Poverty Rate in State Fell in 1990s

California’s late-1990s economic boom may be best known for creating swaths of dot-com millionaires. But it also helped to shrink income inequality and lift millions of residents out of poverty, according to a report released today.

The analysis by the Public Policy Institute of California shows that the state’s long expansion from 1993 to 2000 boosted the fortunes of people across the economic spectrum, with incomes of some of the poorest Golden State families growing faster than those of all but the very richest.

Over that period, the percentage of Californians living in poverty fell to 12.4% from 18.1%, while incomes for some of the poorest families grew by 32% compared with a 17% gain by high-income families.

While the poverty rate has inched upward since 2000, income inequality hasn’t worsened, in part because of a loss of high-wage jobs in technology and other sectors, the report said.

The results were welcomed by analysts who have become increasingly concerned about the wide gap between rich and poor in California, where income inequality and the poverty rate are higher than the national average.

“The last decade was one of shared prosperity here in California,” said economist Deborah Reed, program director for the San Francisco-based nonprofit, nonpartisan think tank. “That doesn’t mean we’ve solved our poverty problem. But it’s definitely a positive message about where we’ve come since 1993.”

The study -- based largely on an analysis of U.S. Census Bureau data -- compared income growth of California families across a broad spectrum, leaving out those in the lowest and highest 10% of the distribution. Their wildly varying incomes tend to skew the analysis, Reed said.

Focusing on the middle 80% of families, her calculations show that families at the low end saw their incomes grow nearly twice as fast as those at the top between 1993 and 2000. That was due largely to record numbers of jobs created throughout California in the late 1990s.

“The technology boom created demand for goods and services throughout the entire economy,” said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp. “Buildings had to be maintained. Gardening had to get done. It just sort of pushed everything along.”

Some of those income gains have been erased in the recent economic slowdown. California’s poverty rate has since crept up to 13.1%, while incomes of the state’s poorest families fell 3% between 2000 and 2002. Still, Reed said, that dip was a fraction of the 20% income decline the poorest households experienced in the deep recession of the early 1990s.

Particularly notable, Reed said, was that their relative income decline was no worse than that experienced by high-income California families, who have been disproportionately affected by the technology downturn and loss of thousands of high-skilled, high-wage jobs. Typically, she noted, low-wage workers with few skills get hammered harder than highly educated professionals during a downturn.

“We’re seeing a relatively mild effect now because the current downturn is less severe than in the early ‘90s and recent job losses have included high-income industries,” Reed said.

Poverty rates ebb and flow along with the business cycle, so it isn’t surprising that California’s poverty rate declined during the technology boom as job creation soared and unemployment fell. Still, even the wealth creation of the late 1990s hasn’t reversed the long-term trend.

In the last 30 years, California has seen its poverty rate grow to 12.4% in 2000 from 9.1% in 1969. That stands in sharp contrast to the rest of the nation, which saw its rate decline to 11.3% from 12.1% over the same period, according to the U.S. Census Bureau. In 2000, the poverty level for a family of four was $17,463.

Experts cite a variety of factors behind California’s elevated poverty rates, including a high rate of immigration of poorly educated workers. The poverty rate for foreign-born Latinos and Southeast Asians, for example, is 24%.

While the late 1990s boom helped mitigate the state’s income inequality, the income gap between rich and poor in California has grown faster than in the rest of the nation in the last 30 years. In 1969, high-income California families earned 2.3 times what low-income families earned. By 2002, the ratio rose to 3.4, the policy institute said.