearly all sexual orientation and gender identity groups, people of color had significantly higher poverty rates than white people. See also Soon Kyu Choi, M. V. Lee Badgett, and Bianca D. M. Wilson, State Profiles of LGBT Poverty in the United States (UCLA School of Law Williams Institute: December 2019). Recent California data also show that LGBTQ+ individuals overall have been more likely to struggle to pay for basic expenses during the pandemic than cisgender straight Californians.⁷Budget Center analysis of US Census Bureau, Household Pulse Survey data collected July 21, 2021 to August 8, 2022.

One factor that contributes to economic hardship among LGBTQ+ individuals is workplace discrimination, which is a common experience for LGBTQ+ workers. A recent study found that 1 in 10 had experienced discrimination in the past year and nearly half had experienced unfair treatment at work at some point in their careers.⁸Brad Sears, et al. LGBT People’s Experiences of Workplace Discrimination and Harassment (UCLA School of Law Williams Institute: September 2021).

State Leaders Can Support Working Californians Struggling to Make Ends Meet

As state leaders build an inclusive state and economy, policies and resources must respect and support working Californians so they can work, take care of their families, and contribute to their communities.

California has been a national leader in establishing policies to support workers who earn little from their jobs, including by raising the state’s minimum wage and establishing and expanding California’s Earned Income Tax Credit, commonly known as the CalEITC.

State leaders can build on this progress and further support workers by:

• continuing to raise wages and improve jobs
• increasing workers’ collective bargaining power
• fighting against persistent inequities in pay and benefits by race, ethnicity, immigrant, gender, and LGBTQ+ status
• expanding and increasing public supports, like the CalEITC and other cash and safety net supports, that help working Californians make ends meet.

These policies would help to create an inclusive California where all workers — and all Californians — have the resources they need to afford food, housing, child care, and meet all of their basic needs. 

All Californians, regardless of their county, race, age, or immigration status should have the support they need to make ends meet and pay for basic necessities. State refundable tax credits — the CalEITC and Young Child Tax Credit — are a key way the state provides economic support to Californians with low incomes. Racism, sexism, socioeconomic discrimination, and inequitable policies have kept millions of Californians in poverty. But research shows refundable tax credits help families and individuals avoid poverty and food hardship, have better health, and experience improved educational achievement and economic security.

California’s refundable credits are specifically targeted to families and individuals with the lowest incomes and available to people who file taxes without regard to immigration status. These credits reach people with earnings from $1 to $30,000 — equivalent to a full-time, minimum-wage salary. Proposals by the governor and Legislature would make children and families without income from employment also eligible to benefit from the state’s child tax credit.

Leaders Can Ensure Tax Credits Deliver the Support Californians with Low Incomes Need

Across all regions of California, millions of children, parents, and working adults are eligible to claim
the CalEITC and the Young Child Tax Credit by filing their taxes. State and local leaders can do
several things to make sure tax credits deliver the support these Californians need to meet their
basic needs and thrive:

• Boosting the size of these credits. For families and for adults without children this is an effective and efficient way to direct flexible resources to Californians who most need support to make ends meet.

• Piggybacking on the CalEITC and Young Child Tax Credit when targeting one-time taxpayer rebates or relief payments. By automatically issuing payments to filers who claim state credits, support can be directed to Californians with low incomes while leveraging existing administrative infrastructure and minimizing red tape for people receiving support.

• Expanding the availability of free tax preparation and filing services. This can help ensure that the full benefit of credits goes to families and individuals, and is not reduced by for-profit tax preparation fees.

How many children, parents, and adult individuals are eligible to benefit from California’s refundable tax credits?

Estimates for each of California’s regions and counties are included in this report.¹Estimates are based on simulation of income taxes in public-use microdata from the US Census Bureau, American Community Survey, downloaded from IPUMS USA (University of Minnesota, www.ipums.org), using a tax simulation model developed for the California Poverty Measure, a joint project of the Stanford Center on Poverty & Inequality and the Public Policy Institute of California. Population and income data reflect 2018 and 2019, with CalEITC and Young Child Tax Credit eligibility based on 2019 credit parameters (adjusted for inflation as needed), adding filers who use Individual Taxpayer Identification Numbers (ITINs) to reflect the eligibility expansion implemented in 2020. Note that credit parameters for tax year 2021 are identical to tax year 2019 other than adjustment for inflation for CalEITC. Filers with no earnings who would become eligible for the Young Child Tax Credit under the governor’s and Legislature’s proposals are not included in these estimates. By understanding how many Californians in every county can benefit from these important credits, policymakers and community leaders can invest in proven policies that build on tax credits as tools to help Californians make ends meet and thrive in their communities.

Download the full report above to find out how many Californians are eligible for tax credits in your region.

This project has been made possible in part by a grant from Silicon Valley Community Foundation.