By: Anne Wilson, CEO, United Way Bay Area and Peter Manzo, CEO, United Ways of California
Did you know that the federal poverty line does not reflect the struggles of Californians in poverty today?
What the High Cost of Living Means Day to Day
The high cost of living in the Bay Area is alarming, especially because it affects a number of families’ ability to live and work in the same community. With high housing costs in metropolitan areas, families are forced to live farther away from the workplace causing long and necessary commutes. This disproportionately affects low income people of color.
This is unraveling many aspects of civic life. If you are commuting 90 minutes to and from work, how able will you be to participate in your child’s school? Or in their out of school life? It puts a tremendous pressure on all aspects of life.
To help local United Ways and other nonprofits improve programs that reach out to families that have the greatest struggle, United Ways of California conducted a study of what it really costs to meet basic needs. Unlike the official poverty measure, which does not accurately account for local costs of living, Struggling to Stay Afloat: The Real Cost Measure in California 2018 looks at the cost of a decent standard of living for different family sizes in every county in California, and then analyzes how many families in each county and neighborhood cluster struggle to meet those costs. The study found that more than one in three California households (33%) do not earn sufficient income to meet basic needs. This is roughly three times the official federal poverty rate.
Other key findings include:
- Working Hard, but Not Earning Enough: Of the estimated 3.3 million households in California that fall below the Real Cost Measure, 9 in 10 have at least one working adult (when you control for households led by seniors and people with disabilities)
- Housing Burden: Nearly 4 in 10 households in California (38%) pay more than 30% of their income on housing. Households below the Real Cost Measure report spending from 45% of their income on housing to as much as 79% of their income for households below the federal poverty level.
- Households of all Ethnicities Struggle, but Rate is Higher for Latino and African Americans: Latino households are more likely to struggle compared to other ethnic groups. Over 1.5 million Latino households are estimated to fall below the Real Cost Measure compared to over 1 million white households, 429,000, Asian American households, and 269,000 African-American households
- Single Mothers: Over 7 in 10 single mothers in California (72%) fall below the Real Cost Measure
- As Education Increases, rate of Struggling Households Falls: Nearly three-fourths of California householders without a high school diploma or equivalent (71%) fall below the Real Cost Measure compared to those with at least a high school diploma (48%), at least some college education (33%), and at least a bachelor’s degree (15%)
- 6 in 10 Young Children Live in Struggling Households: 45% of households led by a person born outside the U.S. are below the Real Cost Measure, and that number rises to 63% when the householder is not a citizen. Households led by Latino non-citizens struggle most, especially if the household does not include someone over 14 years of age who speaks English well (82% below the Real Cost Measure).
- Seniors: Nearly 1 in 3 seniors struggle to meet basic needs (29%) according to the Elder Index, a measure by the UCLA Center for Health Policy Research
At the heart of the Real Cost Measure are household budgets. Household budgets are easy to understand as they speak to the realities families have to deal with every day, with challenges like:
- How much can I afford on school supplies for my children after my reduced work hours this summer?
- How do I replace my leaky roof when all my income has gone towards this month’s rent?
- How am I going to give my daughter medical attention when the transmission in our car is broken?
This research is also informative for policy makers and community partners to be data-driven in their program development and outreach to communities.
Helping Families Move Up
The good news is, if we work together, there are things we can do to help everyone move up the economic ladder, both by working directly with struggling families as we do through SparkPoint, and also by changing the environment, the water these families swim in, to increase the odds they succeed. United Way Bay Area leads a number of initiatives with nonprofits and public sector partners in coalitions to strengthen families, empower young people, and help them build their own pathways out of poverty.
One of UWBA’s biggest initiatives is called SparkPoint, a network of 22 sites around the Bay Area, that provides financial coaching for families who are struggling to make ends meet. These centers are in community colleges and in elementary schools to support parents of low income families all around the Bay Area.
People who are struggling financially are struggling on many fronts. The SparkPoint program is built around evidence that addressing more than one aspect of financial stability is the most effective approach. SparkPoint centers provide training, coaching and technical assistance to help families pursue four goals: a self-sufficient income (meeting the Real Cost Measure), a credit score of 700 or more, savings equal to three or more months of living expenses, and zero revolving debt. This is intensive work, but well worth it. We have found it can take a family 8-10 months to achieve one of these four goals.
Coaching Low-Income Californians to Build Financial Stability
As the Real Cost Measure report found, low income people are working hard, but not earning enough. Of the estimated 3.3 million households in California that fall below the Real Cost Measure, 9 in 10 have at least one working adult (when you control for households led by seniors and people with disabilities). The challenge is not to get low-income people a job or income, it’s to get them more income, and help them be more savvy about how the manage their household’s finances and move up the economic ladder.
One challenge is that many people fall into poverty and substantial credit card debt because of a medical issue or loss of employment. This significantly affects credit score, which makes it harder to do basic things like renting an apartment or buying a car. United Way SparkPoint centers help address the financial management challenges of low income families with dozens of nonprofit and public sector partners. We coach people through all aspects of their financial health and economic mobility. It’s over time: it’s never one thing, and never an overnight turnaround for people, which is why steady funding for United Way programs, through monthly sustainers and recurring donors, are so important to us.
Another challenge is that while there are tax credits available for low income Americans, it can be hard to get that money without some help. We work to help people access that: It’s their money!
United Way has a coalition of 200 partners in the Bay Area providing free volunteer income tax assistance so that low wage earners can access their federal and CA earned income tax credit, child care refunds, and other credits that they are entitled to. Last year in the Bay Area, that accounted for more than 75,000 tax filers and nearly $80M in refunds and credits, which literally put money into the households of low income families. This is the most useful change to help people meet their needs! We work with thousands of volunteers across hundreds of sites in the Bay Area to reach as many people as possible.
United Way works in the field of youth employment. We know that young people are often financial contributors to their households to help their families make ends meet. The motivation for completing high school and then post-secondary education is highly influenced by young people’s exposure to what jobs and careers are in the Bay Area. United Way has assembled a large coalition of nonprofits and employers that place young people in internships and jobs to provide them experience and motivate their educational completion and achievement.
Providing Basic Needs
It’s hard to learn skills to get a better paying job if you don’t have somewhere to sleep at night or enough food to eat. To address this, United Way works in coalition with nonprofits to help provide for basic needs. In the Bay Area alone, United Way touches about 250,000 lives in the course of a year through initiatives like these. United Way is the distributor of federal funds to emergency food and shelter programs. We know that people must be fed and housed if they are to get on their feet and into a place of stability for themselves and their families. We work with networks of nonprofits and distribute funds and build relationships among those nonprofits to have a better/seamless set of services provided to people.
One of the biggest issues we heard was that people don’t know where to turn for help. United Way supports the 2-1-1 service, which is a free information and referral service that connects people to health and human services in their community 24 hours a day, 7 days a week, through a website, chat and live help from trained specialists, in 150 languages. United Way founded and pioneered the use of the three-digit dialing code 2-1-1, in Atlanta, and won permission from the FCC for programs across the country to use it. In California and across the country, about half of 2-1-1 programs are operated by United Ways, and another quarter are substantially funded by United Way.
What you can do to support people facing a high cost of living?
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Beyond Inequality: How to Help Families Be Upwardly Mobile and Financially Stable
Struggling families overwhelmingly are working families, as the Real Cost Measure report highlights, but hard work often is not enough to get ahead. While it is reasonable to expect these working families to do what they can to improve themselves, it is both hard-hearted and foolish to expect them to overcome the odds through heroic effort alone.
We all stand to benefit if more struggling families and individuals move up so they can meet a basic standard of living. To help them at scale, we should look for ways to change the environment to make it easier to navigate for working families. In the Bay Area and at the state level, United Way was an early advocate for establishment of the California earned income tax credit, for affordable housing bonds in Alameda and Santa Clara county, both of which passed, and for increases in the minimum wage. All of these successful efforts have improved chances for millions of struggling families, far more than we could ever serve directly.
Here are some key areas we suggest donors, policy makers and nonprofits look for other large-scale changes that could make a difference:
- Maximize support already available
- Support Working Families with Quality Childcare
- Increase Affordable Housing and Support Renters
- Be Future Ready: Building the School-to-Career Pipeline
- Adapt Health and Retirement Benefits to Changes in Work
Right now Californians leave $4.5B in federal support for low income families because we’re not connecting everyone to the earned income tax credit or CalFresh food assistance (SNAP). Increasing access to the federal and state EITC and CalFresh would put money back in the hands of low-income Californians, and this also would boost local economies. Put simply, more money can help relieve the pressure of a number of challenges, including rising housing costs. Since 38% of California households pay more than 30% of their income on housing, financial support makes a difference in the lives of our struggling neighbors.
The return on investment (ROI) of high quality child care and preschool could make hedge fund managers envious. For every $1 invested in Head Start, America reaps a ROI ranging from $7 to $9. And yet, 6 out of 10 California children ages 0-5 are growing up in a financially stressed household. If we could provide high quality preschool and childcare to every child, that would benefit children, families, and our shared future. Children would be healthier and enter school ready to learn, and parents would have more time to build their skills or work more hours.
On a recent United Way listening tour, housing and homelessness was the #1 issue we heard about. There is no clear fix for our affordable housing crisis, so we should explore multiple strategies. More can be done to incentivize developers to build affordable housing near major job centers. We also should devote more attention to renters; nationally, we spend 4x more to subsidize homeownership compared to support for affordable housing. Iin a high-cost area like California, renting is more relevant for many more households. That’s something we should look at.
As the Real Cost Measure report highlights, 69% of householders without a high school diploma fall below the Real Cost measure. We need to improve how young people move from cradle to career – enter school ready to learn, read at grade level by third grade, graduate from high school ready for college or real careers, and lifelong learning and skill-building. California public schools do an excellent job in most communities, but where they really have trouble is in educating low-income students. There’s a lot of work being done on that, but it’s essential to integrate K-12 school systems community college, and workforce development so they all pull in the same direction. That pipeline is where systemic change could make a big difference for young people to move into living wage professions and beyond
After the 1930s, we built our social contract around the expectation of a stable job working for a company, perhaps for an entire working life, and important social supports – – access to health coverage, retirement benefits, and more, even unemployment benefits while out of work – were all based around that assumption. Virtually no one today expects to work for one company their entire life; people move jobs often, and often have extended periods where they are without a job. As much as 30% of the workforce are “contingent,” meaning they don’t work full-time or for one employer; this “gig economy” is not just Uber and Lyft drivers, but independent contractors, consultants, temporary and seasonal work, outsourced service providers, agency temp workers, domestic workers, day laborers and more. We need a modern benefits system that’s not tied to one employer or full-time status, and this is even more urgent given the acceleration we are seeing in changes brought by automation and AI.
Curious about the details, demographics, and data? Download the full text of the Real Cost Measure in California 2018 from United Way here.
About the Authors
Chief Executive Officer, United Way Bay Area
Anne joined United Way Bay Area in 1980, and was named its first female CEO in 2000. Under her leadership, United Way has transformed from a community fundraiser into a leader in the fight against poverty. “Sometimes the challenges we face are daunting, but I take strength from the amazing staff, volunteers, and community partners who come together every day at United Way.” United Way works in coalitions with other nonprofits, public sector partners, and direct service providers to reach the most vulnerable community members and provide support in comprehensive wraparound ways to assist them in their own economic stability and mobility.
President & CEO of United Ways of California
United Ways of California improves health, education and financial results for low-income children and families by enhancing and coordinating the community impact and advocacy work of California’s United Ways.
Prior to his work with United Way, Pete was Director of Strategic Initiatives for The Advancement Project, a civil rights “action tank” that advances equity and expands opportunity for low income and vulnerable people, Executive Director and General Counsel of the Center for Nonprofit Management, where he directed the expansion of the Center’s information, training, consulting, technology and search and compensation services to nonprofits; and Directing Attorney of Community Development Programs for Public Counsel. Mr. Manzo is a graduate of Boalt Hall School of Law at the University of California, Berkeley; he also is a graduate of the London School of Economics, where he received a Master’s degree in Political Sociology, and the University of Notre Dame, where he received a Bachelor’s degree in Government.