California Has Highest Poverty Rate, with Housing Costs

LOS ANGELES, CALIFORNIA - SEPTEMBER 09: Antonio DeSilva, who is currently homeless, plays
Mario Tama/Getty
Neil Munro

Democrat-run, migrant-packed California leads the nation in poverty, according to a Census Bureau report which considers Americans’ housing costs alongside their income from wages and salaries.

The September 10 study shows 18.2 percent of California’s population is poor, far above the 13 percent poverty rate in Arkansas, 16 percent in Mississippi, and the 14.6 percent in West Virginia.

High housing costs also helped push New York’s poverty rate up to 14.1 percent, and New Jersey’s rate up to 14 percent, according to Table A5 on page 28 of the report, which is titled The Supplemental Poverty Measure: 2018.

The traditional wages-only measure of poverty shows 4.9 million Californians are poor, according to the measure.

But the cash-plus-housing Supplemental Poverty Measure shows 7.1 million California live below the poverty line. That means 18.2 percent — almost one-in-five — of the state’s 40 million residents are considered poor.

A huge factor in California’s nation-leading poverty is the escalating cost of real estate spurred by the growing number of wealthy people who compete for houses near the state’s coastline. “Coastal California is affordable for roughly 15 percent of residents, down from 30 percent in 2000,” said Joel Kotkin, a California expert.

Local politics also reduces the construction of the houses preferred by Californian families, Kotkin wrote in July 2019. “State and local regulations and fees that constrain housing supply, including measures … have blocked expansion of lower-density housing construction on the urban fringe,” he wrote.

But the housing costs are also being driven up by investors from Wall Street and overseas, but also by the federal and state pro-migration policies which are inflating the state’s population, and political hostility to cheap housing.

By 2017, for example, the government’s pro-migration policies had added 11 million people to the state’s native population of 29 million people. The huge inflow means that one-in-four residents are immigrants.

Many other coastal and immigration-inflated states also have high housing costs which spike their SPM poverty rates:

The 16 states for which the SPM rates were higher than the official poverty rates were California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New York, Oregon, Texas, and Virginia.

States with less coastline, colder winters, and cheaper land, as well as fewer immigrants, tend to have lower SPM poverty rates.  For example, only 7.9 percent of people in Wisconsin are poor, along with 8.3 percent in Utah, 8.2 percent in New Hampshire, 73 percent in Minnesota, and 6.8 percent in Iowa, according to the SPM study.

The 7.1 million poor Californians comprise one-in-six of the nation’s 42.6 million poor residents.

The cash-only measure shows that California’s 4.8 million cash-poor residents comprise one-in-eight of the nation’s 39 million cash-poor people.

California, however, has a slightly lower rate of SPM poverty than the District of Columbia, where the SPM poverty rate is 18.4 percent.

The Census Bureau explained the difference between the two poverty rates:

The official poverty measure, which has been in use since the 1960s, estimates poverty rates by looking at a family’s or an individual’s cash income. The new measure is a more complex statistic incorporating additional items such as tax payments and work expenses in its family resource estimates. Thresholds used in the new measure are derived from Consumer Expenditure Survey expenditure data on basic necessities (food, shelter, clothing and utilities) and are adjusted for geographic differences in the cost of housing.

Demand for housing is driven up by immigration, says a 2019 report by Harvard’s Joint Center for Housing Studies. “Immigrants are a major source of household growth and therefore of housing demand,” said the report, titled “The State of the Nation’s Housing 2o19.” The report continued:

Current projections call for the foreign-born population to drive an ever-larger share of household growth. If efforts to curtail immigration prevail, however, future housing demand will be much lower than projected …

…

even though about 30,000 more households moved out of California each year in 2010–2017 than moved in, in-migration still averaged 165,000 households annually. This made California third only to Florida and Texas in terms of gross household moves into the state.

Immigration impacts housing demands and costs, but it also affects Americans’ wages and salaries, say economists.

For example, Georgetown University professor Harry Holzer told Yahoo News immigration expands national economies but also lowers individuals’ wages and salaries:

This is probably the main reason that immigration generally is good for an overall economy … It increases the supply of workers in various fields, and often reduces the labor costs in those fields for two reasons. Number one … some immigrants are willing to work for less than their native-born counterparts. But also, it’s just extra supply, and an extra supply of workers reduces the costs.
If the immigrants weren’t there, the wages would likely be rising …. And that might be better for some of the native-born folks.

Middle class wages in progressive California have risen by one percent in the last 40 years, says a study by the establishment California Budget and Policy Center, Breitbart News reported September 3.

Accelerating automation may make the problem worse for lower-skilled Americans, Holder wrote in an August 2019 paper for the Migration Policy Institute:

More adaptable workers will likely reenroll in higher education and gain the requisite skills needed to land new (and perhaos better) jobs. But others will experience long periods of unemployment, and then either return to the labor market with lower earnings than before or withdraw from the market altogether.

California’s large scale use of H-1B visa-workers is also a problem for Californians. “Foreign workers on H-1B visas offer employers many advantages: they cannot typically quit the employer who hires them without losing their status, their opportunities in their home country often are substantially worse than these U.S. opportunities, and so forth,” according to Peter Cappelli, Wharton management professor and director of the school’s Center for Human Resources. He continued:

Wages do not rise to reflect the shortfall [of American workers], U.S. employees do not pursue these fields because of that, and employers then become completely dependent on H-1B workers to fill them. We have seen this play out in earlier periods where nurses and mid-level programming jobs were almost completely filled by foreign workers on these visas.

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