California offers a good lesson that generous welfare spending is not a solution to poverty
Despite having the country’s most generous welfare system, California has the highest rate of poverty in the nation. Worse yet, it also has the lowest rate of upward mobility among specific groups of individuals, like Latinos and African Americans.
According to a report by the Urban Institute,
four of the nation’s top ten worst metro areas to live in for upward mobility for African‐Americans and Latinos are in California. Those regions include Los Angeles, Stockton, San Francisco and Bakersfield for African‐Americans and Santa Rosa, Los Angeles, Stockton, and Modesto for Latinos
One of the main culprits for this trend turns out, is bad public policy. Through its policies, California worsens poverty and inequality, as found by Cato’s research.
The Cato Project on Poverty and Inequality in California has spent the last two years studying the ways in which the state’s policies exacerbate poverty and inequality. We have found a variety of policies in areas as far-reaching as housing, criminal justice, education, social welfare, and economic regulation contribute to the problem.
Consider, just one example: housing. A number of state and local policies, including zoning, the California Environmental Quality Act, and building fees have limited the supply of housing and driven up costs. A report from the California Association of Realtors found that the average family would need to make at least $127,200 a year to buy a home in Los Angeles. Only 25 percent of the LA population could afford a home when the study was conducted in 2019. This means that some Californians reap a windfall from rising property values, while others are artificially locked out of the housing market. Making housing more affordable will allow minorities, with a long history of discrimination in the housing market, to accumulate intergenerational wealth. Owning more assets means that people can leverage the equity in their homes to pay for other needs.
Minnesota’s legislators are trying in so many ways to make Minnesota into California. With unnecessary proposals to hike taxes and increase spending — especially on assistance programs — and increase the breadth and burden of occupational licensing laws, among other things, Minnesota might as well be on its way to turning into another California.
We should be skeptical, however, about this trend. California’s policies haven’t done much for its low-income residents. The results are not going to be different in Minnesota.