Getting By Gets More Costly for Families

Driven by housing and child care costs, a California family with two working parents and two children needs to earn more than $52,000 annually to make ends meet, a study to be released today concludes.

That requires both parents to work full time at an hourly wage of at least $12.51, and it assumes that the family saves little or nothing toward retirement or their children’s college education.

Titled “Making Ends Meet: How Much Does It Cost to Raise a Family in California,” the report by the nonprofit research and advocacy group California Budget Project says that even families considered to be middle income are having to make tough economic decisions.

“We assume that if someone is above the poverty line, they’re getting by in life. If you’re making $30,000, it’s a good living,” said Jean Ross, the group’s executive director. “But if you’re trying to support a family, it’s not a good living. We hope to make the case that families in that income range need help with affordable health care. We need to look for ways to supply more affordable housing.”

The study seeks to build basic budgets using average costs of rent and utilities, child care, transportation, food, health care, taxes and miscellaneous expenses in different areas of the state.

The cost of supporting a family of four with two working parents ranges from $42,588 in rural Northern California counties such as Butte and Sutter to $61,593 in San Francisco, Marin, Napa and Alameda counties.

Living in Los Angeles costs about $51,459, according to the study. In Orange, Riverside, San Bernardino and Ventura counties, the report puts the figure at $50,993.

The estimates do not take into account the state’s worsening economy or increased energy costs due to recent hikes in electricity and natural gas prices.

Policymakers typically use the federal poverty level--in 2001, an annual income of $17,650 for a family of four--as the benchmark to judge economic well-being. But the report contends that the poverty threshold is an obsolete measure that fails to consider the reality of modern families, not accounting for needs such as child care.

For example, the report assumes that homeownership for many middle-income families is a distant dream. California’s homeownership rate, at 57.1%, is among the lowest in the nation, the report notes.

Housing prices cited in the report vary widely, from a median of $417,000 in San Francisco to $295,000 in Ventura to $215,900 in Los Angeles.

To buy a home in Los Angeles with a 5% down payment, a family would need an annual income of $61,462, which is about $9,000 more than the median household income. A 20% down payment eliminates the affordability gap in Los Angeles, but not in San Francisco, where a prospective homeowner would need to earn about $25,000 more than the median income of $74,900.

For the state as a whole, the report finds that in a family of four with two working parents, rent and utilities account for 20% of the budget; child care, nearly 20%; food, 14.7%; and taxes, 14.6%. A family of four pays about $7,600 in state and federal taxes, according to the report.

A previous Budget Project study, released in 1999, found that a California family of four in which both parents worked needed at least $44,880 annually to enjoy a modest standard of living. Those costs have risen more than $7,100 in two years.

Monthly food costs were $583 for such a family in 1999, but topped $638 in 2001. The average statewide cost of rent and utilities was $762 in 1999 versus $867 in 2001.

Stephen Levy, director of the Palo Alto-based Center for the Continuing Study of the California Economy, said he generally agreed with Budget Project conclusions that these are tough times for many middle-income families, especially those who purchased homes recently or are renters.

“That is why we’re seeing stories about the difficulties cities have in hiring firefighters, nurses and teachers,” Levy said, “because even with these middle incomes, they’re having trouble primarily because of housing costs.”

Levy said it is less clear that families in rural areas have as hard a time, saying the lower costs of living in those regions tend to make up for lower incomes.