SAN FRANCISCO, September 30, 2013—A new way of measuring poverty in California—accounting for regional variation in the cost of living and the impact of social programs for those in need—shows that 22 percent of residents lived in poor families in 2011, according to a report released today by the Public Policy Institute of California (PPIC). This is higher than the U.S. Census Bureau’s official poverty rate of 16 percent for California. In other words, there were 8.1 million Californians living in poverty, over 2 million more than estimated by the official poverty measure.
According to the new California Poverty Measure, poverty rates were highest for children (25.1%) and lower for working-age adults (21.4%) and adults age 65 and older (18.9%). Poverty rates in the state’s three most populous counties ranged from 22.7 percent in San Diego to 24.3 percent in Orange to 26.9 percent in Los Angeles.
The California Poverty Measure underscores the importance of the social safety net for many families in the state. Programs included in the measure supplement family resources substantially. These programs include CalFresh, the state’s food stamp program; CalWORKs, the state’s cash assistance program; and the federal Earned Income Tax Credit. Without these and other need-based programs, 30 percent of Californians would be counted as poor in this new measure. For children, the impact is even more dramatic: 39 percent—or 3.6 million California children—would be considered poor. For working-age and older adults, the combined role of these programs was smaller but still considerable.
At the same time, the California Poverty Measure shows that resources provided by the social safety net are more than offset by expenses, such as high medical bills for older adults and the higher cost of living in the most populous areas of the state.
The new measure is a joint project of PPIC and the Stanford Center on Poverty and Inequality. It is part of a national effort to improve poverty measurement in the United States beyond the official poverty measure.
“Our goal was two-fold: to reassess the resources people in all parts of the state need to make ends meet and to measure the resources they have more comprehensively,” said Sarah Bohn, report co-author and PPIC research fellow. “The result is a sobering picture for California.”
The California Poverty Measure combines a family’s annual cash income—including earnings and cash benefits from the government like CalWORKs and Social Security—with two types of resources excluded from the official poverty calculation: tax obligations and credits, and in-kind benefits, such as CalFresh, federal housing subsidies, and school lunch programs. Then, major nondiscretionary expenses are subtracted, such as child care, commuting, and out-of-pocket medical expenses. Finally, the California Poverty Measure compares these resources to a poverty threshold specific to family size and location.
The result: For a family of two adults and two children, the California Poverty Measure estimated the 2011 poverty threshold to be as low as $19,500 and as high as $37,400, depending on where the family lived and whether the family residence was rented or owned. Since most of the state’s residents live in high-cost counties, and 89 percent of Californians live in rented or mortgaged housing, poverty thresholds for a family of four for the majority of the state’s residents ranged from $29,500 to $37,400. By comparison, the official poverty threshold is $22,811 for a family of four in any California county.
Among other key findings:
- Refundable tax credits—the Earned Income Tax Credit and the refundable part of the Child Tax Credit—played the largest role in keeping children out of poverty, cutting their poverty rate by 6 percentage points. Without these programs, an additional 560,000 children in the state would be considered poor.
- CalFresh trimmed the child poverty rate by 4 percentage points. Without it, 380,000 children would be considered poor. CalWORKs trimmed the child poverty rate by 2 points, or 230,000 children.
- Medical expenses alter the picture of poverty for Californians, increasing the poverty rate by 4 percentage points overall, and as much as 7 percentage points for older adults. Other necessary expenses such as child care and commuting costs also play a significant role in depleting family resources.
- Need-based social safety net programs dramatically reduced the rate of “deep poverty,” defined as living at less than half of the poverty threshold. More than twice as many Californians—and more than three times as many children—would be considered in deep poverty without the combined effects of resources like CalFresh, CalWORKs, and the EITC. These need-based programs boosted 2.8 million Californians, including nearly 1.2 million children, above California Poverty Measure thresholds for deep poverty.
“The California Poverty Measure illuminates the role of the social safety net,” said Caroline Danielson, report co-author and PPIC research fellow. “Without these programs funded at the federal, state, and local level, many more Californians—particularly children—would be considered poor under our new, more comprehensive measure.”
The report is titled The California Poverty Measure: A New Look at the Social Safety Net. In addition to Bohn and Danielson, its co-authors are Matt Levin, PPIC research associate; Marybeth Mattingly, research consultant at the Stanford Center on Poverty and Inequality and director of research on vulnerable families at The Carsey Institute at the University of New Hampshire; and Christopher Wimer, research scientist at Columbia University and research consultant at the Stanford Center on Poverty and Inequality. The report is supported with funding from the Walter S. Johnson Foundation.
ABOUT PPIC
PPIC is dedicated to informing and improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett. PPIC does not take or support positions on any ballot measure or on any local, state, or federal legislation, nor does it endorse, support, or oppose any political parties or candidates for public office.