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).
