Impact Brief: A Better Yardstick for Measuring California Poverty Alters the Policymaking Landscape

By the fall of 2018, David Grusky knew that time was running out. Almost a year had gone by since California legislators convened a task force to end deep childhood poverty, and the reporting deadline was fast approaching. The simple—but ambitious— goal was to be the first state in the country to put an end to hunger, homelessness, and other forms of extreme deprivation among children.

That turned out to be easier said than done. Every time Grusky, a Stanford sociology professor, and his collaborators ran the numbers on any given proposal, they found the costs were too high and the poverty reductions too modest. These task force simulations were based on the state’s premier poverty measure, called the California Poverty Measure (CPM). The CPM was developed a decade earlier to analyze the impact of government programs on poverty rates in the state. This measure painted a more accurate picture of poverty levels than federal calculations.

The task force had looked at every poverty-reducing option available, including expanding existing earned income tax credits, with an eye toward keeping costs low while maximizing impact. But they kept running into the simple problem that existing programs tended to benefit those who aren’t among the neediest.

This didn’t align with the task force’s goal of helping the state’s neediest families—defined as those living on incomes that are less than half the threshold defining regular poverty. These families, which are typically making $5,000 to $15,000 a year, are said to be in “deep poverty.” Because all of the proposals on the table helped not just those in deep poverty but also those who were better off, they were very costly and “inefficient” in the sense that money was being spent on those who needed it less. Although it would of course be ideal to help less needy families too, it ended up costing a lot and thus would be fiscally unworkable.

The only solution, Grusky and his team concluded, would be to recast the federal child tax credit to better target children in deep poverty. So they used the CPM to assess how much money the state’s poorest residents would need to escape poverty, and they then proposed a state supplement to the existing child tax credit equaling the difference between the family’s income and the CPM deep poverty threshold. Late last year, the task force issued 25 recommendations, and one of the centerpiece recommendations was this so-called targeted child tax credit.

450,000: The number of California children who would benefit from a tax credit aimed at helping reduce poverty, according to the Stanford Center on Poverty and Inequality

The task force cited figures from the Stanford Center on Poverty and Inequality showing that 450,000 children in California would benefit from the credit. The task force also determined that the $2.4 billion annual cost of the credit would be more than offset by the $12 billion in yearly savings that state and local governments would eventually accrue as families use the tax credit to stabilize their housing situations, make investments in their children’s schooling, and thus became less dependent on services as well as earn more and pay more taxes.

If enacted, the task force concluded, the credit could end deep poverty within four years. “With the highest poverty rate of any state in the country, California has long been not just the land of plenty, but also the land of poverty,” said Grusky, who also directs the Center on Poverty and Inequality. “We can now do something that no state has ever done before: end deep child poverty.”

A ‘PRECISION POVERTY’ APPROACH

The task force’s embrace of the CPM was further evidence of how the measure has become embedded in state and local anti-poverty policymaking. In the midst of the Great Recession a decade ago, the Stanford center joined with the Public Policy Institute of California, a leading nonpartisan think tank, to devise a better way of measuring poverty within the state. For decades the prevailing yardstick has been a Census Bureau index, called the Official Poverty Measure (OPM), that doesn’t account for housing costs or benefits like food stamps or the Earned Income Tax Credit.

The 2007–08 recession hit Californians especially hard. But the OPM didn’t show well what was happening in California.

“We knew that the official numbers just weren’t doing justice to the level of poverty we saw on the ground,” said Charles Varner, the associate director of the Center on Poverty and Inequality.

In response, Stanford and the PPIC pulled together a core group of eight researchers from across disciplines, including sociology, political science, and economics, to develop a new measure of poverty that built on recent advances in poverty measurement. This measure, released in 2013, painted a far more authentic—and darker—picture of statewide poverty. The CPM, for example, found that 22% of Californians were living in poverty in 2011. In contrast, the Official Poverty Measure had pegged the rate at 19%. The difference amounted to 2 million women, men, and children.

The CPM, updated annually, also shows policymakers where poverty rates are highest, where they’re getting worse, and where they’re improving. It reveals, for example, a perverse state of affairs in which some of the most prosperous areas also have the highest rates of poverty. Residents in Los Angeles County and the Bay Area, for example, often have steep housing costs combined with higher incomes that sometimes make them ineligible for safety net benefits.

The measure also serves as a diagnostic tool for evaluating the effects of any government policy or program that impacts poverty, including education and health care. It shows, for example, that poverty among the elderly and African Americans would more than double without access to social services programs. At the county level, Stanford scholars are using the CPM to help San Diego assess two programs aimed at providing housing for homeless individuals and cutting their health care costs. They are also advising Santa Cruz County on the impact of a jobless benefit services. “The CPM doesn’t just tell us how much poverty there is,” said Grusky. “It also helps us figure out how to take it on efficiently.”

What are the next steps? The first goal is to deliver the CPM more frequently, not just annually but quarterly, thus allowing the state to identify—and address—emerging problems in real time. The second goal is to deliver the CPM at a very detailed neighborhood level. This will make it possible to identify local neighborhoods that are in trouble and to quickly address problems by bringing in food banks and other services.

The third goal is to provide families and case workers with richer information on the programs that they’re currently using, the ones for which they’re eligible but not using, and various jobs and training programs that are locally available and that have proven successful for other families in similar situations.

Think of it as precision medicine for poverty. Just as a doctor prescribes a treatment based on a patient’s individual characteristics, so too a case worker could work with the family to devise approaches and strategies specific to the needs and characteristics of the family or individual.

“We haven’t had the ability—up until now—to determine which families would benefit more from one program over another,” said Varner. “Using the CPM infrastructure to design precision treatments will usher in a real revolution in how policy is made.” “It’s our job,” says Varner, to “deliver on California’s historic role of providing hope, optimism, and solutions.”

This issue brief describes how teams of researchers and leaders in government, business, and nonprofits can work together to generate new ideas, insights, and solutions to make progress on social problems. David Grusky, the Barbara Kimball Browning Professor in the School of Humanities and Sciences and the Director of the Center on Poverty and Inequality, is co-PI with Maya Rossin-Slater of the Early Childhood Development Lab. The Early Childhood Development Lab works with the Department of Children, Youth, and Families at the State of Washington with the support of Stanford Impact Labs’ Start-Up Impact Lab Funding. This brief was written prior to the launch of Stanford Impact Labs to show how new evidence and insights developed jointly by scholars and external practitioners can inform policies and programs to improve lives.

Stanford Impact Labs invests in highly motivated teams of researchers and practitioners from government, business, nonprofit organizations, and philanthropy. These teams—impact labs—work together on social problems they choose and where practical progress is possible. With financial capital and professional support from Stanford Impact Labs, they can rapidly develop, test, and scale new solutions to social problems that affect millions of people worldwide.

Learn more about the work Stanford Impact Labs is investing in at impact.stanford.edu.