Still the Golden State?

California is nothing if not a land of contrast. It is a state of astounding economic might, yet it carries the highest poverty rate in the nation. It has more residents on the Forbes 400 list of wealthiest Americans than any other state, but also has the most homeless people — nearly 25% of the entire U.S. total.

And even as it touts its standing as the world’s fourth-largest economy, state or country, the gap between the rich and poor in California remains near historic highs. Wealthy residents enjoyed skyrocketing investment returns during the pandemic and into the A.I. boom, while low-income workers were laid off service economy jobs and then ate into their savings — if they had them — in order to survive.

With Californians now bracing for further fallout from deep federal funding cuts and the state’s own retreat from covering undocumented adults under Medi-Cal, here’s a closer look at some of the economic realities of living in the Golden State — and some of the challenges that lawmakers may wrestle with in the coming year:

Poverty. With its poverty rate of 17.7% in 2024, California was tied with Louisiana for the worst in the nation, according to a September brief issued by the California Budget & Policy Center. (Louisiana is consistently rated one of the poorest states in the country.)

Using U.S. Census Bureau data, the center found that California’s poverty rate for children was even higher, at 18.6%. Overall, the number of Californians living in poverty, as defined by the Census Bureau, came to roughly 7 million, or the populations of Los Angeles, San Francisco, San Diego and San Jose combined.

Researchers at Stanford, meanwhile, found that in 2023, nearly a third of all Californians either lived in poverty or were close to it. The university’s Center on Poverty and Inequality worked with the Public Policy Institute of California to develop the data, using their own California Poverty Measure. The CPM goes beyond federal counts by including “necessary expenditures” like child care and out-of-pocket health costs, while adjusting for California’s soaring cost of housing, which varies greatly by region.

Under both counts, the state’s Latino residents are disproportionately poor — as many as 10 percentage points more so than their portion of the population. Latino workers were hit especially hard during the pandemic by the closing of businesses and institutions, and they took a second hit when most federal pandemic relief programs expired in 2022 and 2023.

Though the numbers have stabilized a bit over the past couple of years, poverty in California remains wildly elevated compared with 2019, the last full year before the COVID-19 virus hit the state.

And serious issues are looming. Experts calculate that the coming cuts to Medicaid will likely cost 3.4 million Californians their health coverage, putting some of them one health emergency away from financial disaster. Meanwhile, federal reductions in the Supplemental Nutrition Assistance Program, or SNAP, could put 5 million people at risk of being partially or fully cut out of the food stamp process, hampering their ability to get enough food.

Homelessness. California’s homeless population, which includes people living in shelters, hit a record high of 187,000 in 2024, a number that represented 24.2% of the entire U.S. total. 

But the state’s increase in its number of unhoused people from 2023 to 2024 was well below the national average of 18%, according to data from the U.S. Department of Housing and Urban Development.

Up and down the state, programs dedicated to getting people off the street have made an impact, although the state and federal funding for such work may soon face reductions. A person in a shelter is still defined as a homeless person for counting purposes, and the need for affordable permanent housing is just as urgent as it was a year ago.

Unemployment. Though it doesn’t track with California’s image as an innovating, job-producing engine, the state’s unemployment rate of 5.6% in September was higher than any other state and well above the national rate of 4.4%. Only four other states — Michigan, New Jersey, Oregon and Nevada — had rates above 5%.

The technology and entertainment industries, two of the primary economic drivers in California, have suffered significant layoffs in recent months, and the effects of those losses trickle down to other sectors: restaurants, hotels, high-end purchases.

Income Gap. Economic inequality in the state continues to widen. The roughly 1.4 million households at the high end of the earnings curve — those that brought in $336,000 or more in 2023 — made 11 times the income of the more than 300,000 households toward the bottom who earn only $30,000, according to research by the Public Policy Institute of California. One in 10 families in the state fall into that latter income group.

In Silicon Valley, such disparities can be stark. The average Latino worker in the area, which includes San Mateo and Santa Clara counties, earns only 33 cents for every dollar made by a non-Hispanic white worker, according to the annual Pain Index published by San Jose State’s Human Rights Institute.

The Minimum Wage vs. a Living Wage. California’s statewide minimum will increase in 2026 to $16.90 per hour, among the highest in the nation. But even under the state’s plan to annually adjust it to inflation, the wage is far from keeping up with the real and rising cost of California living. When the minimum hourly rate was created nearly 90 years ago, it was based on the price of common necessities.

The MIT Living Wage Calculator, widely utilized because of its granular breakdown of actual living costs across the country, estimates that in California as a whole, a single person with no children would have to earn $28.72 an hour, working full time, to simply meet their basic needs — housing, food, transportation and medical care, among other things.

That number fluctuates around the state. In Modoc County in the remote far northeastern corner of the state, two adults with no children could afford their living expenses if they both worked full time and earned minimum wage. In Orange County, on the other hand, their combined wages wouldn’t cover the basics. A single person in O.C. would have to earn $32.20 an hour to cover that individual’s living costs.

But all of those numbers are well above the state minimum wage — and higher, too, than what’s earned by the 5.6 million residents who fit the broader description of low-wage workers in the state. California’s immense housing costs have long stayed well ahead of every attempt to raise the minimum to a livable standard.

Final Analysis. None of the issues mentioned above exists in a vacuum, and some are clearly interrelated. But the bottom line is the same either way: Millions of Californians are either barely getting by, actively poor or homeless — and major federal funding cuts are on the way. The 2026 Legislature will have its hands full trying to deal with the fallout.

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