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Is California the Poorest State?

Sarah Bohn, Caroline Danielson September 29, 2014

In September and October of each year the Census releases estimates of poverty in the U.S. and in each state. Earlier this month “official” poverty estimates for 2013 showed 14.9% of all Californians in poverty and 20.3% of California children in poverty.

In October we expect to see the Census calculations for the “research supplemental poverty measure.” These estimates will represent three-year averages for states (2011-2013) and will likely show that more than 20% of all Californians are in poverty. In past years, this supplemental measure ranked California as the poorest state in the U.S. But according to the latest official estimates, 16 states had higher poverty rates than California. How do we make sense of this?

Some basic information on measuring poverty should help clarify the statistics:

  • The “official” poverty measure. This is based in a 1960s-era formula that is meant to provide a consistent measure across a long timeframe. Rates developed using this measure tell us what share of families lack enough cash to meet a simplistic budget. The rates compare pre-tax cash income (from work, investments, child support, social security, unemployment, and the like) to an estimate of resources needed built from a 1950s food budget and updated for inflation. This budget does not vary according to where a family lives.
  • Supplemental Poverty Measure. This is based on a more comprehensive set of resources and an up-to-date estimate of what it takes to make ends meet. Rates developed using this measure tell us what share of families lack enough total resources to meet basic needs. It adds together a family’s cash income (after taxes) and any in-kind benefits received (like food stamps and housing assistance), then subtracts key out-of-pocket expenses (like child care and medical costs). The resulting total is compared to an estimate of resources needed to meet basic living expenses for food, housing, clothing, and utilities. That estimate varies according to housing costs, so it is different within and across states.
  • The California Poverty Measure.This measure was created by researchers at PPIC and the Stanford Center on Poverty and Inequality in the spirit of the Census supplemental measure. It adds in-kind resources to post-tax family income, subtracts necessary expenses, and uses a basic family budget to estimate resources needed, but provides much more detail on California. The California Poverty Measure allows us to better understand how need varies across the state as well as how safety net resources affect the poverty rate.

In our view, the official measure is useful for tracking long-term trends in poverty. But the other measures better capture the full set of resources families have on hand and more accurately gauge current costs of living. Based on these measures, California is indeed one of the poorest states in the country.

This finding is largely driven by California’s high cost of living, rather than by sharply limited resources among its families. Using the California Poverty Measure we find that California’s housing costs loom large. Were these costs closer to the U.S. median, California’s poverty rate by either supplemental measure would be much closer to the official rate, and child poverty would be lower than the official rate.

Nonetheless, we also find that safety net resources substantially moderate poverty for many California families: according to the California Poverty Measure, the state’s poverty rate would be as much as 8 points higher were it not for these programs.

Poverty rates also vary widely across the state. PPIC just released a publication that examines this variation—as measured by the California Poverty Measure for 2011—with a focus on children and the role of the social safety net in mitigating poverty.

News and analysis of California policy issues from PPIC

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