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.

Published Sept. 27, 2016

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.”

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