What a Shocker. Not! Wealthy California Has Highest Number of Poor Residents

Robin Hood is somewhere turning over in his fictional grave.

Visiting friends in Florida recently, my husband commented that if he were going to be homeless, he'd move to a warm state to do it. Well, sunny California is making room for more poverty-stricken residents than any other state in the union.

Color me not surprised!

Guess which state has the highest poverty rate in the country? Not Mississippi, New Mexico, or West Virginia, but California, where nearly one out of five residents is poor. That’s according to the Census Bureau’s Supplemental Poverty Measure, which factors in the cost of housing, food, utilities and clothing, and which includes noncash government assistance as a form of income.

Given robust job growth and the prosperity generated by several industries, it’s worth asking why California has fallen behind, especially when the state’s per-capita GDP increased approximately twice as much as the U.S. average over the five years ending in 2016 (12.5%, compared with 6.27%).

Uh, yeah, it is worth asking. But don't expect to get a satisfactory answer. I mean, there's an explanation, it's just one that makes you go, hmmm.

In the late 1980s and early 1990s, some states — principally Wisconsin, Michigan, and Virginia — initiated welfare reform, as did the federal government under President Clinton and a Republican Congress. Tied together by a common thread of strong work requirements, these overhauls were a big success: Welfare rolls plummeted and millions of former aid recipients entered the labor force.

The state and local bureaucracies that implement California’s antipoverty programs, however, resisted pro-work reforms. In fact, California recipients of state aid receive a disproportionately large share of it in no-strings-attached cash disbursements. It’s as though welfare reform passed California by, leaving a dependency trap in place. Immigrants are falling into it: 55% of immigrant families in the state get some kind of means-tested benefits, compared with just 30% of natives.

Self-interest in the social-services community may be at fault. As economist William A. Niskanen explained back in 1971, public agencies seek to maximize their budgets, through which they acquire increased power, status, comfort and security. To keep growing its budget, and hence its power, a welfare bureaucracy has an incentive to expand its “customer” base. With 883,000 full-time-equivalent state and local employees in 2014, California has an enormous bureaucracy. Many work in social services, and many would lose their jobs if the typical welfare client were to move off the welfare rolls.

Also look to exorbitant housing costs, tough environmental laws that drive up the cost of energy, and a $15 minimum wage (increasing through 2022). Guess what? No entry-level jobs, no need for a high minimum wage.

But keep working those policies, Sacramento. They're totally helping (cue sarcasm font).