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key takeaway

California’s unemployment benefits fall short, leaving many struggling to make ends meet when they lose work. State policymakers can raise unemployment benefits, ensuring this crucial support system adequately sustains Californians during job loss.

Unemployment benefits provide a critical safety net for many workers who lose their jobs, helping them to support their families while they seek to reenter the workforce. However, state unemployment benefits have not been raised in two decades and currently don’t provide enough money for Californians – particularly those with low incomes – to cover the cost of living. This points to the urgent need for California to increase state unemployment benefits so that workers can make ends meet when they lose work.

California’s unemployment benefits only replace up to half of a worker’s lost earnings. But many workers struggle to pay for food and rent even while working full-time. Covering the costs of living on half of their earnings is impossible. For the majority of California renters with low incomes who spend at least half of their income on rent, their entire unemployment benefit would go to rent if they don’t have other income sources. Or it might not even cover the full cost of rent, leaving them in debt, at risk of eviction, and with nothing left over to pay for other basic needs. For example, a worker who loses a full-time minimum wage job (at $16.90-per-hour in Los Angeles County) receives just $1,465 in monthly unemployment benefits, which falls $69 short of covering rent for a studio in Los Angeles.

Workers of color, including American Indian, Black, Latinx, and Pacific Islander Californians – and particularly women – are especially at risk of being unable to support their families while out of work because many have been segregated into low-paying jobs where unemployment benefits are too low to cover basic living costs. Insufficient benefits pose a particularly significant threat to the economic security of Black Californians, who consistently face twice the unemployment rate of white workers due to hiring discrimination and other barriers to work created through centuries of structural racism.

Losing a job would be less devastating if Californians could count on getting unemployment benefits that allow them to cover the costs of rent, food, and other basic needs while they search for work. State lawmakers should increase state unemployment benefits, especially for low-paid workers, and make sure that businesses uphold their responsibility to adequately fund this critical safety net for their workforce.

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key takeaway

California businesses pay taxes on the smallest share of wages in the United States, leading to insufficient funds for unemployment benefits.

Unemployment benefits provide a critical safety net for many workers who lose their jobs, helping them to support their families while they search for new employment. Millions of Californians turned to unemployment benefits after losing work due to the economic effects of the COVID-19 pandemic. However, policymakers previously failed to require businesses to pay the true costs of unemployment benefits for their workers, leading California to borrow billions of dollars from the federal government to pay for benefits – a repeat of what happened during the Great Recession.

California is one of just four states that allow employers to pay unemployment insurance taxes on the smallest wage base permitted by federal law, despite the lessons of the last recession and the need for businesses to contribute more to support the workforce.

State unemployment benefits are financed through payroll taxes paid by employers, which generate revenues that are deposited into the state’s unemployment insurance trust fund. But California businesses don’t pay these taxes on their entire payroll — they pay based only on the first $7,000 of each employee’s annual pay. This low base limits the amount of revenue the state can generate for unemployment benefits. For example, a 4% payroll tax would raise just $280 per worker in California, compared to $2,500 per worker in Washington state, where the taxable wage base is $62,500. Even with the same payroll tax rate, Washington would generate almost nine times more revenue than California for each employee making at least $62,500.

California’s taxable wage base has been frozen at $7,000 since 1983, failing to increase with rising wages. Consequently, the state’s base amounts to just 8% of the average annual earnings for a year-round worker – the smallest share in the US. In contrast, the taxable wage bases in 13 states are at least half of average annual earnings. Most of these states paid for unemployment benefits during the pandemic without federal loans.

California’s leaders must ensure that businesses uphold their responsibility to pay the true cost of unemployment benefits for their workers by increasing the taxable wage base for employer payroll taxes. This would not only prevent future debt, but also make it possible for California to increase unemployment benefits so that workers can meet rising costs of living as they seek to reenter the workforce and provide for their families.

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key takeaway

Young children in California faced a significant increase in poverty between 2021 and 2022, reversing the historic drop in child poverty from 2019-2021.

All young children go through critical developmental stages impacting their lifelong health and well-being. However, young children in poverty face greater barriers to receiving the nutrition, learning materials, safe housing, and other resources integral for successful development. Moreover, Black and Latinx families in California have been more likely to struggle to meet basic needs. This highlights racial inequities in young children’s access to necessities.1Limitations with sample size prevented the analysis in this publication from disaggregating by racial/ethnic identity. Lawmakers should invest in better publicly accessible data so that analyses (such as this one) can reliably disaggregate data by racial/ethnic identity to better understand inequities. Understanding trends in poverty for young children in California is therefore important for assessing the strength of federal and state anti-poverty policies and shaping policies that will help California’s youngest children to thrive.

How has poverty among young children changed over recent years?

Using the supplemental poverty measure, the following chart shows poverty levels from 2019 to 2022 for Californians across key age groups:

  • Ages 0-12: Includes children who are eligible for early learning and care programs through the California Department of Social Services.
  • Ages 0-5: Includes children who are eligible for early learning and care programs through the California Department of Education, Head Start, and Early Head Start. 
  • Ages 0-3: The ages before a child is eligible to enroll in transitional kindergarten. 
  • All Californians: Reflects Californians of any age, for the purposes of comparing poverty among young children.

Poverty trends for all Californians show a decrease in poverty from 2019 to 2021 and an increase from 2021 to 2022 as pandemic-era policies ended. Focusing specifically on young children, the chart shows that poverty among young children increased at a higher rate, as compared with all Californians. Specifically, between 2021 and 2022, poverty rose by 49% for all Californians, but it rose by 143% for children 0-3, 166% for children 0-5, and 121% for children 0-12. This uptick in poverty marks a reversal of the historic drop in child poverty from 2019-2021, reflecting how federal policy decisions to end key pandemic-era supports, such as the enhanced child tax credit, have negatively impacted California’s youngest children.

What can policymakers do to lift young children out of poverty?

The dramatic and troubling trends in poverty for young children hold key implications for California and federal policymakers. While recent California policy reforms targeting young children with low incomes, such as family fee reform, will support their well-being and health, more is needed.

Young children in California deserve to live in a state that affords them the opportunity to grow and thrive without experiencing poverty. Federal and state policymakers have several tools to draw on to ensure that poverty for young children, particularly young children of color, decreases.

  • 1
    Limitations with sample size prevented the analysis in this publication from disaggregating by racial/ethnic identity. Lawmakers should invest in better publicly accessible data so that analyses (such as this one) can reliably disaggregate data by racial/ethnic identity to better understand inequities.

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key takeaway

Income inequality in California widened during the COVID-19 pandemic, with the richest 1% taking home a record share of statewide income. Policymakers can address this by closing tax loopholes for the wealthy and profitable corporations.

California’s rich got richer during the pandemic. Recent data show that in 2021, when many Californians were struggling amid the COVID-19 recession, the share of statewide income going to the richest 1% spiked to a new high. The top 1% held nearly one-third (30.5%) of all income reported for state tax purposes that year — up from 23% in 2019 and their highest share on record (data before 1970 were not available). In fact, the top 1% held more income in 2021 than they did in 2000, at the peak of the dot-com boom.

Income inequality worsened in the pandemic. The average income of Californians in the top 1% rose from $2.3 million to $3.6 million between 2019 and 2021, while it declined for middle-income Californians, from $46,600 to $46,400. As a result, the top 1% had 78 times the income of middle-income Californians, on average, in 2021, up from 49 times the income just two years earlier. In fact, the average Californian in the top 1% earned in just five days what the average middle-income Californian earned in a year.

related content

Learn how California tax breaks are distributed in our Data Hit: Less Than 2% of State Tax Breaks Go to Californians with Low Incomes.

Californians want state policymakers to reduce inequality. Strong majorities of Californians know that income inequality has worsened and they want state policymakers to do more to address this problem, according to polling by PPIC. State leaders can do this by closing tax loopholes that favor the wealthy and profitable corporations in order to prioritize the significant investments needed to make housing, health care, child care, and other basic needs affordable for all Californians.

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