Posted on February 23, 2018

If Immigration Creates Wealth, Why Is California America’s Poverty Capital?

Spencer P. Morrison, American Thinker, February 23, 2018

California used to be home to America’s largest and most affluent middle class. Today, it is America’s poverty capital. What went wrong? In a word: immigration.

According to the U.S. Census Bureau’s Official Poverty Measure, California’s poverty rate hovers around 15 percent. But this figure is misleading: the Census Bureau measures poverty relative to a uniform national standard, which doesn’t account for differences in living costs between states – the cost of taxes, housing, and health care are higher in California than in Oklahoma, for example. Accounting for these differences reveals that California’s real poverty rate is 20.6 percent – the highest in America, and nearly twice the national average of 12.7 percent.

Likewise, income inequality in California is the second-highest in America, behind only New York. In fact, if California were an independent country, it would be the 17th most unequal country on Earth, nestled comfortably between Honduras and Guatemala. Mexico is slightly more egalitarian. California is far more unequal than the “social democracies” it emulates: Canada is the 111th most unequal nation, while Norway is far down the list at number 153 (out of 176 countries). In terms of income inequality, California has more in common with banana republics than other “social democracies.”

More Government, More Poverty

High taxes, excessive regulations, and a lavish welfare state – these are the standard explanations for California’s poverty epidemic. They have some merit. For example, California has both the highest personal income tax rate and the highest sales tax in America, according to Politifact.

Not only are California’s taxes high, but successive “progressive” governments have swamped the state in a sea of red tape. Onerous regulations cripple small businesses and retard economic growth. Kerry Jackson, a fellow with the Pacific Research Institute, gives a few specific examples of how excessive government regulation hurts California’s poor. He writes in a recent op-ed for the Los Angeles Times:

“Extensive environmental regulations aimed at reducing carbon dioxide emissions make energy more expensive, also hurting the poor. By some estimates, California energy costs are as much as 50% higher than the national average. Jonathan A. Lesser of Continental Economics … found that “in 2012, nearly 1 million California households faced … energy expenditures exceeding 10% of household income.”

Some government regulation is necessary and desirable, but most of California’s is not. There is virtue in governing with a “light touch.”

Finally, California’s welfare state is, perhaps paradoxically, a source of poverty in the state. The Orange Country Register reports that California’s social safety net is comparable in scale to those found in Europe:

In California a mother with two children under the age of 5 who participates in these major welfare programs – Temporary Assistance for Needy Families, Supplemental Nutrition Assistance Program (food stamps), housing assistance, home energy assistance, Special Supplemental Nutrition Program for Women, Infants and Children – would receive a benefits package worth $30,828 per year.

Although welfare states ideally help the poor, reality is messy. There are three main problems with the welfare state. First, it incentivizes poverty by rewarding the poor with government handouts that are often far more valuable than a job. This can be ameliorated to some degree by imposing work requirements on welfare recipients, but in practice, such requirements are rarely imposed. Second, welfare states are expensive. This means higher taxes and therefore slower economic growth and fewer job opportunities for everyone – including the poor.

Finally, welfare states are magnets for the poor. Whether through domestic migration or foreign immigration, poor people flock to places with generous welfare states. This is logical from the immigrant’s perspective, but it makes little sense from the taxpayer’s. This fact is why socialism and open borders are fundamentally incompatible.

Why Big Government?

Since 1960, California’s population exploded from 15.9 to 39 million people. The growth was almost entirely due to immigration – many people came from other states, but the majority came from abroad. The Public Policy Institute of California estimates that 10 million immigrants currently reside in California. This works out to 26 percent of the state’s population.

This figure includes 2.4 million illegal aliens, although a recent study from Yale University suggests that the true number of aliens is at least double that. Modifying the initial figure implies that nearly one in three Californians is an immigrant. This is not to disparage California’s immigrant population, but it is madness to deny that such a large influx of people has changed California’s society and economy.

Importantly, immigrants vote Democrat by a ratio higher than 2:1, according to a report from the Center for Immigration Studies. In California, immigration has increased the pool of likely Democrat voters by nearly 5 million people, compared to just 2.4 million additional likely Republican voters. Not only does this almost guarantee Democratic victories, but it also shifts California’s political midpoint to the left. This means that to remain competitive in elections, the Republicans must abandon or soften many conservative positions so as to cater to the center.

California became a Democratic stronghold not because Californians became socialists, but because millions of socialists moved there. Immigration turned California blue, and immigration is ultimately to blame for California’s high poverty level.