This commentary originally appeared in Forbes on September 16, 2015.
The U.S. Census Bureau released their new poverty data. For the first time, Census is including its newer, more comprehensive measure of poverty at the same time it is publishing the update to its more timeworn traditional measure.
Census’ Official Poverty Measure is largely bunk for two reasons: it ignores regional cost of living differences and it doesn’t include the value of all benefits to the poor, such as food stamps (now called Supplemental Nutrition Assistance Program or SNAP), housing assistance or Medicaid and Medicare. As a result, the official poverty measure undercounts poverty in high cost states such as California and New York, while over-counting poverty in the low-cost Midwest and South.
The Census’ Supplemental Poverty Measure, published for five years now, corrects many of the traditional poverty measure’s shortcomings, though the value of government or employer-provided health coverage isn’t one of them.
Census has already posted its latest Supplemental Poverty Measure report, showing poverty rates for the past two years. From 2013 to 2014, supplemental poverty declined from 15.8 percent to 15.3 percent as the economy continued its lethargic recovery.
Unfortunately, due to a change in survey methodology, the report is missing the very illuminating state-level poverty table that was featured in three previous yearly reports.
The state-level poverty data consistently showed California as having the nation’s highest poverty rate, largely due to its high housing costs driven by an overregulated housing market with one of the nation’s most restrictive land-use regimes.
Census’ new report does provide regional poverty estimates, however. These show poverty decreasing in the Northeast, the Midwest and the South, but increasing in the West from 17.6 percent to 18.4 percent.
Poverty’s increase in the West (California is the majority of the population in this region) might come as a surprise to many people, given California’s tech-based economic recovery. But, with the jobs has come soaring rents and housing values as California’s developers and residential construction industry has found it impossible to keep up with demand in the face of the nation’s third-most restrictive land-use policies (behind number one New Jersey and number two Maryland) according to the Freedom in the 50 States report by the Mercatus Center at George Mason University.
Restrictive zoning, greenhouse gas emission considerations, development fees, and other onerous rules make housing far more costly for Californians than it needs to be. Average rents in San Francisco, with a 3.7 percent unemployment rate in July, are $3,213 per month vs. $1,281 in Houston with its 4.7 percent unemployment rate.
Using prior reports as a baseline to extrapolate California’s Supplemental Poverty Measure for 2013 and 2014 indicates that the state is likely experiencing a poverty rate of 22.3 percent. This is high enough to rank California as having America’s highest poverty rate—for the fourth year in a row—proportionately, some 44 percent higher than the national average of 15.6 percent for the most recent two years and 42 percent higher than in Texas, California’s closest demographic twin (both states are among the four majority-minority states).
California has the nation’s 4th-highest taxes as a share of state income, the nation’s highest marginal income tax bracket, 13.3 percent, and a generous social safety net with one-third of the nation’s Temporary Assistance to Needy Families recipients. It’s not supposed to also have the nation’s highest poverty rate in the midst of an economic recovery—a poverty rate that’s soaring ahead of Silicon Valley’s fortunes.
California, and the nation, would benefit from an honest discussion as to why it has such an intractable poverty problem even as it ranks as among America’s most liberally progressive states.
Chuck DeVore is Vice President of National Initiatives at the Texas Public Policy Foundation. He was a California Assemblyman and is a Lt. Colonel in the U.S. Army Retired Reserve.