California’s poverty rate has reached the highest value among all U.S. states. There are two ways to measure poverty; the first one accounts for cost-of-living in different states, while the other does not. The more accurate of the two is the method that accounts for living costs, the Supplemental Poverty Measure (SPM), introduced by the U.S. Census Bureau in 2011. According to the census figures based on the SPM, around 20.4% Californians are below the poverty line, meaning roughly one in five people cannot support themselves and their dependents.
The five states with the highest average SPM from 2014 to 2016 are California (20.4%), Florida (18.8%), Louisiana (18.4 %), Arizona (17.8%), and Mississippi (16.9%). These figures suggest that California is the state with the highest poverty rate among the 50 states.
Reasons for California’s High Poverty Rate
Reasons for California’s poverty includes high housing cost, raised minimum wages, and pointless policies that are pushing the state into poverty.
California’s High Housing Costs
High housing costs are a problem throughout California. The rent on a two-bedroom apartment costs over $1,500.0 per month in a location where nearly two-thirds of the population lives. The areas with low housing costs are for low-income individuals.
More than half of renter households pay more than 30% of their income towards housing. One-third of the population in the state is severely under a financial burden, spending more than half of their income towards this purpose.
California’s Minimum Wages and Job Losses
California’s minimum wage is on track to reach $15.00 per hour, as per the bill signed by Governor Jerry Brown in 2016. But this will not be of use for approximately 60% of the people who live in poverty and are jobless. Research report suggests that it has caused many business closures, and jobs cuts finally leading to population loss.
According to a study released by the Employment Policies Institute, the state’s minimum wage began to deviate from the federal standards significantly in the late 1990s. Employment data over this period was analyzed, with a focus on industries with a higher percentage of lower-paid employees. The study concluded that a 10% increase in minimum wage causes a nearly five-percent job cut in these sectors.
It is estimated that California will lose approximately 400,000 jobs by 2022, when its minimum wage reaches $15.00 per hour. Retail and food sector employees stand to suffer the most, as half of the job cuts come from these sectors. Job cuts in the service industry happen because they are caught between price-sensitive customers and narrow profit margins, leaving layoffs as the only option available.
California’s Poverty Measures
Certain policies were pursued by federal policymakers to tackle the issue of California’s poverty. From 1992 to 2015, California’s state and local governments spent close to $958.0 billion on public welfare plans, including cash-assistance, vendor payments, and other welfare schemes. Further, one in three welfare recipients are located in California. That President Donald Trump wants to cut support programs that help impoverished families afford basic necessities like food and housing–programs that keep Californians above the poverty line.
California’s poverty rate is rising day by day. The high cost of living, job losses, and minimum wages may ruin the state entirely in the coming years. Specific measures must quickly be implemented that will maintain the economic security of the state and create new opportunities for the Californians.
“California Has the Highest Poverty Rate in America. Why? ,” Foundation for Economic Education, January 21, 2018.
“New Census Figures Show That 1 in 5 Californians Struggle to Get By,” California Budget & Policy Center, September 2017.
“Why The $15 Minimum Wage Will Cost California 400,000 Jobs,” Forbes, December 15, 2017.
“Why is liberal California the poverty capital of America?,” Los Angeles Times, January 14, 2018.