Poverty: It’s Not Where You Think It Is

Chuck DeVore | Vice President, Texas Public Policy Foundation

Ask Americans where the nation’s deepest pockets of poverty are and most will likely answer, “The South.”

They’d be wrong, of course.

The Official Poverty Measure, now over 50 years old, is built on a simple equation: if income is less than three times the cost of a subsistence diet, scaled for family size, including cash government assistance, a person or family is poor. By this standard, New Mexico has the dubious distinction for the highest poverty rate in the U.S., 21.5 percent (averaged over three years), followed closely by Mississippi at 20.7 percent and Louisiana at 20.6 percent.

But, this ancient poverty formula, untouched since the early days of the Lyndon Johnson Administration, has two ridiculous omissions: first, it assumes the cost of living in New York City (average rent: $3,432) is the same as it is in Lubbock, Texas (average rent: $947); second, it ignores non-cash assistance to the poor, such as food stamps and housing subsidies, as well as costs, such as work-related daycare expenses and payroll taxes.

What if there was a measure of poverty that accounted for these things? What would America’s map of poverty look like then? Well, fortunately, there is such a measure, it’s called the Supplemental Measure of Poverty and the U.S. Census Bureau has published state-level estimates for it for the past three years now.

The Supplemental Poverty Measure accounts for state variations in the cost of housing and it calculates the value of myriad non cash government assistance to the poor as well as common expenses incurred by the working poor. Under this measure of poverty, the generally low cost South, except Florida, and the Midwest see their true poverty levels drop, while poverty rates soar in California, Florida and much of the Northeast.

In fact, by the Census Bureau’s reckoning via the Supplemental Poverty Measure, California, not Mississippi or New Mexico, has the nation’s highest poverty rate, with almost a quarter of Californians, 23.4 percent, living in poverty once the cost of housing is considered.

This Golden State poverty revelation can cause serious cognitive dissonance for a committed liberal. How is it, they might ask, can California, a state with the highest and steepest “spread the wealth around” personal income tax rate, 13.3 percent, also have the nation’s highest poverty rate? How can a state which has the nation’s fourth-highest state and local taxes as a share of income designed to fund an all-encompassing welfare state also have the worst poverty in America? (Commence rending of garments.)

California’s defenders will cite its high costs and the fact that it’s a minority-majority state to rationalize its highest-in-the-nation poverty rate. “The weather is great in California,” they say, “of course housing is expensive.” Well, the weather isn’t so great in New York or New Jersey, and housing is expensive there too. The fact is that overregulation, restrictive zoning and land use policies, taxes, and environmental rules all contribute to putting adequate housing out of reach of too many Californians, New Yorkers, and New Jerseyans. For instance, developers who’ve done business in Texas and California say that what takes four to five months to get permission to build in the Lone Star State takes four to five years to obtain the needed permits in California.

But what about demographics? Certainly some slack should be cut for the Golden State’s rich diversity?

There are four minority-majority states: California, Hawaii, New Mexico and Texas. The most-populous of the four look a lot like the nation will by 2030 when demographers predict America itself will become majority-minority.  

The Census Bureau gathers information on Supplemental Poverty rates by race and ethnicity at the state level, allowing comparisons between like groups. The picture isn’t pretty for the Golden State’s vaunted self-esteem: the poverty rate for white, non-Hispanics in California is 14.8 percent, in Texas, it’s 9.7 percent; Hispanic poverty is a whopping 33.7 percent in California, proportionately 48 percent higher than Texas’ 22.7 percent rate; among African-Americans, poverty is 30.1 percent in California vs. 19.9 percent in Texas; Asian poverty is 17.9 percent in California compared to 14.1 percent in Texas. Overall, there are proportionately 47 percent more people in poverty in California than in Texas. For all four of America’s largest racial or ethnic groups, California has a poverty rate that’s above the national average for that group. In Texas, all four of the demographic groups enjoy below average poverty.

When politicians suggest using the power of government to combat poverty, is it too much to ask that we first, do no harm? As a cure for poverty, a true accounting of wellbeing suggests that jobs and opportunity beat taxes, regulation and welfare.

Chuck DeVore is a vice president with the Texas Public Policy Foundation and served in the California legislature from 2004 to 2010.

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