California's extreme economy creates a new class of 'poor'

California is among a number of states where the accelerating costs of living are redefining who is poor.  

Robert Galbraith/Reuters/File
A home for sale is seen in San Francisco in this file photo.

Only in California, it would seem, could Muhammad’s way of life be considered “poor.”

His monthly income is $4,000 to $5,000. But in San Francisco’s Ocean Beach neighborhood, he needs every penny. The rent for his one-bedroom apartment (for three children and his wife) is $2,200, and Muhammad has to take every job that comes his way, often working 12- to 15-hour days.

“I think I’m one job away from what people would consider poverty,” says Muhammad, who asked that his last name be omitted. “But yeah, there’s an underlying feeling of being impoverished.”

The struggles of working families to make ends meet amid rising housing and child care costs is well known. The Census Bureau has even put a name on it: the supplemental poor. And California has a supplemental poor problem. 

The Golden State's supplemental poverty rate sits at 20.6 percent – more than five percentage points higher than the traditional poverty measure. That's the biggest difference for any state in the country, save Hawaii.

It is the product of a situation that is particularly Californian, but which holds lessons for other states. Call it the extreme economy – a high concentration of Silicon Valley tech moguls and millionaires help drive up the costs of living on one end, creating challenges for a disproportionately large population of supplemental poor on the other.

Few states can replicate both California's soaring wealth and deep poverty. But the pattern of an economy amplified at the extremes is not a uniquely California phenomenon. From New York to New Jersey to the District of Columbia, high costs of living have driven up the ranks of the supplemental poor, leaving an economy where even a middle-class income is now barely enough to get by. 

“I don’t think [the trend is] unique to California,” says David Grusky, director of the Center on Poverty and Inequality at Stanford University. “There are other zones in the country that are experiencing very high housing costs and the same sorts of effects can be expected.”

California vs. Idaho

Unlike the official poverty standard, the supplemental measure – which the Census Bureau began calculating in 2009 – takes into account more than just a family’s pre-tax cash income and the minimum it would cost to provide a healthy diet for each family member. It includes expenses like housing and child care, as well as resources such as food stamps, housing vouchers, and other cash and near-cash transfers.

The US poverty rate was 13.5 percent in 2015; the supplemental rate was 14.3 percent.

In some places, such as Idaho, Indiana, and Maine, the supplemental measure shows a lower poverty rate than the official standard.

But the opposite is true in many places throughout the United States, where the supplemental poverty threshold shows a different picture of poverty, according to the latest Census data, released this month.

California is a window into the trend. The average monthly rent in California is $1,250, twice as high as the national average. A home in the Golden State costs about $440,000, compared with about $180,000 nationally.  

“In California, the cost of living is sharply higher once we take housing costs into account, so extra resources from tax credits, housing, and food assistance don’t stretch far enough to move residents above poverty,” writes Caroline Danielson, a senior fellow at the Public Policy Institute of California, in an email.

$700 for child care

Child care is another big factor, and one that is not necessarily concentrated in major cities.

When Shawna Pollard learned this month that her husband, Robert, now makes too much to qualify for low-cost day care, the couple found themselves in a bind. They had relied on subsidized day care – at $246 a month – for their two young sons after Robert was laid off. Now, they're faced with full-time day care costs that average about $700 a month in Butte County, where they live.

Her husband's $33,000 income is not enough, she says.

Pollard has considered dropping out of college, where she is a full-time student working toward a degree in office administration, to care for the kids. But the move would be counterproductive. The reason she went to school was to find a higher-paying job.

“If we can’t afford child care, I’d have to quit school. And it would hurt a lot of things,” she says. 

Pollard is currently appealing the decision and has only good things to say about the program that provided her the subsidy.

“These programs are designed to help you, and they’ve been a great help,” she says. “I don’t know what we would have done without them.”

What the supplemental measure shows is that the definition of poverty is changing in some states, says Michael Herald, director of policy advocacy at the Western Center on Law and Poverty, a nonprofit that advocates for low-income Californians. “There’s a whole group of people we didn’t really think about being poor before, but are just as poor in many cases as those below the poverty line.”

[Editor's note: This story has been corrected to note that Hawaii has a slightly larger difference between its supplemental poverty rate and traditional poverty rate than California and to clarify the trends in the supplemental poverty data.]

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.