The Conversation

Putting the focus on income inequality

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California, long viewed as a leader among the country’s states for its precedent-setting legislation, has a couple of top ratings that tarnish its progressive reputation – dire poverty and a yawning gap between rich and poor.

These are not problems solely besetting California. In January, Oxfam – an international confederation of organizations combating poverty – warned that the world’s richest 1 percent is on track to possess more than half of the globe’s wealth by next year.

That is dark news on the income inequality front, from a global perspective.

But just when it seems that Oxfam has identified a trend that is too abysslike for anyone to tackle, the Stanford University Center on Poverty and Inequality offers a way to think about this locally – in California and elsewhere in the United States.

In February, the center issued a report – “State of the States: The Poverty and Inequality Report 2015” – observing that experts have long appreciated “that when it comes to poverty and inequality policy, many of the available levers are found principally at the state or local level.” Among the levers it cites are the minimum wage, earned income tax credits for the working poor and, “perhaps most importantly, it is states that decide how to implement temporary assistance programs for families in need.”

For anyone doubting that income inequality is a pressing problem in California, consider this:

▪ In the three-year span from 2011 to 2013, California had more people living in poverty and a higher percentage of its population living in poverty, than any other state. The number of people in that category was more than 8.8. million – almost a quarter of the state’s population, according to the U.S. Census Bureau’s supplemental poverty measure. That measure is based on out-of-pocket spending on basic needs, including food, clothing, shelter and utilities. In 2013 that average poverty threshold for the nation was $25,639 for homeowners with a mortgage, $21,397 for homeowners without a mortgage and $25,144 for renters.

▪ The latest state unemployment figures count 6.9 percent unemployed – 1.3 million Californians. Experts say that number doesn’t count those who have given up looking for a job.

▪ California ranks as the state with the sixth-highest level of income inequality – with the most well-to-do 10 percent of households receiving 51 percent of income generated in 2012, according to the Stanford center. That follows behind Connecticut and New York, where the top 10 percent received 55 percent; Florida, 54 percent; Washington, D.C., 53 percent; and Nevada, 52 percent.

Jonathan Fisher, one of the authors of the Stanford report’s section on income inequality, said the report’s findings show “the top end (of households) has recovered fully while the middle class has not recovered: Their income is still below the pre-recession level. That’s probably our most startling statistic.”

Today the income inequality issue is very much center stage, emerging as one of the foremost issues of the 2016 presidential campaign: The topic is debated across the country – from the White House to the dinner tables of America.

In fact, income inequality has risen to such prominence that it is receiving notice from unlikely quarters.

For starters, Jeb Bush, who is mounting a campaign for president on the GOP ticket in 2016, has a super PAC that has stated: “While the last eight years have been pretty good ones for top earners, they’ve been a lost decade for the rest of America.”

Business is well aware of the problem, too. In January, an affiliate of the San Francisco Chamber of Commerce, Leadership San Francisco, met to discuss the topic for the first time in its 30-year history.

Bob Linscheid, president of the chamber, told me that the session was conducted to better understand the issue.

“The fear is when you have the haves and the have-nots, it creates a divisive attitude on the part of the public,” Linscheid said. “When there are haves and have-nots, you need to be investigating programs for those less fortunate.’’

Then there’s Jim Brulte, recently elected for a second term as chairman of the California Republican Party and formerly a state lawmaker for 14 years.

On a panel hosted by the Public Policy Institute of California in December, Brulte spoke about income inequality with his characteristic frankness: “If we don’t really understand that there are places in this state that are doing better than anywhere else in the world, and we also have areas in the state doing worse than just about any other place in the country, if we don’t recognize that and try to figure out how to fix that, that’s a recipe for a huge problem – even greater than we currently have.”

At another point in the panel discussion, Brulte observed: “We are not adding the middle-class jobs we need to add. … It may be the challenge of the next quarter century.”

Brulte rejected my request for an interview about income inequality. So we are left with his comments on the panel, which on their own are truly remarkable. This was no liberal Democrat speaking – this is the leader of the Republican Party in California.

Meanwhile in Sacramento, Speaker Toni Atkins, D-San Diego, says the Assembly will be putting a big focus on income inequality, “recognizing the need to make more investments in low-income and middle-income Californians.” While some measures – such as paid sick days for workers – have already targeted this problem, Atkins said, “50 percent of children in California are poor or near poor.”

Senate President Pro Tem Kevin de León, D-Los Angeles, also listed income inequality as one issue Democrats will focus on. In a recent speech before the Sacramento Press Club, de León said he and Senate Democrats “want to grow our middle class through education and job training to provide the skill sets that are required by businesses today.”

Sen. Mark Leno, D-San Francisco, is sponsoring legislation, Senate Bill 3, to increase the state’s current $9 minimum wage to $11 in January and $13 in July 2017, with the state minimum wage increasing annually based on inflation beginning in January 2019.

Leno says that under present state law, a person working full time at the current $9-an-hour minimum earns $18,000 a year before taxes.

“I am adamant that as long as it is legal to pay poverty wages in California, we will have high rates of poverty,” Leno told me. “When you make it illegal to pay someone working full time a poverty wage, you will lift millions out of poverty, and then fewer will qualify for government assistance.”

Another piece of legislation targeting income inequality is Assembly Bill 43, which establishes a state earned income tax credit aimed at helping low- to middle-income working households and their communities where the measure’s supporters say much of the tax credit money would be spent. Its author, Assemblyman Mark Stone, D-Scotts Valley, told me, “We want to put more money in the pockets of people who need it. This tax credit gives money to the poorest working families.”

The GOP leadership in the Democrat-controlled Legislature sees no easy fix. Assembly Minority Leader Kristin Olsen, R-Riverbank, notes Brown already signed legislation in 2013 raising the minimum wage and adds she doesn’t see “this is as a silver bullet when it comes to tackling poverty.”

“One of the challenges of raising the minimum wage is that businesses have to do one of two things – raise the cost of goods and services, or limit the number of employees they can hire.”

Olsen, who said her father had to work his way out of poverty, adds that Assembly Republicans “are very concerned about how high our poverty rates are. We are finding generations of Californians living in poverty, and we are committed to addressing the issue.”

She said an Assembly GOP package will focus on creating a regulatory environment that helps working families gain scheduling flexibility and also allows more Californians to “participate as entrepreneurs.”

Senate Minority Leader Bob Huff, R-Diamond Bar, says Republicans “are looking for opportunities to weigh in” on the poverty issue. But about legislation increasing the state’s minimum wage again, he says: “Mostly I see the GOP against it.”

Right now, we are early in the legislative cycle. But it is certain that whatever happens on income inequality in the Legislature this year, the governor will play a crucial role.

As GOP state party leader Brulte put it when he was on the Public Policy Institute panel: “Jerry Brown is, in fact, a strong governor, and when he focuses, he knows what he wants, he drives to it and he gets results.”

Brulte’s observation is true.

The governor stands on a stage he knows intimately, having been in political office in Sacramento off and on since the 1970s and having participated in countless negotiations on budgets and other major legislation involving billions of dollars.

He knows that California has historically been a recognized leader nationwide on a wide array of political issues – energy, the environment and workers rights, to name a few – and he cares very much about how future historians will measure him.

“We are now in a period of economic growth that has become increasingly uneven, and that threatens the state’s future growth,” said Chris Hoene, executive director of the California Budget Project, which performs analyses aimed at improving the economic well-being of low- and middle-income Californians. “As that becomes more noticeable, the pressure on the governor grows from all sides to move to a strategy of growth and investment. The heat is on,” Hoene said.

While Brown says California already does a lot for people in need, some critics, including Neel Kashkari, Brown’s GOP opponent in last year’s election, complain he doesn’t grasp fully the plight of those on the bottom.

Brown has shown, though, that he clearly understands one central facet of the problem: In a speech last year to the California School Employees Association, he asked, “If the consumers are up to their eyeballs in debt, aren’t making a decent salary, how the heck are they going to buy anything? And if they don’t buy anything, the economy doesn’t go forward and doesn’t work.”

As the governor evaluates his course of action, he knows that a large portion of his popularity rests on his long-standing reputation as a prudent, often tight-fisted politician when it comes to spending the state’s revenues – and the programs to combat poverty and income inequality do cost money.

So it remains to be seen whether Brown will use his political power to help craft comprehensive legislation tackling California’s poverty and income inequality in a way that makes a profound impact within the state and far beyond its borders.

This much is known: Such legislation will not succeed without him.

Susan Sward is a writer who lives in San Francisco.

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