California’s high cost of living, especially for housing, is the major reason why the state has the nation’s highest rate of poverty, according to an alternative method of calculation used by the Census Bureau.
The Tax Foundation has now calculated another way high living costs affect the state – devaluing Californians’ incomes and financial assets relative to other states.
It’s called “the real value of $100” and is based on new data from the federal Bureau of Economic Analysis for 2014.
In California, $100 was worth just $88.97 in real 2014 purchasing power, relative to the nation as a whole, and that was the fifth lowest value behind the District of Columbia ($84.67), Hawaii, New York and New Jersey, all of which also have high housing costs.
Other studies have shown that Californians devote higher portions of their incomes to housing, both owner-occupied homes and rentals. The state has a chronic housing shortage, which drives up costs, and making housing construction easier is a major issue in this year’s legislative session. Gov. Jerry Brown has proposed to cur regulatory red tape for some kinds of housing projects.
From the standpoint of a c-note’s purchasing power, Mississippi was the highest in 2014 at $115.34, 30 percent more than what $100 would buy in California. It was followed by Arkansas, Alabama, South Dakota and West Virginia.
Personal incomes, which also tend to be higher in high-cost states such as California, offset somewhat the sharp differences in cost-of-living.
However, the state has a substantial bloc of low-income residents. About a third of Californians are receiving health care under Medi-Cal, which serve the state’s poorest residents, for instance. And that’s why the state has the nation’s highest rate of poverty, nearly 25 percent.