Category: Economy

Poverty and Well-being in California

California is one of 12 states in which poverty declined last year, according to newly released US Census statistics. The state’s official poverty rate is down by 0.6 percentage points to 16.4%, from 17.0% in 2012. But poverty in the state remains high relative to the early 2000s. In 2007, the year the Great Recession began, California’s official poverty rate was 12.4%.

Official poverty statistics are intended to capture cash resources at hand. In other research we have analyzed the role of social safety net programs in augmenting cash resources and helping families to avoid dire economic need.

It’s important to note that jobs are still the biggest source of income for Californians overall, even among those living in poverty. And good news out last week shows the economy is continuing to improve—the unemployment rate in California is now 6.1%, less than half of what it was during the worst of the economic crisis.

At the same time we are all aware that well-being is complex, so it is instructive to look at multiple measures. Food insecurity—defined as ranging from worrying about being able to afford enough food to actually cutting back on meals—is also down from a recent high of 16.2% in California (across 2009–2011) and is estimated to be 13.5% for 2012–2014. In addition, the number of homeless in California—often not well-represented in indicators of need—is estimated to have declined by 13% between 2012 and 2014. The share of all California children with a validated report of maltreatment (most commonly for reasons of neglect) has also dropped, although this appears to be a longer term trend that predates the recession.

Broadly speaking, then, trends in well-being appear to be positive, even though we have a ways to go before poverty and other indicators decline to the levels experienced before the recession.

Big Declines in Number of Uninsured Californians

Nearly 2 million more Californians had health insurance coverage in 2014 than in 2013, according to newly released US Census data. Still, about 4.7 million Californians reported they were uninsured in 2014.

The percentage of Californians without health insurance coverage dropped nearly 5 points in the first year the Affordable Care Act (ACA) was implemented—from 17.2% to 12.4%. Declines were even more dramatic among adults age 18 to 64, who benefited the most from the ACA coverage expansions. Among this group, uninsurance rates declined nearly 7 percentage points—from about 24% in 2013 to about 17.3% in 2014.

Declines in uninsurance rates occurred across all racial/ethnic groups, with the largest drops among Latinos (6.5% overall and 9.2% adults age 18 to 64), followed by African Americans (5.7% overall and 8.1% adults age 18 to 64) and Asian Americans (4.9% overall and 6.7% adults age 18 to 64). Despite coverage gains, Latinos continue to have the highest proportion of residents without health insurance, with about 28% of adults age 18 to 64 reporting no coverage.

Changes in uninsurance rates also varied across California counties. The largest declines were in parts of the Central Valley and Monterey County, where the percentage of residents without insurance dropped by more than 6%. The counties that experienced the largest declines include Stanislaus (8.5%), Monterey (6.7%), and Merced (6.4%). Los Angeles County, home to the largest number of residents without health insurance in the state, had more than half a million fewer residents reporting they were uninsured in 2014 than in 2013. Generally, counties with higher shares of uninsured residents in 2013 experienced the largest declines.

California experienced one of the largest declines in the proportion of residents without health insurance coverage across the nation. But the percentage of Californians who remain uninsured is still above the national average – and continues to be higher than in several states that have not expanded their Medicaid programs.

Chart Source (TOP): American Community Survey, One Year Files for 2014 and 2015 accessed at American Factfinder.

Chart Notes (TOP): Individuals are considered to be uninsured if they do not have coverage at the time of the survey. The uninsurance rates presented do not account for the margin of error associated with the estimates. For the state estimates by race the margin of errors range from about 0.1% – 0.5%. The margins of error are larger for the county-level estimates and are larger for counties with smaller populations.

Californians and Climate Change

It’s been nine years since the movie “An Inconvenient Truth” had its debut and AB 32, the “California Global Warming Solutions Act of 2006” was passed by the Democratic-controlled legislature and signed by Republican Governor Arnold Schwarzenegger. Since then, Republicans and Democrats at the federal level have sparred over the scientific evidence on global warming, the government’s role in regulating greenhouse gases, and energy policies that will promote economic growth and well-being. Still, California likely voters’ strong support of AB 32—through good economic times and bad—has barely budged (66% PPIC July 2006, 63% PPIC July 2015).

The July 2015 PPIC poll finds that Californians’ economic fears are part of the reason for their steady support for AB 32—which requires California to reduce its greenhouse gas emissions back to 1990 levels by 2020. Among California’s likely voters, 69 percent say global warming is a threat to California’s economy and quality of life.

Another reason for likely voters’ support for AB 32 is their hope that it may improve the jobs outlook. Asked about the economic impact of state actions to reduce global warming, they are more likely to say the result will be more jobs for people in the state (34%) than to say that the result will be fewer jobs (24%) or that there will be no impact on jobs (29%).

Our polling finds a strong link between likely voters’ fears about the impact of climate change and hopes about state action to address it. Among those in favor of AB 32 today, the overwhelming majority say that global warming is a serious threat to the state’s economy. And a plurality of the supporters of AB 32 say the state’s actions to reduce global warming would lead to more jobs (44%). Less than a third (30%) say these actions would have no effect on job numbers. Just 14% say the result would be fewer jobs.

Californians have not only expressed consistent support for the state’s current goals to curb greenhouse gas emissions, they favor expanding those efforts. Solid majorities of likely voters strongly support three ideas proposed by Governor Brown earlier this year and reflected in SB 350, which is under consideration in the legislature: reducing petroleum use in cars and trucks by 50% by 2030, increasing the use of renewable energy for the state’s electricity to 50% by 2030, and doubling the energy efficiency in existing buildings by the year 2030. Most likely voters also support the proposal in another bill, SB 32, which would require the state to reduce its greenhouse gas emissions to 80% below 1990 levels by 2050.

Once again, strong support of these more ambitious climate goals is tied to the perceived economic effects of both climate change and the state’s actions to address it. Overwhelming majorities of likely voters who favor the new proposals say that global warming is a very serious or somewhat serious threat to the economy (88% reduce petroleum use; 82% increase renewable energy; 85% double energy efficiency; 87% reduce greenhouse gas emissions). Among likely voters who favor these new proposals, pluralities say that California’s actions to reduce global warming will lead to more jobs. Small minorities who favor the new climate change proposals say there would be fewer jobs as a result of actions to reduce global warming.

To reach California’s goals to curb emissions, the state will need to find ways to drastically reduce its greenhouse gases and reliance on fossil fuels. On this topic, the poll finds strong majority support for policies that encourage more electric vehicles and solar power. Overwhelming majorities who favor these policies also view global warming as a serious threat to the economy. Pluralities of those who favor these proposals expect that actions to reduce global warming would lead to more jobs.

PPIC’s surveys have consistently shown that most Californians are aligned with the state’s current efforts and proposed policies, and that they have made up their minds about the perceived economic impacts of climate change and state actions to curb it. Still, the ongoing political debate over what steps to take relies on partisan talking points borrowed from the national arena. There is a shortfall of factual analysis to help leaders—and all Californians—understand the costs, benefits, and trade-offs they are being asked to make. Specifically, will climate change take a greater toll on poor and disadvantaged communities? How will climate change policies improve job prospects in these communities?

As one of the most important issues facing California’s future, climate policy is certainly deserving of a well-informed discussion and a thorough public hearing as new climate-oriented proposals make their way through the legislative process this summer.

Testimony: Measuring Poverty

The Assembly Human Services Committee held a hearing on Tuesday, July 14, to consider a joint resolution regarding official poverty measurement tools. PPIC research fellow Sarah Bohn provided background on official poverty statistics and explained how different measurement tools affect our understanding of poverty in California. Here are her prepared remarks.

 

My name is Sarah Bohn, I am a research fellow at the Public Policy Institute of California. PPIC is a nonpartisan, independent research institute and as such does not take positions on bills before the legislature. I am here today to inform the committee on facts related to Assembly Joint Resolution 22 (AJR 22). As some of you know, PPIC, in collaboration with the Stanford Center on Poverty and Inequality, has been deeply involved in research on alternative poverty measurement for the past three years. I will provide background on the shortcomings of official poverty statistics and offer an updated view of poverty measurement—and poverty in California.

According to official statistics, poverty is significantly higher (50% higher) than it was 50 years ago, when the War on Poverty began. As we shall see, this finding should be taken with a big grain of salt. Poverty status, as you know, is based on how family income compares to the “federal poverty line.” This was developed in the early 1960s as the first working definition of poverty in the U.S. It is based on family budgets of that time, when a typical family spent one-third of its income on food. So the threshold was (to simplify a bit) three times the cost of food a family would need to meet basic needs. While this was a novel use of the facts and information available then and was hugely important in creating a standard metric to inform policy, it’s hard to apply the same metric to modern families and derive a clear understanding of how families—and policy—are doing. There are two main reasons for this: (1) the cost of living and family budgets have shifted considerably, with families spending more on housing, work expenses (like commuting and child care), and medical care and less on food overall (2) several government programs have changed and expanded, but are not counted in family income data in the official poverty measure. For these reasons, official poverty statistics are hard to interpret; they essentially compare a part of family resources to an outdated benchmark.

Two current measures—the Census Bureau’s “Supplemental Poverty Measure” and the PPIC-Stanford “California Poverty Measure” (which uses a similar methodology)—update and realign the basic poverty concept that is now more than 50 years old. There is quite a lot of momentum and agreement around the benefits of these “supplemental” measures. In summary, the methodology aims to improve on official poverty measurement in the following ways. First, both measures use detailed data on what families actually spend to meet basic needs, rather than relying on a 1960s-era approximation. Second, these metrics allow for the cost of living to vary (conservatively), depending on where one lives. Third, they make use of a comprehensive estimate of resources families have on hand, which includes cash income, program benefits, taxes paid or credited, net of medical and work expenses.

The Supplemental and California Poverty Measures provide new insights to poverty. I’ll highlight a couple that are especially related to the impact of policy. First, I’ll return to the effects of the War on Poverty. Using supplemental measures, researchers find a clear downward trend in poverty—specifically, that government programs reduced poverty by 15 percentage points since the mid-1960s. These are facts that cannot be uncovered by official poverty data, which, you may recall, suggests that poverty rates rose 50 percent despite policy efforts. Second, poverty in California today would be much higher were it not for the safety net. Without major programs like CalWORKs, CalFresh, the federal Earned Income Tax Credit, and housing subsidies (among others) nearly 40 percent of children in California would be poor—or 30 percent of state residents overall.

It’s possible that the safety net in California could have an even longer reach than it already does. For one, increasing program participation among eligible families could reduce poverty. Also, because many poverty programs are not scaled to cost of living, their ability to materially affect families in poverty varies substantially across the state. In high-cost areas, safety net benefits reduce poverty by about 30 percent, but they reduce it by 50 percent in the Central Valley and far north. Poor families in coastal (and the most populous) parts of the state face costs $7,000 to $12,000 higher than the federal poverty line accounts for. Although we find that poor families in high cost areas are more likely to be working—and earning more—than their counterparts elsewhere, their earnings are not enough to boost them above the more realistic cost-adjusted supplemental poverty threshold. But their slightly higher earnings (which are still low by California standards) make them less likely to qualify for some safety net programs.

These examples scratch the surface of what is possible using the tools of improved measures like the Supplemental and California Poverty Measure. We also hope to use our research to assess how proposed changes to programs could move families out of poverty. But beyond these efforts, I would argue that simply tracking poverty in and across California and the U.S.—using truly comprehensive and accurate metrics—should be a regular contribution to the policymaking process. For those of us at PPIC and for other researchers involved in poverty research across the country, including those at the Census Bureau, alternative measures of poverty are still in their early phases, and, as such, rely on policymaker awareness and on funding to continue to produce. Thank you for your interest in the topic and your time today.

 

High Poverty Rate Persists

Although the state’s economy has rebounded, the latest poverty statistics suggest there’s been little improvement in the share of Californians struggling to make ends meet.

More than 1 in 5 Californians—or 8.1 million people—were living in poverty in 2012, the most recent year for which we have data. This is according to the California Poverty Measure, a comprehensive metric developed by PPIC and the Stanford Center on Poverty and Inequality. This share is about the same as it was in 2011. Rates were highest among children, with about 1 in 4, or 2.3 million, living in poverty—virtually unchanged from 2011.

Why? Although California’s overall economy is growing, not all have shared equally in the recovery. The reasons for this are both specific to this economic recovery and true more generally of economic upturns. The unemployment rate remains higher than it has been since 2004 and a high share of workers—by historical standards—have given up looking for work or are underemployed (working part time when they would prefer full time, for example). As is typical of past patterns of recession and recovery, high-income families tend to rebound most quickly, followed by middle-income and finally low- income families. This means that improvements in poverty metrics tend to lag behind other indicators of how the economy is faring.

The good news is that the social safety net—programs like CalFresh and the federal Earned Income Tax Credit—helped many families through the recession and still plays an important role in keeping families out of poverty. Without it, more families—including 1.3 million children—would be poor. We estimated that without these and other safety net programs, poverty would be roughly a third higher in the state as a whole. This cushioning effect of the safety net decreases swings in poverty, meaning that a slowly changing poverty rate is partly an indication that the safety net is working.

Video: PPIC Statewide Survey Briefing

As discussions continue in Sacramento about drought relief, funding for higher education and transportation projects, and an extension of Proposition 30 tax increases, PPIC surveyed public opinion on these and many other topics. At a briefing last week in the capital, PPIC researcher Jui Shrestha provided the survey findings. Among the key points:

  • Two-thirds of Californians say the regional water supply is a big problem, and two-thirds say people in their part of the state are not doing enough to respond to the drought.
  • While most adults say that spending money on the maintenance of California roads, highways, and bridges is very important, there is little support for increasing the gasoline tax or vehicle registration fees to do so.
  • Half of Californians favor extending the Proposition 30 tax increases, and about a third favor making them permanent.

Climate Change and California’s Future

Mark Baldassare, PPIC’s president and CEO, opened the PPIC conversation on climate change this week with these remarks. We invite you to watch the video of the event.

California has found its way to broad, bipartisan agreements on environmental issues for decades. The state has been a leader in efforts to improve air quality, conserve open space, and protect the coastline. The public has typically embraced these “green” policies. In a PPIC poll in 2014, majorities of Californians said that “stricter environmental laws and regulations are worth the cost,” while fewer said they “cost too many jobs and hurt the economy.” Despite increasing evidence that climate change poses a major threat here and abroad, the federal government and international community have been slow to act. California, on the other hand, has been responding since the early 2000s with some of the most far- reaching policies in the world.

Most notably, Republican Governor Arnold Schwarzenegger joined Democratic legislators and signed AB32 – the Global Warming Solutions Act—in 2006. It committed California to reverse the trend of rising greenhouse gas emissions and to lower those emissions to 1990 levels by the year 2020. It was hailed as a watershed moment in California history that would also have far-reaching consequences nationally and internationally.

In the years that followed, the governor and legislature worked to comply with the law by adopting a number of major policy changes. These include efforts to expand renewable energy, change community development, and create a market price for carbon through a cap and trade program. In 2010, a campaign led by Democrat Tom Steyer and Republican George Shultz persuaded voters to soundly reject Proposition 23, an initiative to suspend AB32. Voters then passed Proposition 39 by a wide margin. This 2012 initiative closed corporate tax loop holes to pay for clean energy projects.

The state’s response to climate change has had consistent support from a broad coalition that cuts across racial/ethnic, economic, and regional groups—while the amount of support has varied along partisan lines. In the PPIC annual environment survey last July, 68 percent of adults said they favored the emission goals identified in AB32. Strong majorities have expressed support for the law since we first asked about it in 2006. Sixty-five percent of Californians are also in favor of the state government making its own policies to address global warming—separate from the federal government. Majorities have expressed this preference since we first asked about it in 2005. And sixty-one percent say that the state government should act right away to reduce global warming rather than wait for the economy and job situation to improve.

One reason the state’s response to climate change has had such strong support is the high level of concern about the issue among Californians. In a PPIC poll last December, 76 percent of adults said that global warming is a very serious or somewhat serious threat to the economy and quality of life in California. More than seven in 10 have expressed this view since we started asking this question in 2005.

Another explanation for Californians’ support is the perceived economic benefit of the state’s policies. In the PPIC poll last December, 43 percent of adults said that California’s efforts to reduce global warming will result in more jobs for people around the state. In contrast, 29 percent said the state’s effort will not affect job numbers, and only 21 percent said it will result in fewer jobs. Californians have always been much more likely to say that taking action on global warming will result in more jobs— rather than fewer—since we began asking this question in 2010.

Today, California climate change policy has reached another pivotal moment. Last year, the state Air Resources Board declared that California is now on track to achieve its greenhouse gas emission goals by 2020, just five years from now. Earlier this year, Governor Brown and state legislators proposed that California recalibrate its climate change policies with a new set of goals reaching farther into the future. As before, the new goals are ambitious and contentious.

In January, Governor Brown proposed three new goals to be accomplished in the next 15 years: increase the amount of electricity produced from renewable sources from one-third to 50 percent; reduce today’s petroleum use in cars and trucks by up to 50 percent, and; double the energy efficiency of buildings and make heating fuels cleaner. SB 350 by Senators Kevin de Leon and Mark Leno reflects the governor’s new goals for 2030. And SB 32 by Senator Fran Pavley would set California’s greenhouse gas emissions in the year 2050 at 80 percent below the level reported in 1990.

There is much to consider in setting these goals and we know that change of this magnitude is not easy. Governor Brown said in his inaugural address: “Taking significant amounts of carbon out of our economy without harming its vibrancy is exactly the sort of challenge at which California excels. This is exciting, it is bold, and it is absolutely necessary if we are to have any chance of stopping potentially catastrophic changes to our climate system.”

California can benefit from the innovation, technologies, and new jobs generated by the state’s leadership on climate change policy. Achieving the goals, however, will also have costs and require lifestyle changes around transportation, employment and housing decisions.

The climate change policies in place today and the proposed goals will affect every Californian. To talk about some of the experiences so far and the issues raised by a new set of climate change goals, we have put together a bipartisan panel that reflects several key perspectives. The panel includes state and local government representatives, as well as business interests from different sectors of the economy.

The state’s climate change policies are among the most difficult and important issues to surface this year. We hope that a public dialogue about the challenges that we face, the goals under consideration, and the trade-offs involved in upcoming policy choices will help California to achieve its brightest future.

Video: January PPIC Statewide Survey Briefing

State residents are feeling more optimistic than they have in years—about California’s elected leaders, the direction of the state, and their own economic futures. Dean Bonner, associate survey director, presented these and other key findings at a briefing last week in Sacramento. In addition to asking about government and fiscal issues, the January survey gauged opinions on four important issues being debated at the state and federal level. Among the findings:

  • Crime, police, and race relations. A solid majority of Californians say the police are doing either an excellent job or good job controlling crime in their communities. But blacks are much less likely than others to hold this view.

  • Water and drought. A majority of Californians say the supply of water is a big problem in their region, and most say the state and local governments are not doing enough to respond to the current drought.

  • Health care reform. A record-high 51 percent of Californians have a generally favorable view of the 2010 health care reform law, while 41 percent have an unfavorable view.

  • Immigration reform. A solid majority of residents support President Obama’s executive action to shield as many as 4 million immigrants from deportation, while about a third are opposed.

What the Unemployment Rate Doesn’t Show Us

California’s unemployment rate is 7.2%, down from 8.4% one year ago and from California’s peak of 12.4% in 2010. California is adding jobs faster than the nation as a whole and now has more jobs than before the recession. Also, the ratio of employment to population is slowly increasing, a sign that more people are reentering the labor force. However, behind these oft-cited statistics, the picture is more complicated.

While California’s economy is improving, the recovery has not been strong or fast enough to keep up with the growth in California’s working-age population. Additionally, the recovery has been uneven across sectors and metro areas, and the unemployment rate is still higher than it was before the recession began. According to the Bureau of Labor Statistics, California has the third-highest unemployment rate in the nation—only Mississippi and the District of Columbia have higher rates. In numerical terms, 1.35 million Californians are looking for work—and more than 35% of them have been looking for at least six months.

High as it is, the unemployment rate does not account for the 7% of California adults who are underemployed—working part-time when they’d rather work full-time. Nor does it count “discouraged and marginally attached” workers—those who have stopped looking for work because, for example, they think there are no jobs available or they don’t have the skills for available jobs. When discouraged and underemployed workers are added to the ranks of unemployed, California’s rate of un- and underemployment (or labor underutilization,” the term used by the Bureau of Labor Statistics) comes to 15.4%—8.2 points higher than the official unemployment rate. In fact, California’s underutilization rate is the second highest in the country (only Nevada’s is higher). Based on underemployment rates, we know that growth is needed not just in the number of jobs but also the number of full-time jobs.

Education is the most important factor in determining who is employed—and fully employed. Workers with college degrees are less likely to be unemployed, underemployed, or to have stopped looking for work. These workers fared better during the recession, an indication that education can be a buffer against the bust cycles of our economy. And education is likely to be increasingly relevant in our future economy: more than two-thirds of new jobs over the next 10 years or so will require at least some college training.

State and federal policymakers are making some investments in training resources for California’s workforce—the California Career Pathways Trust and the federal Workforce Innovation and Opportunity Act are two good examples. The challenge is to do more to ensure that current and future workers are trained for the jobs of both today and tomorrow.

California–State of Change

As leaders from government, business, and philanthropy gathered last week to discuss California’s future, we were reminded once again that these are exciting times in our state. The discussions were part of PPIC’s full-day conference, California—State of Change, and they highlighted both the advantages our state enjoys and the major challenges ahead.

Speakers noted that the recovering state economy, newly elected state leaders, a richly diverse population, and a history of innovation provide much to build on—as well as a lot of building to do. For example, California has recently enacted sweeping changes in corrections and education finance. But, as the governor’s chief aide, Nancy McFadden, emphasized in her keynote address, most of the hard work of implementing these policies lies ahead.

Among other challenges noted in the subsequent panel discussions: a state tax structure that leads to extreme revenue volatility, a need for public employee pension reform, an uneven economic recovery that has left many Californians behind, government institutions that do not provide the tools for managing in the 21st century, and an electorate that is disengaged from the political process.

But, as other speakers reminded us, Californians are living in a time of reform. A change in term limits may lead to more stability in the legislature and result in more long-term policymaking. Recent initiatives to shift many school decisions from the state to the district level and to move state corrections responsibilities to the counties could make local governments labs for innovation—but only if we have the will and the data to evaluate the results.

Our final panel demonstrated that California still knows how to dream big. The discussion focused on three projects: a historic effort to combat climate change, the construction of high-speed rail, and the advancement of stem cell research. All have been controversial, but they show that California voters and elected officials embrace innovation, as they have throughout the state’s history. 

We invite you to watch the videos of each session. We hope you find the conversations as thought-provoking as we did.