California Minimum Wage Increases and Impact on Head Start Enrollment

Analysis shows a near perfect correlation between increase in the California state minimum wage and increase in Head Start enrollment of children above the poverty line.

In 2016 the state of California began a series of annual minimum wage increases, and is currently at $12/hr in 2019, with some cities enacting their own higher minimum wages. The increase in minimum wage has had a notable impact on enrollment for Head Start programs across the state, with fewer minimum wage earning families qualifying as below the federal poverty level. A typical Head Start program is mandated to serve children whose family income falls below Federal Poverty Guidelines (also known as the federal poverty line), but may also serve children at higher income levels under certain circumstances. California Head Start programs have experienced a dramatic increase in enrollment of children whose family income is between 100-130% of Federal Poverty Guidelines, which is a special category of enrollment that Head Start programs may serve with authorization from the Office of Head Start. This authorization is only allowed if a program has demonstrated it has exhausted enrollment of children below the Federal poverty level.

In working on Community Assessments for Head Start programs in California, one noticeable trend has been fewer families qualifying as income eligible (family income below the poverty line). One theory explaining this trend is that the state minimum wage is driving up wages to the point where families no longer qualify as income eligible. By analyzing statewide Head Start Program Information Reports (PIR) this theory can be supported. In the 2014-2015 program year 54 out of 122 California Head Start programs used the 100-130% income category (this excludes AI/AN Head Start programs because they may serve a larger percentage of over income children). In the 2015-2016 program year this jumped to 75 of 120 California Head Start programs and was at 107 of 120 in the 2017-2018 program year, an all time high. The number of children enrolled in the 100-130% of poverty-category also jumped, going from 432 in the 2014-2015 program year to 1,259 in the 2017-2018 program year, a 66% increase. What happened over these program years?

In the middle of the 2015-2016 program year the state minimum wage in California increased by $1 per hour to $10 per hour starting on January 1, 2016. This wage increase pushed a full time minimum wage earner above the federal poverty line for a family of three, from an average annual income of $18,720 per year to $20,800 per year. The 2016 Federal Poverty Guidelines for a family of 3 was at $20,160 per year. Since then the minimum wage has increased by 20% for employers with more than 25 employees and by 10% for employers with 25 or fewer as January of 2019. This far outpaces the increase in the federal poverty level, which was adjusted to $21,330 per year for a family of 3 in 2019. This indicates that fewer and fewer families supported by one wage earner will qualify as “Income Eligible” for Head Start services as the state minimum wage rises in California. The graph below illustrates this trend by showing the annual wage of a full time minimum wage earner in California (blue lines) and compares it to the federal poverty line for a family of three (dark green line) as well as 130% of the federal poverty line (light green line).

The subsequent rise in the number of California Head Start programs using the 100-130% enrollment category is nearly perfectly correlated with the rise in minimum wage (a correlation coefficient of +.91). The graph below removes the federal poverty lines and adds the number of California Head Start programs using the 100-130% enrollment category.

The graph below shows enrollment in California Head Start programs by enrollment category. The combined percentage of children enrolled in the “Income Eligibility” category and “Receipt of Public Assistance” category (both mean a child’s family income was below the federal poverty level) decreased from a high of 97.3% of all enrolled children in the 2012-2013 program year to a low of 75.4% in the 2017-2018 program year. Since the increase in California’s minimum wage, enrollment in the categories of “Over Income” and “Income between 100% and 130% of Poverty” have each increased to all time highs at 8% and 11.3% respectively in the 2017-2018 program year.

The graph below compares total enrollment in the 100-130% of poverty category to the state minimum wage in California. The two are nearly perfectly correlated (correlation coefficient of +.96 from 2014 to the 2017-2018 program year.)

Over the past four years the increase in California’s minimum wage has outpaced the increase in Federal Poverty Guidelines, which is calculated based on cost of living estimates. So long as this continues then fewer and fewer families will qualify as income eligible for Head Start services. What kind of families will have a harder time qualifying as income eligible?

  • Two parent families with one child: one parent working full time and one parent in school – In the 2017-2018 program year 5,216 California Head Start families had at least one parent in school or training. This is down 43.6% from a high of 7,125 in the 2015-2016 program year, right when the California minimum wage began to increase.
  • One parent families with one to two children and one wage earner – PIR data does not report the number of children in the family, but it does report the number of single parent families with an employed parent. In the 2017-2018 program year there were 20,197 Head Start families with a single parent who was employed. This is down 5.5% from a recent high of 21,383 in the 2014-2015 program year, right before the California minimum wage began increasingly annually.
  • Two parent families with parents who work part time jobs – An increasing number of Head Start families have two parents who are employed. There were 4,992 such families in the 2017-2018 program year in California, down from 8,596 in the 2014-2015 program year, a 41.2% decrease. Any two parent families with two or more children must balance work along with the duties of parenting their children. PIR data does not capture specific work schedules or full-time vs. part-time work status, but many families resort to staggered work schedules and part time work to ensure that at least one parent is available to take care of children when they are not at school.

While the rise in minimum wage in California is a welcome development for low income families, Head Start programs in the state must anticipate an increasing number of families falling in the 100-130% of poverty category and must shift recruitment efforts to target homeless families and children in foster care in order to remain in compliance with Head Start Performance Standards. Housing trends in the state indicate an increased cost of living (median rent is up 18.4% over the past 8 years, for instance) which may eliminate many of the positive impacts brought by minimum wage increases. So while these families may experience marginal increases in family income they may still be in need of social services due to a lack of affordable housing, childcare and healthcare in the state.

If you would like an analysis of your program’s enrollment as well as your service area’s poverty rate, cost of living and median family income, then please contact me. I have worked with many Head Start programs in California, Oregon, Washington, Delaware and other states across the nation with a state minimum wage that is higher than the federal minimum wage. I provide Community Assessment and Community Assessment updates for Head Start and Early Head Start programs and have also worked with Washington ECEAP, Oregon Pre-K and Arkansas ABC programs.