1 in 5 Californians Is Poor. Housing Prices Are to Blame

1 in 5 Californians Is Poor. Housing Prices Are to Blame

Children of poor migrant families receive free medical checks before the start of the new school year during a charity event at the Los Angeles Mission's "skid row" headquarters.

SourceMark Ralston/Getty

Why you should care

Because rising living costs are making California viable for only a privileged few.

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In the Netflix television show Altered Carbon, the fears of rampant income inequality are fully realized. High society is taken literally, as the rich and wealthy live in a cloud city in the sky. The series is set hundreds of years in the future, and yet it tellingly takes place in the San Francisco Bay Area, with leaders who muse about making themselves immortal and are obsessed with the propagation of their own compounding wealth.

The analogy is even more cutting when you consider that, when it comes to one measure, the Golden State is already living a prelude to such disparate lives:

One in five Californians is poor when housing, medical costs and taxes are taken into account.

That’s the highest poverty rate for any state from 2014-2016, according to the Census Bureau’s Supplemental Poverty Measure, with Florida, Louisiana and Arizona nipping at California’s heels. Critics of that finding note that if you go by the “official” poverty rate, which throws out living costs, California is only the 16th poorest. And they point to the state’s economy, which consistently has healthy rankings for unemployment, labor force participation rate and GDP per capita. Their argument? The economic engine is humming: California in May became the world’s fifth-biggest economy, surpassing the United Kingdom, for goodness sake.

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Homeless men and women eating lunch at the Midnight Mission in Los Angeles in 2015. On this September day, the center served more than 600 meals.

Source Kevork Djansezian/Getty

Yet that prosperity clearly isn’t trickling down, despite the best efforts of lawmakers, who have used cash assistance, vendor and other welfare programs to pump almost $958 billion into the state’s poverty issue from 1992-2015, as Kerry Jackson of the “free market” Pacific Research Institute think tank noted in a January editorial. A living wage in California would need to be about $25 per hour, says Rebecca Brown, CEO of Boston-based Equity Focus Consulting, who previously worked on poverty issues in Oakland. But economists fear raising wages would lead to even fewer job opportunities. The state’s median wage was $19.67 per hour as of May 2016, according to federal wages statistics compiled by governing.com.

The biggest contributor to California’s dismal ranking is its high housing prices, notes Joel Kotkin, a demographer at Chapman University in Southern California’s Orange County. The public clamors for houses next to public transportation while large swaths of the state go underdeveloped. Extensive regulations lead to skyrocketing construction costs, which in turn raise the roof on home prices.

Legislation has tended to under-tax real estate investments, Brown says, “making them more profitable while also increasing the cost of living.” Rather than building accessible jobs in manufacturing and other industries, the state’s growth remains focused on the Bay Area, making economic expansion more geographically concentrated than in the past. The state’s agriculture economy is built on the backs of undocumented workers, who labor below the minimum wage and have few financial supports.

Energy prices in California are high, due in part to environmental regulations meant to reduce the state’s carbon footprint. Residents pay 18.91 cents per kilowatt-hour, compared to the U.S. average of 13.15. “We are waging a vainglorious attempt to be a climate expert, the paragon, at the expense of the people in California,” Kotkin says.

The working poor in particular are “moving out of the cities in droves to find somewhere they can afford to live,” Brown says. She recites a laundry list of other challenges: low health care access, poor nutrition, inadequate education and mental health treatment, to name a few. The widening wealth gap in California will eventually cause social and political tension, Kotkin argues: “The base for the Democratic Party is upper-income professionals and the poor. And those two groups don’t necessarily have the same interests.”

So what can be done about poverty? Brown offers some solutions, from directly injecting dollars into family incomes — one study she cites showed a $1,000 increase could have a positive impact on children’s math and reading scores — to neighborhood intervention programs, such as Harlem Children’s Zone, which holistically target a single region for help. Still, there is no “panacea,” as Brown puts it. While the Golden Gate Bridge leads to unfathomable riches for some, for many Californians, the American dream turns to rust.

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