Not so golden

AS DIRECTOR of development at the Second Harvest food bank in Riverside, California, Tracylyn Sherrit is used to fielding tales of hardship. But these days they sometimes come from unexpected quarters. An elderly woman in Palm Springs, a reasonably prosperous tourist town in eastern Riverside County, recently called, desperate for help: her family were visiting for Thanksgiving and she could not afford to feed them.

Riverside County is part of the Inland Empire, a vast sprawl east of Los Angeles that was whacked by the housing bust. California’s inland areas, such as the Inland Empire and, to its north, the agricultural lands of the San Joaquin Valley, have long lagged the coast on indicators such as employment, income and education. At the California Economic Summit, a recent gathering of state worthies, all the talk was of “two Californias”: the wealthy coastal part and the struggling inland bit. Cities like San Bernardino and Fresno reek of poverty and sadness.

But two recent reports suggest that poverty in California’s coastal areas may have been significantly understated, thanks largely to high housing costs. The US Census Bureau’s traditional measure, which pegs the poverty line at $23,492 for a family of four, ignores geographical variations in the cost of living, as well as non-cash benefits such as tax credits. Include these and the poverty rate in Los Angeles County (America’s largest by far by population) climbs from 18% to 27%, according to a recent report from the Stanford Centre on Poverty and Inequality and the Public Policy Institute of California, a think-tank. Most other cities also see big jumps; San Francisco’s rate nearly doubles.

On this accounting California’s poverty level rises to 22%. The Census Bureau’s “supplemental poverty measure”, which uses a similar methodology, has it at 23.8%, the highest in the country (by the traditional measurement California is 14th). In America’s biggest state, more than 8m people struggle to meet their everyday needs. Over one-quarter of children live in poverty. But California has spent so long grappling with its fiscal woes that this has been neglected. “Everyone knows it’s an issue,” says John Husing, an Inland Empire economist. “But no one is talking about it.”

The unavoidable cuts to social services have been biting hard. A recent rosy report from the state’s fiscal analyst has spurred calls from Democrats to repair the safety net. But Jerry Brown, the governor, seems determined to hold the line. Nor does he seem too concerned by the high poverty rate, which he recently described as “the flip side of California’s incredible attractiveness”. Low-skilled immigrants flock to the state, he argues, and take low-paid jobs. At best this simplifies the issue. California is not the magnet for foreign immigrants it once was; educating and integrating their children is now the main task. But there is no hiding the ethnic divide. Almost one-third of California’s 15m Latinos live in poverty. Two-thirds of Latino adults have a high-school diploma at best, compared with 26% of whites and 36% of blacks.

In fairness, Mr Brown has not been idle. He has adjusted school-finance formulas to send more cash to poor areas, and has cautiously backed fracking in the vast Monterey oil shale, which may one day generate serious wealth and jobs. More immediately, he has approved a rise in the state’s minimum wage to $10 an hour, beginning in 2016 (although some business groups fear this will kill jobs).

But he faces strong headwinds. The state may be piling on jobs, but from a low base: at 8.7%, the unemployment rate is still the fifth-worst in the country. Add the underemployed and discouraged, and California is second only to Nevada. One third of America’s welfare recipients live in the state. California is also hollowing out: between 2007-09 and 2010-12 the number of people earning between $50,000 and $100,000 fell by almost 75,000, while every income bracket above and below grew. Income inequality is higher than in almost any other state, by one measure. The elites of the Bay Area are thriving, and growing in number, even as the poor of the Inland Empire struggle to survive. Without some sort of policy fix, and soon, California will be the Golden State only for the few.