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key takeaway

California’s poverty rate has increased significantly, with disproportionate impacts on Black and Latinx residents. This alarming trend highlights the urgent need for federal and state policymakers to implement robust anti-poverty measures, such as strengthening the Child Tax Credit, Earned Income Tax Credit, and SNAP program.

California’s poverty rate increased to 18.9% in 2023, up from 16.4% in 2022 and 11.0% in 2021, according to new Census data.  The state’s poverty rate was particularly high among Black and Latinx Californians and California continued to have the highest poverty rate of the 50 states.

California’s high poverty rate means that 7.3 million state residents lacked the resources to meet basic needs last year — more than the populations of California’s four largest cities: Los Angeles, San Diego, San Jose, and San Francisco. In sharp contrast, the incomes of the richest 1% of state residents continued to substantially exceed the incomes of most Californians. The average income of the top 1% of California households was $1.2 million  in 2023 — 67 times the average income of households in the bottom 20% and 14 times the median household income.

These figures point to the need for federal and state leaders to take urgent action to ensure that all Californians have the resources to thrive, and recent experience proves that policymakers can achieve this vision. Bold investments in the federal Child Tax Credit (CTC) and other economic security-promoting policies during the pandemic brought about a historic drop in poverty in 2021. When Congress allowed these effective policies to expire, that progress was reversed the following year, causing the largest increase in the national poverty rate in 50 years.

With Congress poised to pass a substantial tax package in 2025, federal policymakers should prioritize strengthening and expanding two of the most effective anti-poverty policies: the federal CTC and Earned Income Tax Credit (EITC). Additionally, federal leaders should strengthen SNAP nutrition assistance (CalFresh in California), which plays a critical role in reducing poverty and poverty-related hunger. California policymakers can also cut poverty by strengthening state tax credits and the safety net, and ensuring that all Californians — regardless of immigration status — have access to affordable housing, nutrition assistance, health coverage, and good jobs.

Poverty Rates in California Are at the Highest in Years

California’s poverty rate, as measured by the Census Bureau’s Supplemental Poverty Measure — a more comprehensive reflection of economic well-being than the Census’ Official Poverty Measure —  increased two and one-half percentage points to 18.9% between 2022 and 2023.1SPM thresholds rose 8.6 percent in 2023 for renters, which is notably higher than the 4.1 percent inflation rate from 2023. This difference reflects that prices rose faster for some household items (mainly rent) than average inflation for the full range of household items. Some researchers prefer to use “anchored SPM thresholds” given that SPM thresholds are higher than inflation. Given California’s high cost of housing (among other costly household needs), the Budget Center maintains the SPM thresholds provided by the Census Bureau. The 2023 poverty rate is also higher than the pre-pandemic rate of 16.6% in 2019.

This is the second year the poverty rate has significantly increased, after the expiration of many pandemic-era policies put in place to reduce economic hardships many Americans experienced as a result of COVID-19. These include federal supports such as the expanded Child Tax Credit, the expanded Earned Income Tax Credit for childless workers, and enhanced unemployment benefits — all of which ended in 2021. Additionally, Supplemental Nutrition Assistance Program (CalFresh in California) emergency allotments, which temporarily increased nutrition benefits, ended in early 2023.

California’s labor market also fared worse in 2023 than nationally, with the state’s unemployment rate increasing and inflation-adjusted hourly wages for low-wage workers decreasing in California.

Poverty Rose Across Children, Adults, and Older Adults

While poverty rose across all age groups, rates vary among children, adults, and older adults, notably:

Poverty Increased for All, Californians of Color Face Greater Hardship

Poverty increased for all racial and ethnic groups in California in 2023. However, poverty rates are more pronounced among Californians of color, highlighting deep-rooted inequities that are a direct consequence of historic and ongoing racism.

Most notably, the rise in poverty was sharpest for American Indian, Alaska Native, Native Hawaiian, Pacific Islander, and multiracial Californians (noted as “Other Californians of Color” in the chart above). Specifically, the poverty rate for this group collectively surged from 8.4% in 2022 to 13.6% in 2023. This significant and alarming increase underscores the unique challenges that these communities face, such as historic marginalization, systematic displacement, and limited access to targeted resources.

Poverty also remains disproportionately high for Latinx and Black Californians at 25% and 22.3%, respectively. Both groups saw an increase of about 4 percentage points from 2022 to 2023. These higher poverty rates reflect how centuries of discriminatory policies and systemic racism — such as redlining, wage discrimination, and chronic underinvestment in communities of color — continue to prevent Black and brown Californians from accessing the same economic opportunities as white people.

The persistence of higher poverty rates for Californians of color is not accidental.  Structural racism is the result of policymakers and other individuals with power successfully implementing policies and actions that block people of color from opportunity, many of which are rooted in racism.

Income Inequality Remains Stark in California

In addition to information on poverty, the Census data also sheds light on the incredible magnitude of income inequality in California. In 2023, the richest 5% of California households had an average income of $662,792 and the richest 1% had $1,208,478 on average.3The variable used to estimate household income is the sum of individual top-coded income variables, therefore the total may be underestimated for households at the top of the income distribution. Income reported to the Census Bureau may differ from income reported to the Franchise Tax Board due to underreporting, differences in the composition of households versus tax units, and the exclusion of capital gains income from the Census data. The average income of the top 1% of Californians is 14 times the $89,300 median California household income and 67 times the average income for the bottom 20% of Californians, which stood at a woefully inadequate level of $18,170.  For reference, a single adult needs an annual income of more than $56,000 to afford typical expenses in California, and a single parent with one child needs an income of nearly $100,000.

Notably, the Census income data does not include capital gains — income from the sale of assets like stock shares and real estate — which make up a significant portion of income for wealthy households. Therefore, the Census figures for the top 5% and top 1% of Californians understate their total income. Tax data, which do take into account capital gains income, demonstrate the high level of income concentration in the state, with the top 1% of Californians generally receiving around one-fifth to one-quarter of total income over the past several decades.

Policymakers Can Cut Poverty and Create a California for All

High poverty following the end of major pandemic-era investments proved that policymakers play a significant role in determining the economic well-being of all people. This means they can reverse the spike in poverty by investing in policies that help families and individuals meet basic needs and thrive in their communities.

At the federal level, these include:

California policymakers can also do more to cut poverty across the state, including by:

  • 1
    SPM thresholds rose 8.6 percent in 2023 for renters, which is notably higher than the 4.1 percent inflation rate from 2023. This difference reflects that prices rose faster for some household items (mainly rent) than average inflation for the full range of household items. Some researchers prefer to use “anchored SPM thresholds” given that SPM thresholds are higher than inflation. Given California’s high cost of housing (among other costly household needs), the Budget Center maintains the SPM thresholds provided by the Census Bureau.
  • 2
    The increase is not statistically significant at the 95% confidence level.
  • 3
    The variable used to estimate household income is the sum of individual top-coded income variables, therefore the total may be underestimated for households at the top of the income distribution. Income reported to the Census Bureau may differ from income reported to the Franchise Tax Board due to underreporting, differences in the composition of households versus tax units, and the exclusion of capital gains income from the Census data.

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