By: Dan Walters
September 15, 2019 —
As the California Legislature churned toward adjournment last week, its members received another reminder that the state’s most vexing — and shameful — socioeconomic malady persists.
The Census Bureau reported that California still has the highest level of functional poverty of any state, averaging 18.2% of its 40 million residents impoverished during the three preceding years.
The number comes from a “supplemental” method of calculating poverty that includes a wider array of income measures than the long-standing official poverty rate and adjusts for the cost of living.
California’s official rate, 12.5%, is virtually identical to the national rate, but it soars to the top — or bottom — of the supplemental list largely due to its extraordinarily high cost of living.
Our supplemental rate is five percentage points higher than the national rate and is nearly three times as high as Iowa’s rate, 6.8%, the nation’s lowest. It’s also markedly higher than those of neighboring states such as Oregon (11.1%), Arizona (12.8%) and Nevada (13.7%), and arch-rival Texas (14.4%).
The Public Policy Institute of California used a similar methodology to create a California Poverty Measure and tabs it at 17.8% in its most recent report. Strikingly, however, PPIC also calculates what it calls “near-poverty” and finds that another 18.5% of Californians fall into that category.
Overall, therefore, more than 35% of Californians, perhaps 15 million human beings, are living in severe economic distress — a number nearly identical to enrollment in Medi-Cal, the state’s health care program for the poor.
The deepest roots of California’s two-tier society lie in the traumatic evolution of the state’s economy in the 1980s and 1990s from an industrial base to one rooted in services and technology, and the state’s concurrent absorption of millions of often undereducated immigrants.
They filled the low-skill, low-pay jobs that proliferated in the post-industrial economy. But as living costs soared, especially for housing, their modest incomes could not keep up, creating a huge cohort of what’s been dubbed the “working poor.”
Although California’s median household income is slightly above the national median of $63,179, a third of its workers make less than $15 an hour.
Meanwhile, a multi-million-unit shortage of housing grows worse by the moment, driving its costs ever-upward, and housing is not the only cost factor that influenced the Census Bureau poverty calculation.
The California Center for Jobs and the Economy, a business-backed economic research organization, says in a new report that Californians pay the nation’s second-highest prices for gasoline, an average of $1.07 per gallon more than prices in other states. That alone costs California motorists an extra $15 billion a year.
The organization also notes that California’s residential electric power rates are 52.9% above the national average and 7th highest in the nation. Since 2010, the average residential power bill has jumped by 25.5% to $1,247 per year.
Those rates are headed further upward as utilities, one of which is in bankruptcy, apply for increases to comply with state renewable energy rules and pay for wildfire damages.
The organization says that commercial power rates are even more disconnected to those of other states — costs that inevitably find their way into prices for groceries, clothing and other consumer goods and services.
Feeble efforts to raise family incomes, such as increasing the state’s minimum wage or creating an earned income tax credit, or trying to cap rent increases will do little or nothing to lower California’s poverty rate.
Rather, we must confront the root causes while increasing housing construction and moderating other costs of living.
It’s California’s existential crisis.